This is an audio transcript of the Payne’s Politics podcast episode: ‘Prime Minister Rishi Sunak’

Sebastian Payne
Rishi Sunak became the UK’s latest prime minister this week when he was crowned leader of the Conservative party and pledged to reverse the errors of his predecessor, Liz Truss.

Rishi Sunak
Some mistakes were made, not born of ill will or bad intentions. Quite the opposite, in fact. But mistakes nonetheless. And I have been elected as leader of my party and your prime minister in part to fix them. And that work begins immediately.

[MUSIC PLAYING]

Sebastian Payne
Welcome to Payne’s Politics, your essential insider guide to Westminster from the Financial Times with me, Sebastian Payne. In this week’s episode, we’ll be examining the first week of Rishi Sunak’s government, how he triumphed over Boris Johnson in the rather abrupt leadership race, the formation of his Cabinet, his first turn at prime minister’s questions and just how brutally he has reversed almost everything of the Truss era. Political editor George Parker will discuss with chief political commentator, Robert Shrimsley. And later, we’ll be looking at how the new government is going to try and fill that massive fiscal black hole created by Liz Truss’s disastrous government. What options are on the table? How can Jeremy Hunt fill them? And just how difficult is it going to be? Our economics editor Chris Giles will explore with special guest Jill Rutter, a former Treasury official who now works at the UK in a Changing Europe think-tank. Thank you all for joining.

[MUSIC PLAYING]

Just over a week ago, Liz Truss was still the prime minister and the Tory leadership race was under way. But events moved at warp speed over the weekend as Rishi Sunak took a commanding lead over his opponents. The leader of the Commons, Penny Mordaunt, struggled to find enough supporters to hit that critical 100 MP threshold on the ballot. But the most drama came from Boris Johnson on whether or not he would enter the race. He jetted back from his holiday in the Dominican Republic to try and raise enough supporters to get on the ballot. He claimed he had the 102, but didn’t quite have enough momentum to beat his former chancellor. Standing outside Number 10 after the king had asked him to form a government, Mr Sunak paid tribute to his political rival and said he would still be focused, however, on his policy platform.

Rishi Sunak
I will always be grateful to Boris Johnson for his incredible achievements as prime minister, and I treasure his warmth and generosity of spirit. And I know he would agree that the mandate my party earned in 2019 is not the sole property of any one individual. It is a mandate that belongs to and unites all of us.

Sebastian Payne
George Parker, welcome back to the pod. Listening to that clip, I’m sure Boris Johnson would agree with every single word Rishi Sunak was saying there about the 2019 victory being not just about him, but lots of people at the same time. Let’s just roll our minds back to last weekend when we last recorded the podcast. A leadership race was under way. Rishi Sunak had declared along with Penny Mordaunt, but really all of the psychodrama of the first days was about Boris Johnson. So for reasons that are not yet explained, he was on holiday in the Dominican Republic while Parliament was sitting and he flew back to the UK to try and rouse enough support. Talk us through what happened last weekend and why ultimately he didn’t run.

George Parker
Well, it was almost like Napoleon returning from Elba, wasn’t it? Such was the excitement, as you say rather unexplained, given the fact the Parliament’s hardly been sitting at all since July. But he needed to spend two weeks on the beach in the Dominican Republic. Anyway, he came back and immediately the whole Boris Johnson circus was under way. His cheerleaders and the press were egging him on and he set about trying to get those 100 nominations he needed to get on to the ballot paper. And on the Sunday morning, I was working. He had a briefing with his team. He said, “Let’s go for it. We’re gonna do it”. As the wards urged them all to go out and try and find that massive hundred names. At the end of Sunday evening at about 9:00, he said that he had acquired the names necessary to join the contest, and he modestly said that once he entered the contest, he was quite confident he would have won it because the party membership would have backed him. But in the interest of the party and the country, he recognised he wouldn’t be able to unite the party. And so magnanimously he was standing aside because the time wasn’t right in brackets. Hasta la vista. He would back at some point in the future.

Sebastian Payne
Well, Robert Shrimsley, there was a lot of scepticism last weekend about whether he actually had these hundred names to get on the ballot. And my understanding is, speaking to people in Boris Johnson’s circle, was that when he had these phone calls to the Dominican Republic, his supporters, people like Sir James Duddridge, his former parliamentary private secretary, and Nigel Adams, who was his main fixer in the cabinet, they were all telling him, “Yes, boss, we’ve got sort of 150 people ready to go. If you come back, the party will welcome you with open arms.” But then when he landed back in the UK on Saturday, the actual hardcore list was much smaller and it was actually closer to about 60 names. So Boris Johnson was then forced, desperately try and ring around all these people to get to the hundred. And the BBC’s Chris Mason reported on Saturday afternoon they’d hit 100, and as George said by Sunday, his campaign claimed it was 102. Do you believe they ever had those names?

