In 1989 a fierce debate erupted and caught British Politics in the centre. Enraged by the re-appointment of the Exchange Rate Mechanism sceptic, Alan Walters, as Thatcher’s personal advisor – the ‘Pioneer of Privatisation’, Chancellor Nigel Lawson, resigned in a fury. This period marked the apotheosis of a long-standing feud between Lawson’s soft Europhile Treasury and Mrs Thatcher’s unequivocal European cynicism.
In a historical vein, the reported conflict that has emerged in recent weeks is simply the latest iteration in the age-old feud between the sycophantical Downing Street and an ever-frugal Treasury. While Number 10 strives to brand itself to the electorate as the dashing Captain of the school’s Football Team – the Treasury is the straight-laced prefect with immaculately polished shoes and a distaste for younger students running in the hallway. This principle is held up by no single greater example than Boris’ administration.
The philosophy behind ‘Borisnomics’ is scarcely akin to the words of Smith or Burke – but instead that of John Falstaff. Following the wave of momentum experienced in the 2019 General Election, with Franklin D. Roosevelt resonating pledges to ‘Build Back Better’, the Conservatives in many respects have become a party of Fabians. Although those on the right have broadly reached a consensus that the spending policies to tackle the coronavirus were a necessary evil, clear lines of division have begun to be drawn regarding the course of the economy moving forward.
Boris’ bombastic joie de vivre unsurprisingly extends into his roadmap to get the economy back on its feet post-Covid. Despite amassing more public debt since the Second World War, Boris insists this will not skew his ambitious plan of ‘Levelling Up’. On the contrary, Rishi’s petty bourgeois upbringing in the family pharmacy has instilled a distinct fiscal conservatism – as he was eager to inform Andrew Neil on GB News the other week. While spending so much money it would even make John McDonnell blush is hardly a talking point during the Treasury’s next Tea Party, Rishi appears eager to apply the brakes.
Indeed the question this poses is which the right course moving forward will be?
In applying conventional Austrian wisdom, there appears a slight contradiction within Boris’ economic roadmap. While his vision is for a United Kingdom united not just in name, but in prosperity and opportunity, I’m firmly on team Rishi in saying this is ill-conceived.
In the extensive history of economics, a nation is yet to tax themselves into prosperity, not least a nation going through the short-term turbulence of leaving the largest trading area in the world. If Boris is aiming for a permanent recovery, crowding out the private sector through immense public work schemes will only further magnify structural economic weaknesses.
While at the moment being able to exploit the cheap borrowing costs around the globe finances such spending, if our debt to GDP ratio continues to spiral post the global recovery, foreign lenders will likely begin to question the credit worthiness of the UK, leading to natural upwards pressure on such costs.
‘Levelling Up’ may be pure tactical genius on Boris’ behalf, a significant factor in the Conservatives’ found success in the heart of the Red Wall, however it shouldn’t become a wolf in sheep’s clothing for significant state intervention.
In Timothy Foxley’s masterful research paper on how such an idea can be done through amplifying the power of free market incentives through a ‘People’s Rebate’ – where individuals and employers in the poorest areas would receive in return a relative portion of their income and NI contributions – cultivating a distinctive pro-enterprise area and tackling regional unemployment – the vision of tackling inequality is by no means one that market mechanisms are to be excluded from.
To ensure strong growth on the other side of the pandemic, such mechanisms are vital to ensure an organic and vibrant economy – not one that simply attempts to redistribute the prosperity of the south elsewhere – but one that ensures similar prosperity for all regions.
The difficulty Boris faces, however, is trying to make the improvements in the North of England he wants to be remembered for without disillusioning his traditional Southern voter base. Through facilitating market mechanisms to address the regional divide, this is a problem that can be largely mitigated.
The tale of Mrs Thatcher and her problems with a maverick Chancellor will likely be haunting Boris while staring up to the ceiling from his Downing Street bed. The recent divide is not just one of policy, but of principle. Boris more than anyone recognises the threat that Rishi poses to his leadership – and so the question that will be permanently ringing within his mind is how to prevent a new occupant in Number 10.
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