It never ceases to amaze me the way that the media, both reflecting and influencing public opinion, build public figures up – and then knock them down. The latest public figure to be rising, and riding, high is chancellor Rishi Sunak. This man was virtually unknown to the wider world until the duumvirate running this country – prime minister Johnson and his principal adviser Dominic ‘Eye Test’ Cummings – unceremoniously undermined the authority of his predecessor, Sajid Javid, to the point of provoking his resignation.
Sunak is, for the moment, in a strong position. It is difficult not to be popular if you are a rightwing believer in low public spending going against your instincts and doling out money as if there were no tomorrow. Chancellors whose predecessors have resigned or been sacked are in a strong position. One thinks of Roy Jenkins, who succeeded James Callaghan in 1967-70, and Norman Lamont, chancellor 1990-93. The latter’s appointment was so soon after Nigel Lawson’s emotional resignation in 1989 that people have almost forgotten the brief chancellorship of John Major, 1989-90. That was before Major became prime minister and appointed Lamont, his campaign manager, as chancellor.
Lamont inherited the recession that was the inevitable aftermath of the ‘Lawson Boom’ of 1988. That’s the traditional route to British recessions: an expansionary phase of the business cycle, exaggerated by over-ambitious mistakes in economic policy. In Lawson’s case, it was a belief that he had achieved ‘an economic miracle’. Instead he had stoked up the inflationary fire, which led to a recession. It turned out to be a serious mistake for prime minister Thatcher and Major to have put the pound into the European exchange rate mechanism (ERM) just as reunification led to a burst of inflation in Germany, and the high interest rates within the ERM forced out the pound on Black Wednesday, 16 September 1992. It was only a matter of time before Lamont carried the can for Black Wednesday and the recession of 1990-92. Lamont was against the ERM policy, but this did not stop him from accepting the prestigious Cabinet role of chancellor, which had long since superseded the foreign secretaryship as the second-most important post in the cabinet. The 1990-92 recession had been the third under Conservative chancellors in 30 years. The first was under Tony Barber, chancellor 1970-74, who followed Labour’s Jenkins. When unemployment reached the previously unheard of postwar total of 1 million in the winter of 1971-72, all the brakes came off economic policy and we experienced what became known as the ‘Barber Boom’, followed by the first oil crisis of 1973-74. Barber’s reputation never really recovered.
But the mid-1970s recession was minor by comparison with that of 1980-81. The chancellor at the time was Sir Geoffrey Howe. The recession was aggravated by Howe’s first budget of 1979, and his 1981 budget, when he cut public spending while unemployment was still rising, has been controversial ever since. True, monetary policy was eased, and an overvalued pound edged down to more realistic levels, but unemployment went on rising to over 3 million by 1985. Howe hardly goes down in history as a great chancellor. He is remembered more for his spectacular fall out with Thatcher over Europe and his devastating resignation speech. Returning to the 1990s, Lamont’s successor, Kenneth Clarke, 1993-97, had a relatively easy ride, presiding over a marked economic recovery period, which stretched to 2007 under Gordon Brown’s 1997-2007 chancellorship, was associated with what became known as ‘sustained, non-inflationary growth’. It was of course too good to last, and along came the great recession of 2007-2009. The Conservatives tried to blame this on Gordon Brown’s spending policies. This was nonsense. Brown was not responsible for the recessions that swept the western world. It was, as Treasury permanent secretary Sir Nicholas Macpherson wrote at the time, “a banking crisis, pure and simple”. Alistair Darling was chancellor from 2007-10. He and Brown emerged creditably from that recession. Unfortunately, their well-engineered recovery was slowed by incoming Tory chancellor George Osborne’s austerity programme, and the impact of that policy has been seen in the unpreparedness of the British economy for the Covid-19 crisis. The important point about the present crisis is that it is not an unexpected, business-cycle recession, but the result of a deliberate clampdown on economic activity. So far, so good for Sunak’s reputation. But if he goes ahead with his plan to terminate the furlough rescue operation and unemployment soars, as forecasters expect, Sunak may find himself diving from hero to zero as fast as his reputation has risen.