Robert Shrimsley
I think it’s possible. By the way, I don’t think he’s got enough credit for giving up his holiday and coming back to think about being prime minister. I think, you know, we should applaud the public service ethos that runs deep in our leaders these days. I think the truth is he was just a bit rushed into it. He wasn’t expecting it quite at this moment. He didn’t have a team in place. His big cheerleaders, the people who’ve always backed him. So then come on back. It’ll be fine. We’ll get you there. There’s a mood for you. People want the end to this chaos. They don’t want Rishi Sunak. And so he flew back in, I think, expecting it to be much stronger than it turned out to be, as you said. And I think he suddenly go “Well OK, this is actually it’s pretty close to what I’m going to get over the line. And even if I do get over the line of getting in, just gonna to make it”. And although he said he was confident he would win a ballot of the members if it got that far, I think it’s quite possible he might not have done if the MPs had voted heavily for Rishi Sunak, which I think they would have done. You could sense among the Tory party membership a real sense of, “blimey, we really got this wrong last time. Actually it should have been Rishi”. And I think it is possible that he actually looked at this and thought “I’m gonna get hammered in the MPs’ ballot. And I might not win the members ballot and then it’s over for good. Better to do what I’ve done before, just park this one”. He also tried, I think, very interestingly, to sort of fake out Rishi Sunak into thinking that he could beat him and therefore Rishi should fold and come back on, join the Dream Team and we’ll get the band back together again. So I think when all of those things failed, when he looked at the people around him and thought, “You haven’t done this for me”, I think he, he slightly just thought “this might not work out. This won’t have a happy ending”.

George Parker
But I think even if he had got through to the party membership ballot, the MPs would have held this indicative vote, wouldn’t they, to indicate who they supported. And it would have been quite obvious that the MPs at Westminster favoured Rishi Sunak over Boris Johnson. If it had gone out to the party membership and the party membership had elected Boris Johnson, that would have triggered a constitutional crisis in the Tory party. Although it was interesting that George Osborne, the former chancellor, said that he thought that if that happens and that the party membership imposed Boris Johnson on an unwilling parliamentary party, there would be a rebellion.

Robert Shrimsley
But we saw that movie with Jeremy Corbyn, but he wasn’t prime minister.

George Parker
And he said the crisis could have been triggered by the end of the week. The MPs might have just simply refused to accept the results.

Sebastian Payne
And I think Boris Johnson actually realised that and actually played into his calculation when he put out that statement. And he also mentioned that statement as you mentioned, Rob, that he tried to do a deal in the national interest with Rishi Sunak and also with Penny Mordaunt. And we know they’ve spoke over the weekend and not surprisingly, both of them rejected that. But let’s go to Monday, George. So we knew by Monday morning it was raised, the question of when, not if, Rishi Sunak won. He’d got well over half Conservative MPs by that point. But Penny Mordaunt remained in the contest for reasons that were somewhat unfathomable, that she only had 26 publicly declared names at this point compared to, I think something like 160 odd, for Rishi Sunak . . . 

Robert Shrimsley
Mmm.

Sebastian Payne
And her campaign were very insistent that she had enough numbers to get on. But George Freeman, who’s returned to government as minister under Mr Sunak, he actually went out publicly and said, “look, it’s not happening, Penny needs to pull out”. But every hour Penny Mordaunt stayed in, was every hour her job prospects got worse. Why did she stick in?

George Parker
Well I think she was being assured by Andrea Leadsom, who was running her campaign, that if she stuck in there, she could just about have got 100 names. But as you say, there was a split in her camp as early as Sunday, actually, where people were saying that she should have stepped down and, she could possibly have wangled deputy prime minister out of Rishi Sunak had she done so on the Sunday. But the fact she kept on going until literally I think it was five to 2, 5 minutes before the nominations closed, before she folded. Her campaign, by the way, showed me the nomination forms. They’d been emailed by people to back up their claim that she’d reached 90 names. So I did look at that, there were 90 names on that thing. But what I can’t verify is whether some of those people might have nominated multiple candidates.

Sebastian Payne
Because I was in the famous “committee room 14” in Parliament with a whole bunch of journalists when we were all standing there waiting. And then it just hit the room like a wave when Penny announced she hadn’t hit the nominations that we now know, she phoned Rishi Sunak half an hour before and said, “I’m pulling out. That’s the end of it”. Robert, were you at all surprised by the amount of support Rishi Sunak got? Because had he won in September, it will be a very different government we’ll be looking at now for two reasons. Number one, he would have been under huge pressure for tax cuts because of the campaign Liz Truss won, even if he had tried. But second of all, the commanding support he got from Tory MPs from the very left wings of the Tory party to the very right wings, which was actually we, as we’ll talk about later in his cabinet, from Gillian Keegan, the new education secretary whose is as Liberal Tory as they get. To Suella Braverman, the home secretary...

