On becoming prime minister in October, Rishi Sunak set himself two essential tasks. The first was to fix the immediate economic turmoil unleashed by his predecessor, Liz Truss. His second was to restore order to a government in meltdown and reassure the public that a capable pair of hands was back behind the wheel.
While even his critics would concede he has made progress on the first, the events of the past week have served as a reminder that even the most competent drivers are capable of occasional carelessness.
Having spent days meticulously planning his first big set piece on levelling up, Sunak headed into this weekend buffeted by allegations of unfairness over the allocation of a £2 billion Whitehall funding pot. The fallout will be particularly wounding for Sunak, whose aides decided last month to delay the levelling-up announcement until the new year in the hope of generating positive headlines.
The carefully choreographed week, during which cabinet ministers were sent to winning towns and cities, ended with Sunak having to apologise after he was filmed riding in his ministerial car without a seatbelt. On Friday he was issued with a fixed penalty notice, his second in under a year — he had been fined over a Downing Street party. It also emerged last week that Nadhim Zahawi, the Conservative Party chairman, had made a multimillion pound payment to HM Revenue & Customs to settle a tax dispute.
As Sunak turns his attention to the fortnight ahead while recuperating at Chequers this weekend, the road in front of him looks similarly hazardous.
In ten days’ time, on February 1, hundreds of thousands of teachers, university staff, train drivers and civil servants will go on strike. It is set to be the most disruptive wave of industrial action so far.
Five days later, the NHS is braced for its biggest walkout in decades, with ambulance workers due to strike alongside nurses. By the end of the month junior doctors who are members of the British Medical Association (BMA) are expected to have voted to join them, with a 72-hour strike in March increasingly likely. Junior doctors belonging to the smaller HCSA (Hospital Consultants and Specialists Association) have already voted overwhelmingly for strike action.
Sunak will try to get back on the front foot by hosting a cabinet awayday at Chequers on Thursday, focusing on how the government can deliver his five promises to halve inflation, grow the economy, cut national debt, reduce NHS waiting lists and tackle illegal immigration. Strikes and public sector pay are also likely to feature.
The emphasis will be on the NHS, with Sunak also planning an intervention on the health service later this week. Plans for tougher immigration laws to tackle the small boats crisis and deport migrants who arrive in Britain illegally are also progressing, with an announcement expected by the end of February. This weekend, the Home Office has confirmed that it is reviving a number of the policies enacted under Theresa May. This includes resuming data sharing between banks and the department from April, to shut down accounts opened by illegal migrants.
The checks were suspended five years ago in the wake of the Windrush scandal. A new ministerial taskforce will also review whether immigration checks on accommodation, healthcare services and the labour market should be increased. In particular, ministers want to impose additional responsibilities on firms operating in the rapidly expanding gig economy, which relies heavily on self-employed casual workers, amid concern that many illegal migrants are working in the sector.
Home Office insiders say it marks a return to the “hostile environment”, although a government spokesman rejected this “characterisation”.
However, across Whitehall, senior ministers and political aides warn that any hope of solving the NHS crisis or the strikes hampering the economy are vanishingly slim.
Cabinet ministers have been holding talks with unions since the beginning of the month, a decision, Downing Street sources say, that was prompted by Pat Cullen, head of the Royal College of Nursing, signalling publicly that the union could move on its demand for a nurses’ pay rise of inflation plus 5 per cent.
However, while the government hopes that a deal is close on the rail network — train operators last week presented a “best and final offer” of a 9 per cent pay rise to the RMT union for onboard crew and station staff — elsewhere there has been no meaningful progress and little prospect of next month’s strikes being called off.
The impasse stems from a Downing Street edict that talks on pay for this financial year are not on offer. Instead, ministers are limited to discussing the pay review process for 2023-24 and issues relating to working conditions.
Even within these strictures, Jeremy Hunt, the chancellor, has made clear to ministers that future awards must be consistent with the government’s overarching goal of halving inflation by the end of 2023. This means all pay awards must be below inflation. While some sectors will get more generous increases than others, Downing Street insiders warn that any bumper offer to one group of workers, such as nurses, would simply lead to other public sector staff asking for the same.
