Last Friday morning, a group of Tory advisers, including Boris Johnson’s new deputy chief of staff, David Canzini, held a meeting at Conservative party headquarters to discuss political strategy. A self-styled hard man who uses the name @DCGrumpy on Twitter, Canzini was one of those brought in to Downing Street a few weeks ago to sort the place out after “partygate”, and resurrect Johnson’s fortunes.
“Canzini is one of Lynton Crosby’s people,” said a party source, referring to the veteran Australian election guru who worked with Johnson on his successful 2008 mayoral campaign in London. “They think Ukraine has changed everything, taken the focus off partygate. They think, with the war, that everything can move on, and they get him re-elected in 2023 or 2024.”
Over the past few weeks, Canzini has been telling Tory advisers that Brexit and measures to deal with the soaring cost of living should be the two top domestic priorities for the Johnson government. Advisers say the theory seems to be that the supposed benefits of leaving the EU, including freedoms over setting taxes such as VAT, can help ease the current economic pain caused by inflation, giving a domestic coherence to the Johnson administration that it has struggled so far to find.
In Friday’s strategy session, there was discussion of how their ministers should best take these messages to the country. But the mood was subdued. The reason was that the process of “relaunching” Johnson and his government around domestic themes had just hit a major bump in the road, in the form of Rishi Sunak’s spring statement two days before.
Before he rose to address MPs at 12.40pm on Wednesday, Sunak’s set-piece had been billed as the moment when the Tory government would show it cared about people struggling to pay their energy and food bills, as inflation headed skywards.
But – despite its enthusiastic initial reception by Conservative MPs in the chamber – within hours of Sunak sitting down, it was clear the statement had bombed, both in the party and out in the country.
By Thursday and Friday, even normally ultra-loyal Tory newspapers were accusing the chancellor of having failed to rise to the moment and grasp the gravity of the cost of living crisis. The Express ran a headline on its front page on Thursday asking what on earth had gone wrong for the man who, only weeks ago, was hailed as Johnson’s likely successor: “The forgotten millions say: what about us?” it said.
Tory MPs observed that Sunak’s chances of ever being prime minister appeared to have just gone up in smoke while Labour claimed that privileged Conservatives such as Sunak – one of the richest men in politics – simply could not identify with real people.
“I don’t want to get all class war about this,” a shadow cabinet minister said on Thursday “but it did look a bit like the rich boys think this crisis in people’s lives is all just a political game.”
Before the statement, there had been tensions within the cabinet over what it should contain. Several senior ministers, including Jacob Rees-Mogg, the minister for Brexit opportunities, had wanted Sunak to cut spending to reduce inflation.
Johnson, on the other hand, is said to have wanted more help for people with their mounting energy bills. But Sunak wanted to hold down spending in order to cut taxes closer to a general election, and stood firm to his own plan.
What emerged was a set of offerings and political messages that satisfied almost no one. A 5p cut in fuel duty and a rise in the threshold at which national insurance will kick in were among measures for those struggling to get by. But the NI move raised questions about why Sunak had opted in his spending review last autumn to raise it by 1.25% from April – a plan that remains in place.
The biggest hole in Sunak’s plan, however, was that there was nothing for millions of people who are self-evidently suffering most – those on benefits. “It did not sit well with us being all about levelling up,” said a former Tory minister afterwards.
Despite demands for the chancellor to increase benefits by the rate of inflation, or near to it (such a move would have cost a few billion pounds if implemented for just one year), he did nothing: benefits and pensions for millions will go up by 3.1% next month as already stated, with inflation heading towards 8%.
Political motives were clearly at play. In an attempt to appease Tory MPs who accuse him of being a high-tax chancellor, Sunak held back about £20bn of cash in his war chest for a 1p income tax cut – but not until 2024, the probable year of the next general election.
The Office for Budget Responsibility (OBR) said the chancellor’s actions would offset only about a quarter of the tax rises he had announced last October and warned that living standards would fall by 2.2% over the coming tax year – the biggest fall since the 1950s.
What had been intended as an occasion to ease the pain had served merely to advertise the enormity of the cost of living crisis, increase national anxiety, and demonstrate the government’s inability to respond.
Out in the real world away from Westminster, those Tory MPs who took seats from Labour in 2019 had particular reason to worry. Johnson had led the Tories to victory and broken down the “red wall” in that election on promises to level up the country and deliver Brexit dividends to working people.
One such red wall seat is West Bromwich East, now held by Conservative MP Nicola Richards, having before been a Labour stronghold. The constituency contains some of the poorest communities in the UK.