Robert Shrimsley
Who isn’t. (laughter)

Sebastian Payne
Who certainly isn’t. That is quite a commanding position for a new leader to be in.

Robert Shrimsley
In political terms, this really couldn’t have worked out better for Rishi Sunak. As you say, if he’d won in the summer, it would have been a very contentious victory. He’d have had half the party against him. He’d have been in a lot of difficulty in lots and lots of ways. And, you know, interest rates were still going to go up anyway. So he would have been tagged for all this stuff, instead of which he’s universally acclaimed as the man they missed and the seer of seers for warning what would happen with Liz Truss’s budget and he arrives as a saviour. So he’s arrived to the acclaim of his party, the markets, many people in the country when they look at the alternatives and he couldn’t be better. The only problem is he still inherited all the appalling problems that he’s got to fix. But I think, in terms of the politics of this situation, it couldn’t have gone better for him. But nonetheless, the circumstances are about as benign as they could be given the circumstances we’re in.

Sebastian Payne
And one thing that was very significant, of course, about this moment is that Rishi Sunak is the UK’s first non-white prime minister, which is highlighted by Sir Keir Starmer.

Keir Starmer
The first British Asian prime minister is a significant moment in our national story . . . 

MPs
Yea.

Keir Starmer
And it’s a reminder that for all the challenges we face as a country, Britain is a place where people of all races and all beliefs can fulfil their dreams.

MPs
Yea.

Sebastian Payne
Now not everyone has taken that view, George. There’s been some people on the left fringes of politics who’ve taken a different view on Rishi Sunak. But it’s been striking what little of an issue it has become and just how far this politics has moved on in terms the race issue. When Rishi Sunak was born in 1980, there’s not a single person of colour within the House of Commons — that didn’t happen ‘til seven years later. And of course the Tory party famously was universally white for a long period until David Cameron came and started to boost his ethnic representation. And the Tories obviously are now very pleased this week to say not only have they had three female prime ministers, although there’s one of those they might wish to forget about, but have also given Britain its first non-white leader.

George Parker
Yeah, it’s to the credit of the Conservative party and David Cameron, especially, as you say, with this famous A-list brought through a lot of people from diverse backgrounds since the Conservative party in the mid-noughties. That’s a good thing. And I think most people would share the view of Keir Starmer that it’s a fantastic advertisement for the kind of society Britain’s become. I think I know there were some voices of, there were some on the Labour left who said, “well, he went to Winchester College, he came from a privileged background” and so on and so forth. Nevertheless, it’s an amazing thing. Most European countries haven’t yet had a leader from an ethnic minority background the way we had. One of the most striking things about it is how not striking it was and how little commentary there was around this, actually. You know, it’s a huge moment for the country and I think an unadulteratedly good one.

Robert Shrimsley
I think it’s an interesting point that it was both in, first female prime minister and first Asian prime minister, it’s interesting that it was the Conservative party. And I would argue it was always going to be for two reasons. One is because they win more often. So there’s that part of it. But secondly, because the kind of people who are threatened by that kind of change of a woman in charge, or an ethnic minority person in charge, are more reassured if that person comes from the Conservative party than if they come from the Labour party. It would seem to me likely that it would be that way.

Sebastian Payne
Now let’s look at Rishi Sunak’s cabinet, which came together on Tuesday night, George. And it really was different shades of blue that were put together that people from the left of the party, Sunak supporters and the right of the party. So if you look at the top of, you see Jeremy Hunt to the surprise of no one, was reinstalled as chancellor to reassure the markets. James Cleverly was kept on and he was appointed by Liz Truss. I think that was certainly one of the few continuity people from the Truss government in a senior position. The most controversial of course by far has been Suella Braverman as home secretary. And the fact was — Keir Starmer’s called it a grubby little political deal — but it was done because she delivered Rishi Sunak the leadership. Beyond that, though, the rest of the Cabinet seems to generally be in a sort of, in a way, a restoration of many of the people from the Boris Johnson era, plus the people of the Theresa May era. So there’s not that many radical new faces.

George Parker
Sunak described it as a unity cabinet, but also continuity and stability were the two other big themes, I think, of that reshuffle. And it was striking how many people were either kept in the jobs they already had, or went back to jobs they previously held, including, of course, Michael Gove at the levelling up department. Christine Harris stayed at the Northern Ireland department and of course Dominic Raab going back as Justice Secretary and deputy prime minister — both jobs that he’d previously held under Boris Johnson. That was a big theme, I think, continuity, getting people into jobs where they could hit the ground running, as Rishi Sunak would like to say. But the big standout obvious error that he made, the only error I think probably he made in his first week in office was the reappointment of Suella Braverman at the Home Office, which I think is a disaster waiting to happen for him.

