‘A job to run away from’: Dilemmas await successor to UK's Johnson

‘A job to run away from’: Dilemmas await successor to UK’s Johnson

Nominations for the 11 Tory leadership contenders are expected to open on Tuesday, with MPs voting in the first round the following day. Analysts anticipate that Boris Johnson’s successor in Downing Street will inherit a poisoned chalice. Topping the list of problems, the cost of living crisis vexing the developed world is especially serious in the UK, amid years of dreadful productivity growth and now the fallout from Brexit.

One thing Johnson’s critics to his right and left agree on is that his effusive bonhomie was a thin veil in front of a void, leaving him incapable of dealing with Britain’s amplifying troubles.

Johnson’s ex-consigiliere Dominic Cummings once said he complained that being PM was “like getting up every morning pulling a 747 down the runway”. Even if Johnson’s successor has the strategic vision many say he lacked, that simile will look just as apt.

“It’s a job to run away from rather than runs towards,” said Jonathan Tonge, a professor of politics at Liverpool University. “There’s no political headroom and there are no economic goodies to offer.”

Much of the world is confronting a cost of living crisis amid post-lockdown supply chain crunches, the energy shock from the war in Ukraine and the consequences of loose monetary policy as economies surged back from the Covid shock. But Britain’s economic problems are especially acute.

Fiscal conundrum

Of all G20 economies, only sanctions-hit Russia will perform worse than the UK in 2023, the OECD forecast last month. UK inflation reached 9.1 percent in June, its highest level in four decades and the highest in the G7 at present. The same month, the pound sank to its lowest level against the dollar since the pandemic started, dipping under $1.20.

Governor of the Bank of England Andrew Bailey told a conference of central bankers he was unsurprised by the drop in sterling’s value, attributing it to Britain’s flagging economic outlook. “I think the UK is probably weakening rather earlier and somewhat more than others,” he put it.

Amid these economic afflictions, tax has emerged as the leadership contest’s foremost battleground. Contenders like Foreign Secretary Liz Truss and ex-health secretaries Jeremy Hunt and Sajid Javid promise to cut taxes to boost household finances.

In large part, these proposals can be interpreted as swipes at ex-chancellor Rishi Sunak, who leads the polls amongst the Tory Party members who choose between the final two after MPs eliminate the rest in successive voting rounds. Economically right-wing Tories have made much of the British tax burden reaching its highest level since Labour prime minister Clement Attlee’s 1945-1951 government – notably Commons leader Jacob Rees-Mogg, who described Sunak as “the much-lamented socialist chancellor” at a cabinet meeting last week. For his part, Sunak ruled out indulging “comforting fairy tales” in his campaign launch video on Friday.

While taxes are at near record levels in the wake of the Covid crisis, so is government borrowing – and price rises are making it costlier to service, seeing as a lot of UK public bonds are inflation-indexed.

“Johnson’s successor will have very little economic room for manoeuvre,” Tonge warned. “Sunak was chancellor; he’s actually looked at the books and he’s seen that it’s bleak. The others seem ignorant of the parlous state of the public finances. The idea that we can risk government revenues by cutting taxes is ridiculous considering the level of debt.”

Others say the political exigencies are so pressing that fiscal consolidation will have to wait, despite the economic risks. “Realistically, the Treasury is going to have to let borrowing increase in the short term so that it can help people out on the lowest incomes and not allow public services to deteriorate,” argued Tim Bale, a professor of politics at Queen Mary, University of London.

Housing crisis

As well as the immediate fiscal dilemma, the tasks required to boost Britain’s long-term economic performance carry political risks.

Productivity growth is the pre-eminent factor in raising the standard of living, economists point out. The late 2000s financial crisis transformed Britain from a leader to a laggard in this regard. Britain’s productivity growth was the second-highest in the G7 from 1997 to 2007. It was the second-lowest in the G7 from 2009 to 2019.

Businesses have long warned that elevated housing costs are a major factor behind the UK’s productivity problem, making it harder for companies located in high-productivity areas to recruit and retain skilled workers. The price of the average home is running at a record 7.1 times the average of annual wages. While London is by far the most productive British region, it is also the least affordable in terms of property, with prices 9.7 times the typical annual salary.

