We all know this is going to end in tears and we are running out of scapegoats to blame – Owl
Dominic Cummings, addressing staff gathered in “mission control” on Tuesday morning, was blunt about the motivation behind Downing Street’s new outpost in the heart of the Cabinet Office.
The response to the Covid-19 crisis had too often been a “shitshow”, he said. This new unit would try to put an end to any “miscommunication” between the political and administrative arms of government.
In roughly equal numbers, political aides and civil servants stood in the whitewashed room with rows of desks and TV screens to listen to his version of the future.
After Mr Cummings had finished, Boris Johnson spoke briefly. He joked at one point that the “mission control centre” reminded him of a newsroom. Other inhabitants of Room 38, 70 Whitehall, had a different take. Some thought the atmospherics were more Ricky Gervais’s The Office than Nasa.
The screens, which in time will display data-tracking progress against key challenges such as coronavirus, were showing a Powerpoint presentation of government priorities.
Further down Whitehall in the Treasury, one metric above all is flashing red — Britain’s ever-growing mountain of debt. Government borrowing has ballooned over the past few months to pay for an additional £190 billion spending since March.
While millions of diners were Eating Out to Help Out last month, the man picking up some of the bill was wondering how to pay. Rishi Sunak, the chancellor, commissioned work on a slew of tax rises but he and his team were aghast to see their deliberations splashed across the newspapers as MPs were about to return to parliament.
Seven major tax rises were modelled over the summer, including increases to capital gains tax, corporation tax, fuel duty and national insurance contributions for the self-employed. Cuts to pension tax relief for high earners are being mooted along with a simplification of inheritance tax rules.
In normal times, any one of the tax changes would be deemed politically toxic, as previous chancellors such as George Osborne found to their cost.
Without context or other explanations many, if not all, of the rises looked unappealing, including to Mr Johnson. The extent to which the prime minister is prepared to increase taxes in the budget this autumn remains unclear but some of his cabinet believe that he is determined to resist his chancellor.
“It’s not going to happen,” one senior ally said. “It’s the wrong solution. It goes against fundamental Tory principles. It’s not what Downing Street wants to do. The prime minister is not into it at all. This is a Treasury position, not a No 10 position. These briefings are all about softening up No 10.”
Details of the Treasury’s proposals infuriated some cabinet ministers.
“If you raise taxes at this stage you will choke off the economic growth that will pay off the debt in the long term,” one said. “There’s no support for this on the back benches. If we wanted Jeremy Corbyn and his tax rises we would have voted for him. We didn’t.”
Alok Sharma, the business secretary, and Oliver Dowden, the culture secretary, are said to be more accepting of the idea of tax rises. One cabinet minister said: “The issue will be that because Boris is not Mr Austerity, where are we going to get the money? I’d be absolutely against direct tax rises but we do have to look at indirect taxes. At the moment we’re addicted to the low cost of borrowing and it looks like that is going to continue for some time.”
There is a continuing debate around the Tory manifesto pledges, particularly the pensions triple lock. Under the mechanism, the state pension rises in line with wages, inflation or 2.5 per cent, whichever is higher.
Mr Sunak is understood to be pushing for the lock to be suspended next year to ditch the 2.5 per cent element.
This would save the Treasury £2 billion a year and avoid a significant rise in state pensions at a time when wages are expected to stagnate. Mr Johnson is said to hate the idea of abandoning a manifesto pledge.
Of the tax rises under consideration, the Treasury is understood to believe that pensions tax relief is the most ripe for reform. Higher earners now get tax relief at their marginal rate of 40 per cent when making pensions contributions, while lower earners have relief of just 20 per cent. “It’s inherently unfair,” one Treasury source said. “Why should the rich get such a huge benefit compared to those on lower earnings?”
Mr Sunak is understood to be considering introducing a flat rate of relief for all saving into their pensions. Sajid Javid, Mr Sunak’s predecessor, considered adopting a flat rate of 30 per cent. The move would provide a boost to lower earners saving into their pensions while cutting relief for higher earners.
Treasury modelling suggests that it would save the government £3 billion to £4 billion. Mr Sunak is considering a flat rate of tax relief of 20 per cent, saving about £10 billion a year. While the savings may be significant, introducing the measures would be complex and require Revenue & Customs to devise a new system, taking up to five years to implement. Whatever the private tensions, the prime minister and chancellor stood together as they addressed MPs on Wednesday. “If we don’t approach the next election with there being some clear blue water on spending, borrowing and of course, tax, then we will have removed one of the most important reasons that people vote Conservative,” Mr Sunak told a meeting of last year’s intake of Tory MPs. “If that’s what the British people believe in — that none of this stuff matters, sound finances don’t matter — then they would have voted Labour at the last election. But they didn’t. So it is important we set up that distinction, you can’t just show up three months before the next election and say this stuff is important. You’ve got to prove it.”
Mr Johnson warned the new intake that things were going to get worse before they got better — widely interpreted as an acknowledgement that the budget would be politically painful.
Mr Sunak is said to be determined that the budget proves to the markets that he is prepared to set public finances on a course towards sustainability.
Downing Street sources said that Mr Johnson and Mr Sunak were in “lock step” over plans for the budget. The vehemence of the response to some of the proposals caught Mr Sunak off guard, however. Rises to fuel duty are now almost out of the question. He is sympathetic, also, to the argument that faced with Brexit uncertainty a rise in corporation tax may be best postponed.
Meanwhile, Mr Cummings presses ahead with his rewiring efforts behind a bank of desks that includes his data supremo, Ben Warner, and officials.
The key figure apart from Mr Cummings is Munira Mirza, the head of the policy unit. Also in the room is the prime minister’s implementation unit and the No 10 legislation team.
Insiders say that Mr Johnson prefers to remain in No 10, along with Martin Reynolds, his principal private secretary. Lord Frost’s Brexit unit has not moved to mission control, nor has Mr Sunak’s team. Sir Ed Lister, the chief strategic adviser, is also absent.
“It’s like a sort of data boy’s frat house,” one official said after visiting Room 38. “Dom sits there with the people he thinks are clever enough to be there. It’s like that film about Facebook, The Social Network. You know, where they sit around in a Harvard dorm trying to build some software. Except they’re trying to run a country.”
Simon Case, the new cabinet secretary, retains an office almost equidistant from both power centres.