Sebastian Payne
Well, let’s listen to an exchange on Rishi Sunak’s first prime minister’s questions, which was dominated by that appointment for the home secretary.

Keir Starmer
The home secretary made an error of judgment, but she recognised that. She raised the matter and she accepted her mistake. And that’s why, that’s why I was delighted to welcome back into a united cabinet that brings experience...

MPs
Yea.

Keir Starmer
And stability to the heart of government. Yesterday, the prime minister stood on the steps of Downing Street and promised integrity, professionalism and accountability. But then with his first act, he appointed a home secretary who was sacked by his predecessor a week ago for deliberately pinging around sensitive Home Office documents from her personal account.

Sebastian Payne
Robert, I spoke to one Tory MP this week who said to me, would I rather have Boris Johnson as leader or would I rather have Suella Braverman as home secretary? And the answer was the latter, because they saw it in those stark terms that it was her endorsement. There was a lot of calls pinging around between Rishi Sunak and Suella Braverman last week and her endorsement, I think, was certainly seen by Boris Johnson’s team as the moment that tipped it over. But as George said, in terms of an appointment, it’s been wholly disastrous. There’s been a lot of confusion about whether Rishi Sunak has misled the House of Commons about that investigation claims that she’s known as “Leaky Sue”, according to Jake Berry, the former Tory party chairman. How does this end?

Robert Shrimsley
It’s a very good question. I mean look — you have to give her credit for one thing, which is she’s played her cards very well twice. You know, she leveraged the top job from Liz Truss and then she leveraged it back from Rishi Sunak because she knew that the endorsement of the right that she represented was crucial and she delivered it at the key moment. She’s played her cards well politically. And Rishi Sunak paid the price to be premier. And the person who said that to you in a way is right, because the home secretary can always be sacked by the prime minister. Whereas, getting rid of a prime minister is normally quite difficult. So how does it end? There are a number of ways it could end and none of them are great. The first possibility is that she ends up riling Rishi Sunak all the time, representing a certain argument in the conservative body, ends up resigning on him and reopening the right centre split in the Conservative party. Another possibility, which may be people who don’t wish her well would look at this to say, “Look, the Home Office is a disastrously difficult job. It wrecks people’s careers most of the time. Priti Patel was once a favourite in the, in the Conservative party. You watched her falling down the rankings that ConservativeHome used to run as she didn’t get to grips with things”. And so one possibility is that Suella Braverman talks the talk but is unable to walk the walk because some of the issues she’s got to face are really, really difficult. The third possibility is that whatever happens, Rishi Sunak, etc do not win the next election. And Suella Braverman is now set up and anointed as the leader of the Conservative right and someone who can take them in a different direction. I think probably my money’s on the middle option. I think she will be damaged by the job. But none of these options are great for the Conservative party or necessarily the country.

Sebastian Payne
Or George, for Rishi Sunak, because as you said, the general view was that the Cabinet spoke to his desire to speak to all wings of the Tory party and that obviously includes the right. But there are other people within the Cabinet who are on the right of the party and this feels as if the Suella Braverman appointment is damaging the new prime minister already.

George Parker
Yes, it is, because I mean, one of the things that Rishi Sunak said in the House of Commons was that Suella Braverman herself brought to the attention of the Cabinet secretary, the fact that she’d been sending emails on her private email account to a Tory MP, John Hays, and his wife, rather strangely. I mean, what does it tell you about one of the holders of the great office, the state, that they’re sending secret cabinet papers on decisions not yet taken. So a Tory MP to give it advice, and for some reason his wife as well, it seems very obvious from the other accounts we’ve heard that actually she only fessed up to this after she was rumbled, basically. So Rishi Sunak will now find himself facing questions and is facing questions about whether he inadvertently misled the House about the exact chain of events. The other thing I’d note about this is that clearly, there’s a lot of unhappiness about her appointment among what you would probably call the deep state, you know, whether it’s MI5 or the cabinet secretary. A lot of people feel that she shouldn’t be holding that sensitive job. And I don’t think it’s beyond the realms of possibility that the deep state will start to leak this obliging information about Suella. And the whole situation feels to me to be extremely unstable.

Sebastian Payne
And your prediction on how it ends for Suella Braverman?

George Parker
I think Suella Braverman won’t be home secretary this time next year.

Sebastian Payne
And finally, I want to ask you both. It’s only been one week in the job. The general view is a side...

Robert Shrimsley
Will he still be here next week? That’s what you’re gonna ask. (laughter)

Sebastian Payne
I think we can all say we’re pretty certain of that. But I think if you look at the first, we felt like his first PMQs went well. The cabinet is broadly gone for him quite well. His first speech outside Downing Street was good. Marks out of ten for Rishi Sunak so far, Robert.

