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Johnson has to square the circle between traditional Tory values and demands to…

by ace

Another day, another announcement about job losses.

On Monday it was Pret A Manger’s turn to announce layoffs as the food chain warned that it would have to close 30 stores and lose “more than 1,000 jobs” if sales of sandwiches and soups do not return. up to at least half of pre-coronavirus levels by September.

With turnover in its stores at quarter of normal levels, Pret is consuming more than £ 20 million in cash per month.

It is a very familiar story in an economy that has been devastated by the coronavirus. Job losses in the coming months could reach millions – levels never seen since the 1980s – when the economic crisis in public health hits our streets, our hospitality sector, our manufacturing and aviation sectors.

Boris Johnson, introducing himself as a modern incarnation of US President Franklin D Roosevelt, promised the British people that he would “build, build” his path to economic recovery, effectively dusting off his 2019 manifesto and promising to accelerate $ 5 billion in relief schemes. infrastructure.

But on Wednesday, Chancellor Rishi Sunak will be more focused on the here and now, announcing measures to try to protect jobs and encourage companies to hire younger workers.

“The goal is to come up with a package of measures to get us out of the recession as soon as possible and help people work beyond the license scheme,” said a government official.

This could mean a temporary cut in VAT for the hospitality sector in order to fuel demand and make people spend, as well as concrete support for internships and work programs.

But there is also the beginning of dividing lines between labor and the government when it comes to economic recovery.

The dilemma for Boris Johnson is the tension between his view of Rooseveltian economic interventionism against the instincts of a party defined in the principles of a small state and free markets, where the private sector drives the economy and not the public exchange.

These competing economic views speak of a potential flaw that runs through its coalition of traditional conservative areas and the old red wall seats.

“The areas that will be most affected by job losses will be the seats Boris Johnson won in the Northeast and Midlands, said a senior figure in Labor.” These places are at risk of higher unemployment spikes because they are low skilled jobs and more heavily focused on retail and a manufacturing base.

“There will be tension between the entry of Tory 2019 and the rest of the party – and not just on a philosophical basis, but on a practical basis from voter pressure.”

More spending, higher taxes for the wealthy and more government loans, priorities for alternate workers are at odds with the most typical conservative values ​​of a small state, free market and low tax economy.

“The party likes to eat and eat the cake,” observed a senior tory to the right of the party. “This is a prime minister in favor of cakeism and that is the tension between a party that wants to spend a lot of money and does not want austerity because it is tired of it after 10 years, but it also wants a flourishing free market where we cut taxes”.

Andrea Leadsom, the former business secretary, speaks to many of her colleagues when she says that government lending levels – the most recent valuation by the Office of Budget Responsibility in April puts it at $ 298 billion in 2020-21 – to makes it “uncomfortable”.

She said: “It is a huge amount of loans … we need to keep international investors confident that the UK can fight to get out of this situation. Otherwise, we will see borrowing costs go up and that is very difficult for the chancellor.. “

It also helps explain why many conservatives, including Leadsom, are demanding that the prime minister now end support schemes.

“I think it is essential to make companies stand on their own,” she said. “Again, we need to get the economy going again.

“Business owners need to think about the new normal and how they can make their businesses really motorized again and start being profitable.

“Otherwise, inadvertently, we will gently kill our economy. If we do too much, we will make companies dependent and they will fail.”

£ 1.57 billion lifeline for the arts

But the crisis raised questions about state intervention and spending, as the government intervened in the economy in ways that months ago would have been unacceptable.

Sir Lynton Crosby, a conservative election strategist, told Sky News in a rare podcast interview that there will be a “battle” over the size of the state and who pays what, in light of these extraordinary interventions in recent months.

Sir Lynton said: “The government has just moved into a lot of areas where it was not before. The government is entering new territory and spending and lending more.

“And he is doing things that people would not have previously accepted and do not necessarily see as a long-term solution. But I think there is a battle – you saw Jeremy Corbyn saying that he was justified by many of the things the government did” in response to this crisis.

“But dealing with the crisis is screening and then you have to go into the hospital and provide long-term care and improve the patient. And even now in the UK, only 41% of people think there should be more interventionist measures here. forward.” , so that people would be prepared to recognize that these measures were necessary, but that is unsustainable “.

In addition to the debate over the size of the government, there is also a question about who pays the bill. Crosby says voters believe ordinary taxpayers shouldn’t pay for it and want multinationals and technology giants to pay more taxes. “There will be a battle over who should pay for it.”

And that again speaks of tensions between the conservative party and the new conservative voters. Recent polls have found that conservative voters have more in common with labor in the economy than with conservative parliamentarians and party members.

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A report led by prominent UK academics in the “Change Europe” think tank concluded: “The fact that conservative parliamentarians so widely reject widespread perceptions of structural injustice – much more strongly than members and popular activists of the Conservative Party – suggests the challenge that the Johnson administration will face. to face if the shock of COVID-19 triggers public demand for redistribution and economic reform. “

He continued: “The Conservative Party won in 2010 and 2015, insisting on the need for austerity and cuts that matched the views of deputies, activists and members on the role of the state, and made sense to many voters.

“If, however, the feeling that ‘there is a law for the rich and one for the poor’ and that ordinary people who have done nothing wrong are being disappointed by the government, then the gap between conservatives begins to close. The party and voters as a whole can be deeply problematic for the Johnson administration. “

How much does Johnson want taxes and expenses? How does the chancellor intend to ensure that public finances are sustainable?

Economists agree that there is little point in trying to answer these questions now, as we do not yet know whether the UK economy will recover from COVID or drag on. The task for the next few weeks is to try to start recovery.

The task for the coming months and years will be to define what the Johnsonian economy really means, while trying to bring together a new group of voters and a traditional conservative party, which are poles when it comes to taxes and spending.

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