“The chancellor completely understands the anger of both public and private sector workers whose pay packets, through no fault of their own, are being eroded by 10 per cent inflation,” said a source close to Hunt. “However, inflation-busting public sector pay rises risk permanently embedding high prices into our economy, prolonging the pain for everyone.”
Hunt and Sunak are united on this, a No 10 source said. “We could have saved ourselves a certain amount of pain on strikes but we have to consider what is affordable and we have to do what is right for the long term. Say we gave above-inflation pay rises to three unions in dispute with us now, their workers could be net worse off in a year’s time because inflation is still running at 10 per cent.”
This red line has left union leaders, including some in teaching, questioning whether more talks are worthwhile.
Elsewhere, sources say that Steve Barclay, the health secretary, is beginning to “sweat” over repeated nurse and ambulance strikes but has yet to put any meaningful proposals to the Treasury. While the idea of one-off payments to nurses has been repeatedly floated in briefings to the media, no formal request has been forthcoming.
Even if progress is made over next year’s pay awards, insiders have said it is highly likely unions will insist that increases are backdated to 2022-23. Barclay has promised to raise this within government but it is unclear whether it will be granted.
There are growing fears that strikes across the health service will make it impossible for Sunak to deliver on his promise to cut waiting lists. The two-day strike by nurses last week alone led to 5,000 operations and 22,000 outpatient appointments being postponed.
Senior government figures believe that Sunak’s relatively young team of aides underestimate the pain that lies ahead if junior doctors in the BMA vote for industrial action.
While Hunt and Barclay are publicly presenting a united front, insiders say their relationship is becoming strained as the strikes drag on.
“You have a chancellor who wants to be health secretary and a health secretary who wants to be chancellor,” one official noted.
Hunt appears to have accepted the need to step back, and that some of the NHS reforms he championed from the back benches cannot go ahead at the moment. But he has not completely stopped meddling in health affairs. Hunt has privately been pushing for doctors to be exempted from public sector pension rules and is considering a new tax-unregistered pension scheme for GPs and senior consultants. This would enable them to build up larger pension pots without breaching the lifetime pension allowance and facing higher tax rates — an issue that the BMA warns is leading to an exodus of high-earning doctors in their early fifties. Hunt considered announcing the change in the autumn statement but is now waiting for the strikes to end. It could be announced as soon as the budget in March.
It may be one of his few positive announcements. Despite originally being billed as the “growth budget”, the statement on March 15 will be lacking in giveaways. Treasury insiders are trying to lower expectations and, apart from possibly extending the 5p cut in fuel duty for a year. have begun briefing that any tax cuts are highly unlikely.
Sunak made the same point last week at a question and answer session in Morecambe. His off-the-cuff remark that the public were “not idiots” and understood why tax cuts were impossible during an economic crisis may resonate with many. But it has also angered plenty of Tory MPs who demand low taxes and have warned privately that they will dial up the criticism unless Hunt changes course. They argue that with wholesale energy prices falling, the chancellor has more headroom than had been envisaged.
While Sunak has sought to avoid confrontation with his backbenchers — including by amending several pieces of legislation — his allies are clear that he will not bend on taxation. “Economic stability is hard won and isn’t done in one fiscal event and a few difficult decisions,” a No 10 source said.
The problem for Sunak is that these red lines have left good news stories in short supply. In the eyes of MPs still loyal to Boris Johnson, the row over levelling up has confirmed that Sunak is not serious about defending the red wall seats gained in 2019.
In a development that will stoke backbench anger, it can be revealed this weekend that dozens of councils may have wasted hundreds of thousands of pounds bidding for levelling-up funding, because ministers made last-minute decisions to exclude those that had been successful in the first round of allocations in 2021.
This does not appear to have been made explicit anywhere during the application process and, according to insiders, left officials scrambling to make changes to the funding allocations days before the big reveal. The government said the original criteria explained that ministers “could take into account” prior investment and first-round grants, but that is unlikely to provide much comfort to those councils that invested time and money drawing up their bids.
Perhaps of more concern for Sunak, who promised to restore integrity and accountability to the heart of government, the furore over Zahawi’s tax affairs and Sunak’s seat-belt fine has brought back painful memories of the Johnson era.
Last week’s blunders may have been only a speed bump for Sunak. But with February’s strikes looming, there are obstacles ahead that threaten to drive his government badly off course.