Robert Shrimsley
Pretty high. The Suella thing is a problem and that definitely takes the shine off — eight out of ten?

Sebastian Payne
George?

George Parker
Yeah. Let’s give him eight out of ten. I thought his performance at prime minister’s questions time hit the right tone. His appearance outside Number 10 also hit the right seriousness of the moment. So, yeah, not bad stuff.

Sebastian Payne
And I’ll give him eight out of ten as well to make it nice and consensual. I think purely based on prime minister’s questions, which I thought was the best bounce I’ve seen since the David Cameron years. That’s maybe not a surprise because all the people advising Rishi Sunak with PMQs were the same as he did David Cameron back in the day. George and Robert, thank you very much.

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The first major policy decision of the Sunak government was dealing with their biggest problem: the fiscal black hole created by the Trussonomics experiment. With a 30 to £40bn chasm to be filled, there were no easy options for the government. Jeremy Hunt, the new chancellor who was reappointed by Rishi Sunak, explained why he decided to delay the Halloween statement to turn it into an Autumn Statement later in this month, where hopefully the public finances will be a bit more chewy.

Jeremy Hunt
It’s also extremely important that that statement is based on the most accurate, possible economic forecasts and forecasts of public finances. And for that reason, the prime minister and I have decided that it is prudent to make that statement on the 17th of November, when it will be upgraded to a full Autumn Statement.

Sebastian Payne
Well Chris Giles, great to have you back on the podcast as always. So we’ve been tracking the public finances for a couple of weeks on the pod. Where we at now, as the time of recording, of what is the size of the hole that needs to be filled and how the general fiscal picture is looking for Rishi Sunak and Jeremy Hunt?

Chris Giles
I hate to say it’s complicated Seb, but it’s complicated. You are absolutely right in the intro to say that there’s a hole of about 30 to £40bn. Now, where it gets complicated is if you want to fill a hole of 30, £40bn, you actually need to have tax increases or spending cuts of more than 30 to £40bn, because when you raise taxes or cut public spending, you actually hurt the economy base. And then that has a knock-on effect on to tax revenues. And this is one of the things that officials in Treasury, of course, they always knew this, but they hadn’t really focused on it until they went to the OBR with their proposals and it came back with then a worse economic forecast. And then add in a little bit of overachievement, because you don’t want to just fill the hole. You want a bit more than fill that hole so that as we move towards the next election, then the news is good and upgrades to the public finances, not downgrades. So I think we’re now looking at a number close to £50bn of measures that need to be announced on November the 17th, unless things improve between now and then. And I think they might when the Bank of England comes to set interest rates on Thursday next week, but still a very large number still.

Sebastian Payne
Well Jill Rutter, it’s great to have you back again as well. But £50bn that Chris is talking about there — that’s not money you can just find on the back of a sofa. That’s gonna require some pretty substantial, either spending cuts or tax rises, to fill it. Now, we’ll get on to what those options might be in a moment, but there’s no low hanging fruit in Whitehall to try and make these kind of savings.

Jill Rutter
No, the sort of language we’ve had before about, yeah, we can do it with some efficiencies or cut a few civil servants there, absolutely doesn’t cut it. You’re looking at really difficult options and it’s a choice between spending cuts or tax rises. I think it’s probably both . . . 

Sebastian Payne
Both.

Jill Rutter
If you’re looking at it. So it’s gonna to be quite unpalatable. Of course, the Treasury, also to an extent, is sort of dampening ambition in Whitehall departments who, if they thought the public finances were improving slightly, you might sort of think, well, my budget really matters. Rishi Sunak had all that language about the 2019 manifesto, a stronger NHS, more policemen and things like that. So I think they’re trying to reset expectations in Whitehall. This is going to be as grim as Jeremy Hunt was promising last week.

Sebastian Payne
Well, Chris, we heard from Jeremy Hunt on Wednesday morning who was saying this statement is going to be delayed. What has changed in the fiscal picture since Rishi Sunak became prime minister? Because we know that things stabilised when Mr Hunt became chancellor, that the gilt market for government borrowing had recovered somewhat. But Rishi Sunak seems to have added an extra level of confidence as a former chancellor and City boy himself. Is the idea of delaying this to get things into a better situation? So when the OBR make their forecast, they’re basing it off the date of now, not the date of when Liz Truss was prime minister.

Chris Giles
They want the full impact of the “dullness dividend” as we, as we like to call it . . . 

Sebastian Payne
As opposed to the...

