The Observer view on Boris Johnson’s cabinet reshuffle

Observer editorial
Photograph: Matt Dunham/PA

Britain faces the most challenging period of its recent history. It has simultaneously to reshape its place in the international order, wholly remake its trading relationships, recast its economy and forge a new settlement between north and south, all within a few years. Yet the government that purports to be ready to meet these challenges is populated by some of the weakest political and governing talent for generations. When the dust had settled on Boris Johnson’s cabinet reshuffle , the overriding impression was that conformity to Number 10’s Brexit-framed diktat, in particular to the prejudices of his chief adviser, Dominic Cummings, is more prized than ability, however much Downing Street may protest that its ambition is delivery of “the people’s priorities”. The country and the Conservative party will be fatally ill-served.

Brexit is the alpha and omega of this government, even if it wishes to expunge the word from the political vocabulary. The tensions surrounding Brexit had become crystallised in the dysfunctional, poisonous relationship that had developed between Sajid Javid and Number 10 and which manifested itself in the one-hour showdown between prime minister and chancellor last Thursday that led to the latter’s resignation after only seven months in office. No self-respecting minister, said Javid afterwards, could accept the demand that he sack five advisers for them to be replaced by Number 10’s nominees – answering to Dominic Cummings and not to the chancellor. His replacement, Rishi Sunak, has had to accept the office on the terms Javid refused and is thus surrounded by a team who report to a stronger power centre. This arrangement would be impossible in a charity shop, let alone the second most important office in the land.

The reason for the coup is that Downing Street cannot accept the economic and political realities and policy consequences as relayed to them by the Treasury, which is keenly aware of two profoundly troubling economic facts. The first is that, despite the prime minister’s upbeat language, the immediate economic prospects are dire and demand extreme circumspection in how the economy is managed. Stagnating tax revenues do not provide the platform for the kind of public expenditure increases sought by Johnson and Cummings as they aim to level up north and south, unless the aim to limit borrowing only for capital expenditure is abandoned. Javid had aimed to balance current day-to-day spending and revenues by 2023, with even that pledge demanding tax increases, given poor growth prospects. It was not a message Number 10 could accept, with Johnson wanting to “ping off the guy ropes of self-doubt and negativity”. The Treasury’s world view was that of recalcitrant Remoaners.

The second is that the Treasury knows dire economic forecasts are intertwined with the reluctance of overseas and domestic companies to commit major investment in the UK with the spectre of an ultra-hard or even no-deal Brexit. If this year’s negotiations with the EU – crammed into a mere 10 months – end with Britain in effect having to trade with its overwhelmingly biggest trading partner on or close to unprivileged WTO terms, which senior ministers such as Michael Gove have floated as a real possibility about which the government is allegedly unconcerned, the economic implications are serious. There can only be a slowdown in exports to the EU, mirrored by an acceleration of imports, as well as a weakening in our vital surplus in financial services, because access to Europe’s markets in services on current terms will be denied. This is why the overwhelming bulk of economic forecasters predict lower growth as a result of a hard Brexit.

The Treasury wants to ameliorate this prospect by pressing for a framework trade agreement with the EU that preserves as much market access as possible, especially for the crucial financial services industry. Javid had been photographed going into Number 10 last Monday with a document making the case that Britain should push for “permanent equivalence” in the regulatory financial regime between Britain and Europe. The Treasury seeks to protect a £69bn trade surplus in financial services, fundamental to sustaining overseas investors’ confidence in sterling, especially as after Brexit Britain’s trade deficit is bound to widen. But this implies Britain being a rule-taker and not “taking back control”.

To make this case to Johnson and Cummings is to betray Brexit. The Treasury’s entire perspective – pushing for a comprehensive trade agreement, trying to safeguard the City and business while managing the economy cautiously given extreme economic weakness – is the antithesis of what Cummings and Johnson believe. The City is more than capable of looking after itself in a “global Britain”, while the way through any short-term economic weakness is to spend, cut taxes and borrow – straight out of Donald Trump’s economic playbook. Javid may have been willing to borrow for capital investment such as HS2, but that was not good enough. He had to be made to bend to Downing Street’s will – or go.

The necessity to follow through on all that a hard Brexit entails was at the heart of the reshuffle, and betrayed the motives behind the moves. The foreign and home secretaries – B team politicians but ultra-loyal to the government’s direction of travel – kept their jobs while those replacing sacked ministers could be relied upon to do Number 10’s bidding or help further centralise power. Thus, Suella Braverman’s job as attorney general will be to weaken the courts’ capacity to constrain government via judicial review, a process to be fundamentally reassessed, while new Northern Ireland secretary, Brandon Lewis, will be required to make none of the independent moves initiated by his predecessor, Julian Smith, which secured the power-sharing government.

The new cabinet is charged with taking the country through its greatest postwar challenge. The collective bet is that concerns about a hard or no-deal Brexit can be ignored as Remoaner gloom-mongering. Yet those concerns are very real and about to manifest themselves. Careless of all precautionary action, Number 10 is centralising power to ensure its will is met. The danger is inevitably that the government is set to founder on the rocks of Brexit. All of us are set to founder with it.