Prime Minister Rishi Sunak? Rishi Sunak himself acknowledges that he is an ‘underdog’ in the campaign, referring to his unfavourable odds of winning against Liz Truss (although one poll does suggest the result may be closer than generally assumed). However, after leading the pack during the initial phase of the contest and attracting the support of more Conservative MPs than any other candidate, Sunak should not be written off. Whatever the result, his positions and economic philosophy is likely to remain important within the party during the next Cabinet and beyond.
Political history. Rishi Sunak had a rapid rise to the top of British politics. He was elected to Richmond in 2015 and became a Junior minister in DHCLG under Theresa May’s government in 2018. He was then promoted to Chief Secretary to the Treasury by Boris Johnson - a move that was widely regarded as a reward for publicly backing the Leave campaign during the 2015 Brexit referendum and for publicly supporting Boris Johnson’s leadership campaign to replace Theresa May in the Times alongside two other MPs; “This was widely seen in Westminster as a decisive turning point: the one where Johnson won over ‘the sensibles’ and pivoted the backbenchers.” Sunak was promoted to Chancellor when Sajid Javid resigned in February 2020. His economic record is summarised below:
Which policy agendas will survive if Rishi becomes PM? Sunak has stated that “a screeching U-turn on lots of policies that were in the 2019 manifesto” would “be tricky to implement”, so which of Boris Johnson’s flagship policy agendas might survive under Sunak’s rule? Public First has updated their Conservative Leadership Election Policy Tracker, key parts of which have been summarised and elaborated on below: (accurate at the time of publication)
The Cabinet under Sunak? Speculation about who might be picked to be in Sunak’s Cabinet is still contested. The Guardian’s Jessica Elgot and Aubrey Allegretty think that Sunak might pick Steve Barclay as Chancellor but the Telegraph’s Gordon Rayner suggests that Michael Gove might be picked instead.
BBC criticised over Conservative leadership climate question. The BBC has been criticised for the way in which it framed questions on the climate in a debate between Conservative leadership hopefuls Rishi Sunak and Liz Truss. A group of environmental campaigners and organisations wrote to the BBC after candidates were asked just one question about the climate which was solely focused on the actions of individuals: “What three things should people change in their lives to help tackle climate change faster?”.
US Inflation Reduction Act. Last week, US Senator Joe Manchin and Senate Majority Leader Chuck Schumer announced they had reached a deal on a new “Inflation Reduction Act” (IRA) which includes the biggest climate spending package in U.S. history. Having previously rejected the climate and energy measures, Manchin eventually backed the deal, which aims to cut carbon emissions by 40% from 2005 levels by 2030. BlueGreen Alliance’s Ben Beachy breaks down the proposed spend in the bill here.
Integrated Rail Plan. The House of Commons Transport Committee has published its report on the Government’s Integrated Rail Plan for the North and Midlands (IRP). It finds that the plan “proposes a much-needed investment in rail infrastructure in the Midlands and North”, however it also finds that the proposals would leave “some towns and cities very disappointed”. The IRP drew criticism from Northern mayors and the CBI when it was published in November last year. It also led to Conservative MPs urging the Prime Minister to go further and implement his manifesto commitment to deliver Northern Powerhouse Rail. For more on the Integrated Rail Plan, see our Digest.
Levelling up and austerity. The Government’s ‘levelling up’ agenda was “always a lie” and would never have reversed the “damage” of cuts to public services across the country, argues the Liverpool Echo’s Liam Thorp. He argues that by “hugely” cutting government grants, local authorities have been forced, since 2010, to “run themselves as businesses” by buying property and assets in an attempt to make up for lost funding.
Yorkshire Day deal. This week, the Government signed an “historic” devolution deal which will create a new combined authority with a directly elected mayor across York and North Yorkshire. The deal will now go through a consultation period with the public and will ultimately be considered by councillors at a full council meeting.
