London: Prime Minister Boris Johnson's government is expected to make two significant announcements next week which will come into force in early July: the relaxation of the two-metre rule and the reopening of the hospitality sector. The announcement will define his premiership and kickstart Britain’s recovery after the coronavirus crisis. The theme for the speech is “build, build, build”, a slogan which is being viewed in No 10 as a potential successor to “get Brexit done”. Johnson himself has been heavily involved in drafting the speech alongside Dominic Cummings, his most senior adviser, and Munira Mirza, his policy chief.
The speech will focus on three broad areas - jobs, health and homes - as Johnson makes clear that the path out of the pandemic will be a huge programme of investment rather than another decade of austerity. The government is preparing to bring forward big infrastructure projects and its hospital-building programme while committing itself to hundreds of thousands of new homes. Johnson will be “much more visible” in coming weeks as social-distancing rules are relaxed. “He’ll get out there and bang the drum,” one No 10 source said. Chancellor Rishi Sunak will also play a leading role in selling the plan to the nation.
The prime minister and his Downing Street team will make a concerted effort to reunite the Conservative Party as Johnson returns to the vision he set out in last year’s election manifesto to “level up” the nation. At political cabinet last week Isaac Levido, who masterminded the Conservative victory in December, gave a presentation which showed a significant decline in poll ratings. “Everyone was very polite about it,” one minister said. “Nobody mentioned that Dominic Cummings could have had something to do with it.”
Matters did not improve at cabinet meeting. Later, the prime minister announced in the Commons that the Department for International Development (Dfid) would be folded into the Foreign Office in one of the biggest overhauls of Whitehall for a decade. The decision to scrap Dfid will leave Anne-Marie Trevelyan, the secretary of state, without a job in September. There are suggestions that she has been promised another cabinet role, with colleagues increasingly fearful for their jobs. There were reports that Sunak was considering breaking the pensions triple lock amid soaring costs.
“It felt like a power-play by Rishi - the guy is unsackable,” one minister said. “He’s Captain Sensible while Boris is blundering. You’ve got to ask whether this is a Cameron-Osborne sofa government or we could be in for a Blair-Brown shitshow.” Both Downing Street and Treasury sources insist that the prime minister and chancellor are in “lockstep”.
The prime minister said that he would do more to improve communications and bring the party with him. One Tory MP, who has been a vociferous critic of the government in recent weeks, was impressed. “Boris is much more aware of what MPs and people with experience say is going wrong,” the MP said.
Will Sunak cut shop prices?
"Timely, temporary and targeted" was the phrase used by Sunak in his Budget in March to describe the first steps in pandemic support packages. And, following Germany's temporary 3% cut in VAT, the prospect of a similar tax cut is again up for discussion in the UK. The policy is certainly timely, because it can be enacted with immediate effect. And because it is reversible, it serves as a temporary stimulus.
Stimulus
In 2008, it was argued that a general VAT cut was targeted because it was aimed at supporting consumer confidence. But that is far more debatable. It certainly was expensive, though. The upfront cost was £13bn over two years, amounting to half of the Darling stimulus package.
Most of this shifted spending in time into the cheaper VAT period. The net impact? A 1% increase in retail sales, just shy of the 0.5% overall boost to consumers predicted by the Treasury at the time, according to the Institute for Fiscal Studies. The argument floating around government earlier in the month was that there was little point in stimulating shops, restaurants and pubs that were not open. Physically enabling trade would be a prerequisite.
Consumer confidence
The point about the temporary cut is to get money flowing in the economy quickly. It has some interesting quirks as a policy. Back in late 2008, 43% of local shops only changed their prices at the till, leaving shelf prices unchanged. It is a considerable logistical cost to do so.
However, the impact on consumer confidence was marked. There was a significant rise in sentiment towards both buying household goods and making major purchases, according to the Nationwide consumer confidence survey.
