Not fines, but inflation is a resigning matter — for Sunak

The only countries where the police normally remove heads of government from office are police states. In a mature democracy such as the United Kingdom, we change prime ministers by voting

them out of office in a general election. Exceptionally they resign in mid-term, either for reasons of ill-health (Churchill, Macmillan and Wilson are examples) or because they have lost the

confidence of their party (Thatcher and May, among others). Neither of these conditions applies in the case of Boris Johnson. The British constitution does not require a prime minister to

resign because they have received a fixed penalty notice.

Whether he was wise to drag this sorry saga out for several months is another matter. What was originally just a Labour Party debating point became “Partygate” because Downing Street pushed

back, insisting that no rules had been broken. Boris Johnson is doubtless sincere when, in the personal apology he issued last night, he said that it had not occurred to him that by taking a

ten minute break in between a punishing schedule of meetings to celebrate his birthday with his wife and colleagues, he was breaking the law. If he had explained this and apologised in the

first place, he could have saved himself and everyone else involved a lot of bother.

With the exception of those who have never supported Boris Johnson, the Conservative Party and the country are now ready to put Partygate behind them. By the next election it will have

become part of the narrative of the pandemic and people will take it into account when casting their votes. The only person who seems to have seriously considered quitting at this point is

the Chancellor. For him to have offered his resignation merely because he received a fine would have been absurd. It would also have been damaging and disloyal.

Yet there is a much more serious reason why Rishi Sunak might have been right to consider his position. Inflation last month hit 7 per cent, a whole point higher than the Bank of England

expected. The rate is predicted to rise to 8.5 per cent this month. If so, it will have doubled in just six months and neither the Governor of the Bank, Andrew Bailey, nor anyone else knows

at what level it will peak. To say that inflation is out of control is therefore hardly an exaggeration.

The primary responsibility for maintaining price stability rests with the Bank of England. That it misjudged the connections between the money supply and the economy during the pandemic is

now becoming apparent. Quantitative easing may have been the right response to the 2008 financial crisis but it was the wrong one this time. The Bank overreacted to a brief phase of

deflation early on in the pandemic and, even when the danger of runaway inflation was apparent, continued in effect to to print money. Long after the house was on fire, our central bankers

poured fuel on the flames.

Why, though, was the Bank inclined to be so cavalier with the money supply? The responsibility for that lies at the door of the Treasury. Rishi Sunak built his reputation as a Chancellor on

a massive Keynesian stimulus,  using public spending and soft government loans to keep the economy afloat during the precipitous but brief recession caused by the pandemic. Financed by the

Bank’s purchase of government debt, Sunak succeeded in masking the impact of Covid, but the policy overshot the mark and carried on for too long. Neither the Governor nor the Chancellor took

seriously the warnings of impending inflation that have resounded for the past 18 months or more, not least from Brian Griffiths here, here, here and here. To ignore the advice of such a

distinguished economist as Lord Griffiths, who headed the Downing Street policy unit under Margaret Thatcher and thus had first-hand knowledge of the last period of high inflation, was a

grave dereliction of duty.

For this reason alone, both Andrew Bailey and Rishi Sunak deserve to lose their jobs. The Governor has manifestly failed in his statutory duty to prevent inflation rising above 2 per cent

for more than brief periods. Few expect inflation to return to that level this year or even next. Despite the much-vaunted “independence” of the Bank, however, the custodianship of the

currency is the first task of sound government. It cannot be entirely delegated to unelected officials, either at the Bank or the Treasury. The buck stops with the Chancellor. He, more than

anyone else, is culpable for the “cost of living crisis”. Most people do not care how rich Sunak and his wife may be, nor about her non-dom tax status. Nor do they care about his fixed

penalty notice. What they do care about is that their bills have become unaffordable. Millions of people are being reduced to destitution. Inflation is a terrible scourge of society which

sets people against one another. In its own way, it is even more destructive than the pandemic.

Rishi Sunak must know by now that he should have told the Bank to take away the punch bowl at least a year before it did. The party that mattered was not the one at Number 10 for which he

and Boris Johnson have now been fined. It was his debt-fuelled bonanza that debauched the currency. His promise in the Spring Statement of an income tax cut just before the next election

merely looked cynical. It added insult to injury. He may carry on for a while in office, but Rishi no longer looks dishy to the great British public. A Chancellor who loses control of

inflation is doomed. If Sunak has not gone by the next Cabinet reshuffle, the Prime Minister should sack him.

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