Chris Giles
The moron premium which was the, the now I think the accepted language for the Trussonomics and certainly what the current Conservative party likes to talk about, the Truss period of government. The dullness dividend, they want that in the numbers. Now if they’d had the medium term fiscal statement on Halloween, on the 31st of October, the Office for Budget Responsibility has told us that they would have used financial market prices from early to mid-October. Early to mid-October was right in the teeth of the moron premium and when expected interest rates were very high and that would have made the public finances look worse than they actually are. And so is no need. And the government absolutely doesn’t want to have to overachieve here. In fact, it’s hoping that in the years and months ahead, things are gonna look better. All the things like debt interest and it won’t have to do as much as it’s going to have to do anyway. So that is the key reason they have delayed it.

Jill Rutter
But I think there’s also other advantages in delaying it, which makes a whole bunch of sense. You’ve got a new prime minister who probably has very strong views about what should be the economy. The only real job he’s done in government is to be chancellor, but very interested to see how that relationship with Jeremy Hunt works out over the longer term. You’ve got a really pretty neutral chancellor, you’ve also got quite a new cabinet of people there. And certainly, you know, we know that the Treasury and Number 10 don’t tend to overshare their tax plans with their colleagues, but they really do need to make sure that they come up with spending numbers that their colleagues are prepared to defend and they can make stick. There’s actually no point pencilling in hugely ambitious numbers for public spending. And then to discover you either can’t get necessary legislation through, you face revolts in your party. And we know the states, the Conservative party, may be slightly less febrile than it’s been, but it’s still a bit agitated. And you need to make sure that those will actually turn in. I remember doing a spending session where we, the health secretary settled way too low. We couldn’t believe it. The Treasury, the health secretary setting those numbers and really would say, you’re not serious. Actually, we were gonna go quite a lot higher and we spent the winter there having to shovel in more cash because you couldn’t make those numbers work. So it’s really important that these are defensible and credible numbers because they are such an important component of the long-run fiscal tightening. They may well be a bit of a way off, but you really need to have cabinet by an all hands in the blood I think as has been termed in the past.

Chris Giles
It’s also the case that the necessity of having the 31st of October date — which was all about trying to reassure markets and bring it as early as you can — there’s at least confidence that the grown-ups are in charge now and that financial markets are not in the febrile position they were in a couple of weeks ago. So the government does have that option of timing. And so all the things deal with saying both allowing Rishi Sunak to have his say, allowing cabinet ministers to dip their hands in the blood and also allowing the OBR’s market prices to be a little bit more as they actually are, rather than from that crisis period. All of that points towards this delay.

Jill Rutter
One of the reasons that the 31st of October seemed to be set was that people thought it was really important to give the Bank of England the necessary information for that monetary policy committee meeting on the 3rd of November. Do we sort of take it that the Bank of England now is sufficiently in the picture, that it isn’t gonna put up interest rates even more than it might do because it doesn’t really, really know what’s in the government’s fiscal plan?

Chris Giles
No, this is really difficult for the Bank of England and the Bank of England would massively prefer the 31st of October date, but they are secondary to government and they have to lump it. 

Sebastian Payne
Well, even though that October 31st date has been in the diary for the last couple of weeks, there was this widespread expectation in Westminster it was going to be delayed as the shadow business secretary, Johnny Reynolds, said.

Johnny Reynolds
Putting it back two weeks, changing the date, changing the chancellor — none of this takes away from the fact that there are very serious consequences for this country from the last, frankly, disgraceful, five or six weeks of Conservative government. So, you know, people’s mortgages are already higher. Business investment is already lower. And of the impact on the national finances is real. So I’m kind of less interested in when exactly they’re gonna do it, but in what they’re going to say. And we’re going to hold them very much to account for the fact that, yes, they might say that’s difficult decisions, but that’s because of their own incompetence and the crisis they have made. This is the consequence of it.

Sebastian Payne
Now, Chris, take us through the menu of options that the government is going to be looking at. There’s not that much time left for those plans to be pulled forward in terms of where they’re going to try and make these savings. And we’ve started to get some indications leaking out of Whitehall. There’s a lot of debate about the pension triple lock that Rishi Sunak, at his first PMQs, very notably was asked, “Will you maintain the triple lock”? Dodged the question on that. What else is being considered and would you put them on the realistic to the unrealistic end of the spectrum?

Chris Giles
Let’s start with Social Security benefits, so including the triple lock. They cost roughly £250bn a year. They will go up by 10 per cent because that’s inflation in September. Each percentage point you can knock off that, saves you 2.5bn roughly. So if you can knock off four and take it down to the level of earnings growth that saves you £10bn a year and that goes into the future. Can they do that? No, not entirely, because that won’t get through parliament. But they can do some of that. There might be for more affluent pensioners, might get six, not ten. And for some parts of the non-pensioner benefit community, which is, you know, again you can get a little bit there. So you can get some money out of benefits. So that is going to happen. Second thing that’s absolutely going to happen is that the spending plans after the current spending review period will be scaled back. At the moment, they are set to remain constant, roughly in line with national income. That means about 3.6 per cent growth rate per year. I would have thought that will be at least pencilled in to be flat in real terms. And flat in real terms means a 2 per cent growth. So if you’re taking 1.7 percentage points off that, that saves you around £20bn a year by the end of the period. That is proper money. And that’s, you know, you’re putting a big dent into the finance system.