Housing supply has failed to keep track of demands for decades – sending prices skyrocketing in the 2000s, with only the Great Recession temporarily checking their ferocious ascent since then. Accordingly, the proportion of young people who own their home has plummeted over the past thirty years.

The share of young people voting Tory has sunk along with it, endangering the party’s ability to recruit its next generation of supporters: 35 percent of 18-24 year-olds voted Conservative in John Major’s narrow general election victory in 1992; when Johnson won his 2019 landslide, it was with just 21 percent of the vote amongst that demographic. By contrast, 64 percent of over 65s voted Tory in 2019. Most of this age group own their homes and have seen their wealth mount thanks to property-price rises.

Johnson promised at last year’s Conservative conference to “enable more young people everywhere to share the dream of homeownership” and thereby help “solve the national productivity puzzle”. Very little happened.

The Tories’ plans to facilitate more housebuilding were blamed for their astonishing defeat in the Chesham and Amersham by-election in 2021. This was a quintessential Blue Wall seat – economically prosperous, somewhat rural and near London. It had voted Tory consistently since its inception in 1974. Yet the Liberal Democrats overturned the 16,000 Conservative majority with a campaign railing at the Tories’ plans to loosen planning rules, as well as opposition to the forthcoming HS2 high-speed railway passing through.

So the challenge for Johnson’s successor is to solve the housing crisis without alienating its core (older, southern) vote. “Housing is difficult for any prospective Conservative leader,” Tonge underlined. “Every survey that’s been done on this shows there’s a correlation between home ownership and voting Tory. But whenever there are proposals to build new homes, you get current Conservative electors at the forefront of these so-called NIMBY campaigns.”

Brexit blues

Brexit is a topic of intergenerational disagreement just like the housing crisis. It is also a drag on the UK economy: By creating trade friction with the EU, Britain’s largest trading partner, Brexit means GDP is 5.2 percent lower than it would be otherwise, according to calculations by the Centre for European Reform.

Northern Ireland provides further evidence. Closer trade links with the EU have helped the province’s economy “slightly outperform the UK average”, a report by the National Institute of Social and Economic Research found.

But the protocol in Johnson’s deal keeping Northern Ireland in the single market for goods created a sore at the heart of the British body politic – a customs barrier between the province and the rest of the UK, unacceptable to many Ulster unionists.

Trying to resolve this problem, Johnson’s government unveiled in June plans to override part of the protocol. But this legislation looks set to divide the Tory Party, risks being shot down in the Commons, and threatens legal and trade repercussions from Brussels.

>> Johnson moves to renege on his own ‘terrible’ Brexit deal – but will the Tories kill it?

Rejoining the EU – or at least the single market – would solve these problems. But no contender to enter Number 10 in either major party contemplates reopening the European question. The 2019 general election showed that would be electoral suicide. The promise to “Get Brexit Done” was a crucial factor in handing Johnson his hefty majority in 2019, while endorsing a second referendum cost Labour dear.

As his predecessor Jeremy Corbyn’s shadow Brexit secretary, Labour leader Sir Keir Starmer was the architect of that second referendum proposal. Starmer is now adamant in ruling out a return to the EU, the single market or the customs union.

Moving on from Brexit and the widely disliked Corbyn has allowed Labour to gain a nine-point polling lead over the Tories, according to Politico’s polling aggregate. Starmer – like the forthcoming new prime minister – has challenges ahead. The 80-seat Tory majority is a mountain to climb, and historically the Conservatives have been the most electorally successful political party in the democratic world. Meanwhile Labour had already lost one Red Wall before the Tories seized northern England in 2019, when the secessionist SNP demolished their Scottish bastion in 2015, and the Tories implanted themselves as their main opposition north of the border.

Yet Johnson’s forthcoming successor can no longer rely on Labour’s unpopularity.

“Jeremy Corbyn effectively threw the Labour down a deep, dark hole – which means it’s spent the last two and a half years focused on climbing out of it; now that it’s out, it has to start setting out a convincing vision for voters,” Bale concluded. “But those voters are no longer scared of Labour, no longer ridiculing it even if they’re not particularly inspired. That means whoever takes over as PM can’t take anything for granted.”

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