Nearly a third of children live in relative poverty, according to government figures from 2019/20, which are likely to have risen further since then as household incomes have become squeezed. In some postcodes, more than 60% of children are living in poverty.
On Friday, Keith Turner, the manager of a local food bank which he set up in West Bromwich community church in 2007, said demand was rising all the time.
“Most people round here are on a hiding to nothing,” he said. “People are usually on prepayment meters, which are more expensive, and the rising energy costs are going to be a killer. That’s only going to get worse.”
He says it is not just food bank users who are feeling the pressure caused by rising prices – but those who run them, too. His team of about eight volunteers take donations from the local community, but nowadays they are not enough and they have to supplement them by buying in additional supplies. “When things are going up by 30p each, it doesn’t sound much on each individual item but it adds up to a significant extra cost to us,” says Turner.
He was disappointed by the lack of help for low earners in Sunak’s statement. “They need to take a serious look at the benefits system,” he said. “It’s being propped up by food banks. The government and civil servants must have the brains and talent to understand that it’s not fit for purpose.”
Outside the nearby jobcentre, Alexander, a single man living in a shared house, explained that he had £250 a month to live on after paying his rent. “I’m looking for work picking and packing but there’s nothing in West Bromwich. I don’t drive, and the buses don’t run early or late enough to places like Oldbury and Wolverhampton, where all the work is. I can get by at the moment but I don’t know how much longer I can live like this.”
Sophia Bright, a single mother of two children aged four and six, said inflation was hitting her hard and eroding the income from her job at a bakery.
“I’m lucky that I can work and my mum can look after the kids but everything is so hard with only one income. There’s a lot of talk about looking after ‘hardworking families’ but you just know they don’t mean my kind of family, because if they did, there’d be more support.
“When you’re the only one working and you have kids to feed and clothe and keep warm, it’s almost impossible. My rent has just gone up nearly 10% because the landlord said his costs have risen.
“I could barely afford heating before and my flat is small – now food is going up as well and I don’t have anyone to split the cost with. There’s no one more hardworking than a single mum, and the government doesn’t seem to care.”
While she did not vote at the last election, she did vote against Brexit, which she now believes is the primary cause of rising prices.
West Bromwich East had one of the highest proportions of leave voters in the UK, with 68% voting to come out of the EU in 2016. Bright thinks lots of people have now changed their minds. “All my friends voted for Brexit and I think now they’re regretting it. I don’t think they’d vote the same again now. I tried to warn them but they didn’t listen – and now look where we f***ing are.”
The latest Opinium poll for the Observer on Sunday finds that 58% of voters think Brexit is helping to push prices up in the shops against just 8% who do not: 49% think it is damaging the economy as a whole, while 16% do not. And 68% think the government should be doing more to ease the cost of living crisis.
The danger for Johnson and his government is that these perceptions take deeper root in the coming months as the cost of living crisis intensifies.
As we report today, huge battles now lie ahead, with millions of public sector workers demanding pay rises that match or exceed inflation. The unions are warning that people will leave their jobs in the NHS, teaching or the civil service unless they receive pay rises that allow them to maintain their standard of living, and reward them for getting the country through the pandemic. But Sunak – who offered nothing to people on benefits – has signalled the need for pay restraint to avoid an inflationary spiral. The two sides are miles apart.
The TUC general secretary, Frances O’Grady, told the Observer on Sunday that the country is at a tipping point. Using unusually strong language, she says: “Many public sector workers across services like health, education and social care say they don’t know if they can take it any more. If they don’t at least get a proper pay rise and help to reduce workloads, it will be the final straw.”
Already since Wednesday there are signs that the cost of living crisis is dividing No 10 and the Treasury as a blame game rages over the bungled spring statement. Splits are appearing across government on wider fronts. In the coming fortnight, the government is due to set out its new energy strategy to achieve independence from oil and gas supplies from overseas, including Russia, and to gain more control over energy costs as a result.
But the issue is prising apart Johnson’s cabinet, with ministers at loggerheads over the extent to which renewable energy projects, such as wind farms, should be increased, and nuclear power stations expanded.
Suddenly the challenges facing Johnson have changed. The crisis over parties has been replaced by another that directly affects millions of people who struggle to pay their bills. As another Tory ex-minister put it on Thursday, that kind of crisis is far more dangerous for the Conservative party as a whole. “If we really think we are in a better place than we were a few weeks ago, we are deluding ourselves.”