Sebastian Payne
But Jill, all that stuff is very painful and will come with a political price. And, of course, part of this has got to be credible to markets, which means it can get through the House of Commons. And I think it was Ian Martin, the columnist of The Times observed this week that there is basically a group of Tory MPs now for almost every single area of the budget. So if you know there’ll be a group who won’t want to do that to benefits, there’ll be a group who want to protect capital investment. And this is why it’s such a big test for Rishi Sunak because we saw this week he’s got this great, probably quite shortlived unity behind his leadership. But as soon as you start to unpick bits of it, you can see certain groups will peel off and that’s when the markets will look at it and see if it’s credible. Even if the grown-ups are in the room, they’re willing to give him and Mr Hunt more benefit of the doubt than Liz Truss and Kwasi Kwarteng.

Jill Rutter
I think it’ll be very interesting to see and one of the things we’ve seen I think under both the Johnson and Truss administration is under-investment in business management in the House. This is gonna require a very, very canny business manager. But I think Jeremy Hunt and Rishi Sunak will have to make clear to the party that this is the absolute critical plank in what they’re going to do. Rishi Sunak said in Downing Street, “I am here to fix the mistakes. This is the, you know, premier mission of my prime ministership”. And I think, you know, we had last week, you know, that bizarre debate about whether that fracking vote was an issue of confidence or not. But really, if they can’t get their critical measures to make the numbers add up and restore fiscal credibility through, then we just start to look like an issue of confidence in the government and a question mark about whether the government really can govern. And brings back the issue for those Conservative MPs is: do you really want a general election in these circumstances now? So I think they’ll have to look and see where they can buy people off and see some tough thumping on other sort of critical issues for people. Very interesting to see where they go on things like immigration, where we knew last week the Truss government was looking to up the growth figures by allowing the OBR to score a more realistic number for immigration in the figures than the government’s aspiration. But I think it’s really going to be critical that the government can see this through. I think it’s also a question when you have a profile that suddenly implies that there’s loads and loads of really difficult things to come, but that’s going to be for the next government. And I think, you know, the government will need to show that it’s making a down payment on some of the difficult decisions. It can’t just leave everything beyond this election period, this parliament.

Sebastian Payne
Well, that said, a lot of this is going to be with the lens of a 2024 general election. So the really difficult stuff comes on the other side. Any of the Conservatives somehow win again for a fifth historic term, and then they’ll have to deal with that very bad situation, all pile all on Labour’s plate. If they get in, they can deal with that. And all of the things you mentioned Chris, are effective spending cuts. What about the prospect of any tax rises? Do you see anything that would be required or considered to do that?

Chris Giles
The most obvious tax increase will be to continue the various freezes that are on personal allowances and thresholds within the tax system and maybe even extend them further. So this is particularly crucial in income tax at the moment where there are freezes in the personal allowance and higher rate thresholds until 2026. So I would have thought those will get extended to 2028, about 5bn quid by that stage, depending on how high wage growth is. But that’s quite easy because people don’t notice it as much. I think we’re going to see a little bit more on the old windfall tax-type of idea, even if it’s not called a windfall tax, maybe on some of the an . . . 

Sebastian Payne
An excess profits tax.

Chris Giles
Yeah, or something on electrical generators who are making a lot of money at the moment. And then I think on taxes, they’re actually starting to get into things that are really difficult. And I would think that they will try and do more on spending. But remember, they’ve done a lot of, in reversing the mini budget and then not having the one pay off income tax from 2024. Those are big as well, effective tax rises and with the corporate tax rate going up to 25 per cent, those are all big moves that they’ve already done on the tax side.

Sebastian Payne
And Jill, what do you make of Jeremy Hunt in this position? Because obviously he’s made this quite miraculous comeback to frontline politics, having been health secretary for a long time, briefly foreign secretary under Theresa May’s government and was parachuted into Liz Truss’s government. And I think it’s no secret in Westminster that he would not have been Rishi Sunak’s first choice as chancellor. He had no choice but to keep him there. Otherwise that would have risked market instability when he became prime minister. But this is a political tightrope that he’s got to walk, as well as all the difficult spending decisions Chris was just talking about. Do you think he can do it?

