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Brexit Chancellor Fights to Be Heard Over Johnson’s Campaigning

Jessica Shankleman and Robert Hutton
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Brexit Chancellor Fights to Be Heard Over Johnson’s Campaigning

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Sajid Javid is due to stand up in the House of Commons on Wednesday to announce an eye-catching 2 billion pounds ($2.42 billion) in extra funding for delivering Brexit, in his first major speech as Britain’s finance minister.

But he’s already learning he needs to fight Boris Johnson’s team if he wants to succeed.

The past week was supposed to see Javid make his mark as chancellor of the exchequer after less than two months in the job. The former banker would present himself as the gatekeeper of fiscal discipline while promising to end years of austerity for schools, health care and the police.

Instead, he was forced to play down rumors of a rift with the prime minister’s officials after they canceled his first big speech just hours before it was due to take place, and then sacked one of his key aides without consulting him.

Now, with the prospect of an election looming, Johnson has already committed billions of pounds of public spending and promised Javid’s announcement Wednesday will be the most generous funding round for more than 10 years.

After a decade of austerity that contributed to former Prime Minister Theresa May losing her majority in 2017, Johnson wants to appeal to voters who lost out. But whether Javid has the money to deliver without an increase in borrowing will depend on the future of Brexit.

Under Strain

On Friday, a furious Javid confronted Johnson and Dominic Cummings, the premier’s senior adviser, over the dismissal of Sonia Khan, his media adviser. Cummings had fired her on Aug. 29 after accusing her of lying about being in contact with former colleagues close to Javid’s predecessor, Philip Hammond, who is committed to preventing a no-deal Brexit.

The tension intensified later that day, when Johnson announced the government’s new fiscal rule in an interview with Sky News. While Treasury insiders count the commitment to keep the debt burden falling as a victory, new rules are usually for the chancellor to announce. This time, the Treasury didn’t even issue a press release.

John McDonnell, who shadows Javid for the opposition Labour Party, said the dismissal of Khan showed who really runs the Treasury.

On Saturday, Javid insisted he has a “fantastic” relationship with Johnson. “Every government has had opponents, they will always paint pictures that they want to exist, but they’re not really there,” he told the BBC.

The spending round he will announce Wednesday has been a collaborative effort with a shared commitment to improve the U.K.’s infrastructure, according to people close to the planning. Like all minders of the purse strings, Javid’s job is in part to push back against ministers who want to spend freely.

Limited Room

Johnson has made a steady drip of spending announcements all summer in a sign his Conservative Party is gearing up for an election. On Friday evening, for example, there was cash for schools and there’s also been a promise of 20,000 extra police officers and 1.8 billion pounds ($2.2 billion) for the National Health Service.

Javid will set departmental budgets for one year only because of the uncertain economic outlook and will focus on commitments to put more resources into education, policing and health care. On Tuesday, the Treasury announced a 210 million-pound training program for almost half a million nurses, midwives and other frontline health professionals.

Javid insists he can increase spending without breaking existing rules, which require the structural budget deficit to be less than 2% of GDP in 2020-21. In theory, the 5 billion-pound price tag of the commitments made so far should be easily affordable. In March, the Office for Budget Responsibility estimated “headroom” of 15 billion pounds for increased borrowing before reaching the deficit ceiling.

However, Javid’s room for maneuver may be much more limited, and possibly non-existent. The economy is set to be smaller next year than the OBR predicted and government spending is rising at an unexpectedly rapid pace. Leaving the European Union without a deal would blow an estimated 30 billion-pound hole in the public finances and leave the fiscal rules in tatters, according to OBR forecasts.

The relationship between prime minister and chancellor is the central one in most British governments. Margaret Thatcher’s battles with her chancellors helped to hasten her end. Tony Blair’s administration was torn apart by his fights with Gordon Brown, who in turn clashed with his chancellor, Alistair Darling. A rare exception was the close alliance between David Cameron and George Osborne.

While some of Johnson’s other senior ministers won their positions through loyalty, Javid was appointed despite his lack of it. He was able to set the terms of his job, even though he refused to bow to pressure from Johnson’s team to support him during the leadership contest.

That’s perhaps unsurprising from someone who has had to fight harder than most to get to the top. While Johnson’s background features the private Eton school and then Oxford University, Javid attended a state school where he was advised to become a television repair man.

His father paid for him to study mathematics at a higher level than his school provided, and he recalls suffering racial abuse because of his Pakistani background. He’s not just the first Asian chancellor but also the first to be educated at a technical college before university.

New Pace

Javid has brought a new pace to the Treasury. Within a week of starting he’d asked every department what they needed to prepare for a no-deal Brexit and allocated the money. Spending decisions that were once painfully picked over for weeks or even months were signed off rapidly, according to one person familiar with the department speaking on condition of anonymity.

Javid and Johnson’s first public rift could be a sign of what’s to come in a government under pressure to deliver the herculean task of leaving the EU by the end of October.

But it could also just be a rite of passage that Javid’s predecessors have almost all trodden, learning that being a fighter is key to holding one of the U.K.’s great offices of state.

--With assistance from Andrew Atkinson.

To contact the reporters on this story: Jessica Shankleman in London at jshankleman@bloomberg.net;Robert Hutton in London at rhutton1@bloomberg.net

To contact the editors responsible for this story: Tim Ross at tross54@bloomberg.net, Thomas Penny, Stuart Biggs

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