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Rishi Roulette or Sure Thing Sunak?

Much has already been written on the politician who, to my mind, has generated more positive headlines than his cabinet colleagues in this time of crisis.

Is it me or can he even carry off a photo opportunity as a waiter serving meals with a smile (but without a face mask) to highlight one of the policies in his summer update? All the while wearing a badge identifying him as: Rishi?

That said, he’s been a bit less visible lately. Probably because I thought I’d write about him!

Still, according to the Institute for Fiscal Studies, his plans to extend state support for business and the economy will take public borrowing to £350 billion.

That borrowing is well under the estimated cost to the public purse of bailing out the banks during the credit crisis (somewhere between £500 and £900 billion), which tends to get lost, so routinely are we told this latest intervention is unprecedented.

Gordon Brown's record

There are other factors I’ll touch on but it’s, arguably, not as serious as 12 years ago, at least in the financial context.

Which brings me to Gordon Brown and his role in the credit crunch.

It’s instructive because wherever you are on the political spectrum, the consensus is that Brown’s grasp of economics was one of the key factors in persuading other leaders to ensure liquidity across world markets was maintained. In essence, co-ordinated global financial stimulus to ensure the global system continued to function.

He was widely considered to have played a pivotal part but, electorally, it was to no avail when he lost to David Cameron in 2010.

If anything, it demonstrates the gulf between economics and politics. Without this intervention, the crash would have been considerably worse. Surely something to benefit him at the ballot box? Evidently not.

Sunak’s positive spin

Invariably, when Rishi Sunak has appeared, it’s been to deliver the news that he’s spending more to prevent companies and livelihoods sagging into the oncoming recession.

Worries about whether or not it can be afforded have tended to be thrown into sharp relief by the fact that he is delivering good news promptly, a positive interlude.

In normal times, opening the Treasury’s hose would be frowned on or, at least, criticised robustly.

But these aren’t normal times. Whatever the narrative being played out, his part in this all-too-real drama has been well defined. He’s the face of a government whose direct financial support for the electorate is unlikely ever to be repeated on this scale.

Going back to my earlier point, if you were (correctly) to characterise such intervention as socialist, would it secure instant electoral success across the aforementioned political spectrum? Or is it not that simple? The latter, I suspect.

At the time of writing, he’s turning his attention to ways to shrink the ballooning deficit. Taxing online retailers is the latest kite to fly, a nod, perhaps, to help stem the digital undercutting of the High Street and its business rates.

Long-term legacy

One major difference between covid and the crash was that the wider economy continued to function - not close down - back then. Most would concede this is where the genuine slog lies.

It’s hard to foresee increased taxation being out of bounds, given that it is the principal state mechanism for raising money needed to pay for public services.

The flip side of this spending is what measures will be taken to repair the hole left by this unforeseen borrowing. And what impact that will ultimately have in four years’ time.

The fact is that the debt will be with us for far longer than that but how it’s interpreted electorally, is another matter.

Sunak appears confident that the scale of investment he is proposing will, over time, be folded into Britain-as-usual and paid back over the coming decades.

As I’ve posted before, being able to balance the long-term, strategic direction of public finances tomorrow with the urgency of today is something with which all chancellors grapple. It’s something with which most actuaries can nod along to, knowingly, as well.

If there’s no second wave of infection (a big if), if the action taken does shield the economy from the worst, then what could be characterised as a necessary gamble could well be seen to have paid off.

Economically and socially, that has to be something to welcome, whatever your politics.

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Invariably, when Rishi Sunak has appeared, it’s been to deliver the news that he’s spending more to prevent companies and livelihoods sagging into the oncoming recession.

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After 40 years of experience in the pensions world, I'm sharing my insights.