Is borrowing a burden? As much of the Conservative leadership election has focused on borrowing and fiscal rules, New Economy Foundation’s Frank van Lerven explains why borrowing is not always burdensome for future generations. While “borrowing can be burdensome for future generations if it results in a suboptimal or inefficient allocation of resources”, he says, “a lack of borrowing for investment” can also be burdensome in the future.
Who are the super rich? One in seven people on the Sunday Times Rich List are unlikely to be paying UK tax as they report that they live abroad, according to a new report by Arun Advani, Andy Summers and Hannah Tarrant of the University of Warwick’s CAGE research centre. The study, which examines a range of data sources on the UK’s 1000 richest people, also found that those on the Rich List own or control 13,900 UK companies between them, with total assets of at least £1.9 trillion.
Boosters and doomsters. The biggest divide in economics is between those who believe that the poor state of the British economy is due to domestic policy, and those who believe that it is due to exogenous factors, according to Sam Bowman who describes these two camps as Boosters and Doomsters. Building on Bowman’s piece, Duncan Weldon argues that the real divide between these two camps stems from Britain’s housing market and pensions system and the “reasonably large cohort of asset owners with pretty secure incomes” that it has created.
“Stagffluence”? As comparisons continue to be made between today’s economic situation and 1970s ‘stagflation’, we must instead think of this period as being characterised by “stagffluence”, in which “terminal stagnation” for most is paired with incredible affluence for a few, argue Rowland Atkinson and Andrew Baker. Craig Berry from UCL’s Institute for Innovation and Public Purpose (IIPP) explores whether Dani Rodrik’s idea of ‘productivism’ is the answer to solving “stagffluence”.
“The Seductions of Declinism”. Sociologist and political economist William Davies draws a link between the “drift of contemporary capitalism towards ‘rentierism’” and Britain’s economic issues as identified in the Resolution Foundation’s recent ‘Stagnation Nation’ report. He argues that Britain’s lack of growth and productivity in the 2010s can be dated back to “the explosion of financial services in the late 1980s” and the continued tendency of wealth management strategies to pursue the preservation of existing assets rather than investment in new firms, production methods and business models.
Green transition requires shift in financial flows. The green transition requires a substantive shift in financial flows which must be backed up by policy interventions, according to a new paper by Katie Kedward, Daniela Gabor and Josh Ryan-Collins of UCL’s Institute for Innovation and Public Purpose (IIPP). The paper identifies four problems with the dominant risk-based approach to green finance which co-author Josh Ryan-Collins outlines here.
Tiered reserve system. Paying interest on central bank reserves is a policy choice and “merits adequate debate and scrutiny”, according to NEF’s Frank van Lerven and Dominic Caddick. They make the case for a tiered reserve system in which “the Bank could only pay interest on a portion of central bank reserves, or it could stop paying interest altogether”.
BT strikes. Last week, BT and Openreach workers went on strike for the first time in 35 years. This comes after CEO Philip Jansen got a 32% pay rise to £3.5 million, and shareholders got £700 million in dividends.
Unspent apprenticeship levy. Over £3.3 billion in unspent apprenticeship levy has returned to the Treasury within the last three years. Apprenticeships in England have been funded over the past five years from a levy equivalent to 0.5 per cent of payroll imposed on employers with annual wage bills of over £3 million. Employers can spend the money on apprenticeships or transfer some of their levy pot to smaller employers, however, any money that is not spent within two years is return to the Treasury.
Citizens Advice cost of living data dashboard. Citizens Advice have launched a cost of living data dashboard it which it shares insights on how the crisis is affecting its clients. Data includes the number of people who've been unable to top up their prepayment meters and the number of people going to Citizens Advice because they can't afford to eat, and so need a food bank referral. Citizens Advice’s Tom Brooke Bullard shares some key insights here.
Poverty, destitution and families. New research by the Joseph Rowntree Foundation explores the link between family type, associated social security payments, and the likelihood of being in poverty and destitution. It found that between 2002/03 and 2019/20 the risk of living in very deep poverty has increased by over half for people living in large families (three or more children) and increased by a third for people in lone-parent families, to reach 19% or 900,000 people.