Jill Rutter
Who could do it? I mean, we don’t know. But I think the plus that’s going for Jeremy Hunt is that he has knocked around Whitehall quite a lot. I think that helps in these circumstances. He’s also running the department that has one of the sort of trickiest budget lines to manage. We know that the NHS is not in a great state, it’s got record backlogs, it’s not caught up with the pandemic, it’s got this massive staffing problem, things like that. We know that Jeremy Hunt has been quite a big advocate for measures that might have cost money upfront to try and get the NHS back on an even keel. So I think that spending credibility actually will be very helpful than if we’d had some, somebody very new to the Treasury. And I think Jeremy Hunt was supposed to be a slightly risky choice for Liz Truss. But actually I think he’s, he’s done a pretty good job, as you say, in the past week and a half, insisting on reversing everything. The one question I sort of have is whether they might have just been a bit better off if suddenly that health and social care levy had got lost between the Commons and the Lords. In which case, if it had just hit the pause button on that, then they’d have an extra 13bn quid to play with, and that would be making some of the decisions much, much easier.

Sebastian Payne
And how much of this Chris is going to be Rishi Sunak’s Autumn Statement versus Jeremy Hunt? Because if we think back to the last chancellor who became prime minister and Gordon Brown, the dynamic between him and Alistair Darling was obviously . . . 

Chris Giles
Terrible.

Sebastian Payne
Terrible. (laughter) I was trying to say it’s not the backseat driver or front seat driver, perhaps, whichever way you look at it. But obviously Mr Hunt will have been working up these plans ever since he became chancellor. Is one of the reasons for the delay, do you get any sense of Number 10 influence here? Are they in lockstep on this? And Mr Hunt will be aware that a lot of his standing is based on the fact he’s a sort of almost temporary chancellor in a way, and was not Rishi Sunak’s first choice.

Chris Giles
I’m sure Rishi Sunak is gonna be heavily, heavily involved in the decisions. They are difficult decisions. And one of the reasons of delay is that the prime minister is going to want to dip his hands in the blood to make sure that he’s comfortable with both the scale of tax increases and spending cuts and also the particular measures. So I think this is going to be a very much a joint effort. Rishi Sunak is first Lord of the Treasury. And I think he will be using that role to be highly involved in this, for this Autumn Statement that I’m sure that’s the case for future ones. I think we might get to a more traditional prime minister-chancellor relationship because the prime minister can’t be on top of every part of the public finances all the time because he or she has far more other things to do. And that is why in the end, the chancellor always ends up being the money person who sometimes surprises the prime minister with good or bad news.

Sebastian Payne
And finally, Jill, if we just pull back the camera lens from Westminster for a moment, say, what’s this going to feel like for ordinary people this winter? Because we’ve obviously got the energy price guarantee come in, which is going to cap the wholesale price. And obviously we should point out that Liz Truss’s government was appalling in explaining this to people. People are gonna get quite a nasty shock when they realise their bills are not being capped at £2,500 is the wholesale price is being capped and I think British Gas had to actually take out an advert in the Times to tell people what the government wasn’t able to do about what this policy is. But if you’ve got the prospect of capital spending problems in the future, you’ve got allowances being frozen, there’s gonna be some immediate pain. Even if the more difficult stuff is in the future.

Jill Rutter
People obviously will be hit by higher energy bills probably than they expected. And the counterfactual that it’s a lot lower than it otherwise would have been is quite difficult to communicate as government. It’s a bit less grim than it was, can be really, really grim isn’t a message you can really get across. I think Chris is right. I mean, things like tax threshold freezes, I mean, do you really know? So are you really calculating how much I would have got if, you know, we’d still have gone ahead with indexation? I don’t think you do that. But what do people notice? People are really concerned about the state of public services. If the 2019 vote was anything, it was, I think for a sort of reversal of austerity, people will notice that those are getting worse. Their councils haven’t got much money and . . . 

Chris Giles
Strikes.

Jill Rutter
One of the really interesting things, as Chris says, is does the government have the money, the resources to settle these waves of strikes that will also make the winter seem very grim? And, of course, the super grim thing on energy for a lot of poor households is the price. But for everybody else, if there’s any threat to supply and we sit there with candles during a power outage, and I think that could make the winter seem incredibly long.

Sebastian Payne
Well, on that cheerful note, Chris and Jill, thank you very much for joining us. And that’s it for this week’s episode of Payne’s Politics. If you like the podcast, then we’d recommend subscribing. You can find us through all the usual channels to receive episodes as soon as they’re released every Saturday morning. If you’re feeling cheerful when you’re listening, then why not leave us a positive review and a nice rating?

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Payne’s Politics was presented by me, Sebastian Payne, and produced by Anna Dedhar and Howie Shannon. The sound engineers were Breen Turner and Jan Sigsworth. Until next time. Thank you for listening.

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