A new Brexit deal could allow Rishi Sunak to lead the Tories out of turmoil
If the Tory leader does not risk leading, he will end up being led – and the price of that is never success
November 20, 2022 3:55 pm
If Tories do not much rate the Tory party or its leadership, how can they hope to revive the ailing political brand in the eyes of voters?
This is the conundrum facing Rishi Sunak as the milestone Autumn Statement sinks in. The implications of a tax hike for Middle England and indications emerging on Sunday of a prospective bid by Number 10 to reset relations with the EU are new dividing lines for a party whose defining obsessions are tax and immigration.
As much as the “sensible tendency” inside and outside the party will cheer reports of an attempt to engineer a “Swiss-style” relationship reconnecting the UK to parts of the single market, the price of that may well be the return of the “blue-on-blue” hostilities which split the party into all-out war after the EU referendum and a new bout of instability.
The conundrum for Sunak is that he is tolerable to the right of the party because he voted to leave the EU. But he is also an arch pragmatist, inheriting a flailing economy and fully aware that trade frictions are a drag on improving the UK’s prosperity.
His early moves – a skeleton deal with France to address the small boats shunting asylum seekers across the Channel and signing off a deal on defence co-operation to facilitate troop movements across European borders – are intended to soften up the main European powers in hope of ending the Brexit stalemate which has already caused damage by making it hard (and sometimes impossible) for businesses to trade with our near neighbours.
Yet any real advances here rely on at least some concessions on free movement and a linkage to Sunak dropping some key parts of the hard legislation to unilaterally override part of the Northern Ireland protocol. Does he stick or twist? The ferocity with which Steve Barclay, the Health Secretary and the Cabinet’s heavyweight Brexiteer, shot down the possibility of a Swiss solution, saying that he and fellow Leavers have “worked very hard to maximise” the freedoms of independence, is a sign that this idea could crash rapidly. Sunak could point out that those “freedoms” have not produced any tangible economic benefit. That may be the point on which Sunak needs to stake his authority, or risk being remote-controlled by the powerful ERG group of right-wingers in his ranks.
One option being discussed in Downing Street, I understand, is an attempted “trade off” deal, which would require some concessions on access to the single market and a less stringent application of the Protocol. Sunak’s calculation is whether he could start moving more overtly in this direction – which would be the centre piece of a premiership otherwise destined to be defined by blood, sweat and tax – or whether the angry fragility of the party would topple the leadership and force an early election to Labour’s benefit.
Very soon, the PM will need to decide where his political momentum will lead and which risks he will need to take to get there. The “you’ve never had it so bad” budget was a relative triumph of management-expectation by the (latest) Chancellor Jeremy Hunt and a welcome reality check after the wayward approach of the Truss-Kwarteng aberration. The markets are, as one analyst puts it, “in resting mode on the UK” – no panicky sell-offs but not yet convinced that there is a growth plan to bank on or increase the investability of UK plc.
Presently, Team Sunak’s problem is that fiscal constraints mean they have little to offer besides an extension of the energy price cap. Inflation means wages will no longer no longer pay for what they used to, “fiscal drag” moves more people into higher tax brackets.
For Tory MPs with an election looming and Labour resurgent and also the donors who fill the war chest, this is a grim outlook and the Commons tearoom mood is edgy. In truth, many find the Sunak/Hunt offering underwhelming. Fundamental here is doubt that the present recipe can deliver a growth plan to offset the pain ahead which will make voters even less keen on voting Conservative than the shenanigans of the last year. One peer who has held prominent trade-promoting roles for the Government as well as convening business supporters says caustically that he has made his last investment in the UK for the foreseeable future.
Despite the near-disaster of Truss’s “turbocharging” of the UK economy via tax cuts, a sizeable number of MPs fret that the Sunak cure will simply extend the pain – and hand the spoils to an incoming Labour government. Hunt and Sunak cannot just get by by impressing centrists with their “share the pain” nostrum. Labour will rightly point out that the pain is exacerbated by erratic government.
All this, with a new turn in the spiral of Brexit agony on top, carries the potential to make the Sunak era uncomfortable very fast. So far, the emphasis has been on balancing out factions to quell internal storms. The downside of this quietism is that the PM may find his hands tied by new “red lines” set by his underlings. To put it another way: if the Tory leader does not risk leading, he will end up being led – and the price of that is never success.
Anne McElvoy hosts The Economist Asks and is a panellist on The Moral Maze BBC on Radio 4