No one should be surprised at reports of disagreements between Numbers 10 and 11 Downing Street about the public finances. Traditionally it is the prime minister who presses for higher spending and lower taxes, with the obvious political dividend they provide. It falls to the chancellor of the exchequer to say no. Provided both are engaged in a common project and the rights and responsibilities of the chancellor and Treasury are respected (as they were not for Rishi Sunak’s predecessor, Sajid Javid) then such differences in outlook can be managed; good personal chemistry also helps.
So the splits between Boris Johnson and Mr Sunak have to be seen in that context. Mr Johnson is one of life’s optimists, sometimes recklessly so, and one of politics’ expansionists. Mr Sunak is a self-confessed fiscal conservative. In reality, the exigencies of the pandemic have blurred the differences between them, as neither figure had much choice other than to support the economy through the crisis, and to underwrite the Bank of England’s efforts to protect businesses and banks. It worked, on the whole, but it has obviously left a considerable and overarching problem for the public finances and management of the economy.
In fact, there are two questions, and they are interrelated. The first is the obvious one about how and when to repair the public finances, in terms of fiscal policy – the medium- to long-term balance of taxation, borrowing and spending. The second, less often discussed, is how and when the Bank of England is to return to its usual remit of limiting price inflation without undue damage to economic growth.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies