The cost of Covid-19 may yet divide No 10 from the Treasury | Economics

The cost of Covid-19 may yet divide No 10 from the Treasury | Economics

Sebastian Haffner, who was a distinguished correspondent for the Observer after the second world war, was in Berlin during the 1930s before escaping to Britain, and witnessed with horror the rise of Hitler and the assault on treasured public institutions.

After Haffner’s death, his son Oliver – with whom I was at school – discovered a manuscript written by his father of what it was like to see the decay of civilised standards. It became a bestseller in Germany, and Oliver translated it into English. The book was published here under the title Defying Hitler – catchy but somewhat misleading, because, of course, most didn’t defy Hitler.

Now, despite what has become my intense dislike for the way Johnson, Cummings, Gove and their fellow Brexiters are steering the nation, I should not for one moment compare them with the Nazis. That would be absurd. Nevertheless, their assault on our institutions, not least parliament and the civil service, is deeply disturbing, and does raise concerns about where it might lead.

In the sphere of economic policy, it was interesting that Robert Chote, the much-respected retiring chairman of the Office for Budget Responsibility (OBR), sounded a warning note at the conclusion of his recent oral evidence to the Commons Treasury committee. The OBR’s view is that the Treasury is right to spend “whatever it takes” to alleviate the economic and social horrors of the depression imposed by the government in the struggle against the Plague. But in its July fiscal sustainability report, the OBR warns that “in almost any conceivable world there is at some point likely to be a need either to raise some taxes or to reduce some existing spending commitments to accommodate new ones (for example in health and social care) and to put the public finances onto a sustainable long-term path”.

Moreover, the OBR states that a no-deal Brexit would “pose downside risks to short- and medium-term growth prospects on top of the economic challenges created by the pandemic”. It notes in its report that “the economy has now experienced two ‘once-in-a-lifetime’ shocks in just over a decade”. I would add that Brexit makes it three. From the OBR’s standpoint, the obvious conclusion is that “normal” policy needs to be geared to the prospect of more frequent shocks, and hence more prudent fiscal policies.

This is not what the Johnson/Cummings duumvirate wants to hear. What with “levelling up”, their massive infrastructure plans and the “end of austerity”, they want to be more Corbynite than Corbyn. Stories have begun to appear in elements of the media umbilically linked to No 10 that the very existence of the OBR could be threatened.

Which brings us back to Chote’s parting words – to the Treasury committee, but manifestly aimed at a wider audience: “More now than ever it is important to value institutions that can give investors and citizens confidence in good government and good economic management. A non-partisan civil service, an independent central bank, robust regulatory agencies and a fiscal watchdog empowered to serve the public and parliament by keeping a relentlessly beady eye on how the government taxes, spends, borrows and lends billions of pounds of other people’s money.”

Now, at this juncture I can assure readers who have followed my decade-long attack on austerity that, in common with the OBR and Institute for Fiscal Studies, I take the St Augustine view that we are nowhere near the point where there should be a fiscal clampdown. And when the time comes, my view is that it should be taxation, taxation, taxation that bears the brunt, not yet more cuts in the kinds of social public spending that is a lifeline for so many less-well-off citizens.

However, we may be near the point where the kind of No 10 versus No 11 battles flare up, on the lines – no doubt with different causes – of the fallout between Margaret Thatcher and Nigel Lawson in 1988-89. As has been noted by almost anyone who watched Rishi Sunak’s presentation of his mini-budget, Johnson’s body language was a sight to behold.

What unites the prime minister and chancellor is that they are Brexiters: in Sunak’s case, since he was 18, well before the term was invented. On the other hand we have evidence from Anne Applebaum, in her new book Twilight of Democracy, that Johnson declared to a dinner party shortly before the 2016 referendum: “Nobody serious wants to leave the EU – business doesn’t want it, the City doesn’t want it. It won’t happen.”

As Sir Brian Unwin, head of HM Customs during the abolition of all border red tape in the EU, said on his retirement from that post, the government under Thatcher had done “so much to inspire and create” the single market.

But the EU is not primarily about economics and trade. It is a historic reaction to the 1930s, and the widespread post-second-world-war belief that what Haffner and others described about the 1930s should never be allowed to happen again.

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