The thinking person’s fiscal crumpet who’s feared by government

Paul Johnson has, over 13 years as director of the Institute for Fiscal Studies, become the best-known economist in the country. He’s also the most powerful, “instantly shredding”, as George Osborne tells me, “the artful spin of that year’s chancellor and telling us what the real bill we’ll be paying is”. “When Paul Johnson speaks,” says former Downing Street press secretary turned Bloomberg writer Allegra Stratton, “politicians quiver and the rest of us listen up. He is Westminster’s fiscal referee.”
Johnson has attained this status not, as erudite types who become famous usually do (Brian Cox, Simon Schama, Mary Beard, David Starkey), by being telegenic, hyperbolic, eccentric or polemical. He isn’t playing the part of the wacky boffin. His appearance, clothing, hairstyle, manner, self-deprecation and accent are profoundly mainstream — for a white, educated, 57-year-old Englishman at any rate.
He’s a good communicator, yet he doesn’t dazzle with eloquence or phrase-making, like his former premier namesake. In the flesh he is engaging enough, with a ready, infectious laugh, but he doesn’t radiate charisma or gravitas. And yet, from the unlikely position of running a niche think tank in a shabby nondescript office in Bloomsbury, central London, he has come to wield enormous influence over the public finances, how the £1.2 trillion government budget is raised and spent. In 2022, Johnson’s instant damning takedown of Kwasi Kwarteng’s mini-budget, dissecting the measures intellectually as bond traders destroyed them financially, contributed to the downfall of a prime minister. If, following Rachel Reeves’ budget last month, Johnson had pronounced it a disaster or a triumph (he did neither), that verdict might have helped determine whether it was.
So, what’s his secret?
We meet at the IFS. I tell him I’d expected stuccoed pillars, lots of marble and mahogany. Instead, I’m surprised his HQ is so… “Shit?” he offers, chortling loudly. “Basic,” I respond. Rows of economists, most of them in their late twenties or early thirties, sit crunching data on their screens. Half of them are simultaneously working on doctoral theses, but this feels a long way from an ivory tower, a sacred grove of academe. It feels like a place of serious, real-world work. The average call centre is more salubrious. At 9.30am, most desks are occupied.
“I’m pretty militant about coming in. I hated working from home. September 2021, as soon as all the restrictions were lifted, I made it clear people had to come in. You can’t train young people, and enthuse them, and build a culture if they’re not here.”
I tell him George Osborne, Ed Balls, Allegra Stratton, Emily Maitlis and others have all paid glowing tributes. “That’s nice,” he says, giggling. Several people say you’re the guy whose response the Treasury is waiting for. “They tell me that too,” he says, giggling again. He’s not exactly comfortable with the flattery, but neither is he rejecting it. He’s a man still getting used to having become, among the chattering classes at least, an unlikely star.
I say that while he has become familiar, if not ubiquitous (“The man you want by your side when numbers start flying, the fiscal Google Translate,” as Emily Maitlis puts it), barely anything is known about him personally. “Well, I don’t often get asked about myself,” he says.
His early and teenage years, he admits, are “not easy to talk about. I had a really miserable and unpleasant childhood.” Materially, his family was comfortable, a detached house in a nice street in Shoreham-by-Sea in West Sussex. His dad was a doctor, in his fifties when Paul was born. “He died when I was ten,” Johnson says. “My mother couldn’t cope. She was depressed. Relations were difficult. She struggled with her mental health. She shouldn’t have been left in charge of children. She had various unpleasant partners.”
At the local comprehensive, young Johnson took refuge in schoolwork. “It was a big school, 30-plus in a class, streamed. Not many kids went to university, but the small number of us that worked could succeed. Some teachers were good; some were bad. I had a really great maths teacher to the end of the lower sixth who was then replaced by a complete dozo.” (I’m not familiar with the word “dozo”, but it doesn’t sound good.) “I focused on what I was good at, which was schoolwork, had a small group of friends, kept to myself. I was very glad to get to university. A lot of people were homesick. I was, ‘This is amazing! I’m not at home any more!’ ”
The university in question was Oxford, the course philosophy, politics and economics. Was it a big deal getting in? “It was for me. I don’t think my mum had a clue, quite honestly. The school got one person into Oxbridge every two to three years, so it wasn’t unknown.” He had, he says, and retains “a tremendous work ethic”, but also, as a kid, “There wasn’t an enormous amount else in my life.”
What level of nerdery are we talking about? What was he reading at, say, 14? “Oh, Dickens and Orwell.” Not Friedrich Hayek then? “No, no. I had no idea. I didn’t do A-level economics; I didn’t really know what it was. And A-level economics was taught by a PE teacher.”
He was keen on current affairs, but not obsessively. “I was absolutely hopeless at music and sport. When the biggest jock was selecting a team, it was always me and one other gimp left at the end. I’m now reasonably fit. As a kid I was hopeless.” He pauses, laughs. “You’re getting a picture of the total nerd here, aren’t you?”
Hey, I reply, nothing wrong with nerdiness; it’s just a pejorative word used about clever, studious people by those less blessed. “Well, I’m not necessarily any cleverer than anyone else, but I definitely worked harder. That got me through. I may not be part of the cool gang but at least I’m good at this.” He did double maths, French and chemistry at A-level. “Further maths A-level is still the hardest thing I’ve ever done. I sometimes think I peaked intellectually then. I’m hopeless at tech. When I started here, I was very slow at learning the statistical packages.”
This candour and modesty is, I think, part of Johnson’s appeal. He is utterly unpompous, the very opposite of the patrician-type expert we’re all accustomed to on our screens, handing down wisdom to the little people. For all his erudition, he has, I suggest, an everyman quality. A normal bloke.
“That’s interesting. I don’t think of myself as normal. I think of myself as that weedy kid who didn’t have a lot of friends. I don’t think of myself as abnormal in the sense of being superior, but in not being one of the gang, always a bit awkward.”
But that is normal, I say. The cool gang is by definition a minority. It puts you in the majority.
I was, I tell him, almost his exact contemporary at Oxford, doing the same course. Unlike me, he was so relieved to be away from home, and so keen on his subject, he was not intimidated by the antiquity, tradition and sheer poshness of his new surroundings. Plus, he realised “there are more people here like me than there were at school”. That said, he also thought, “There are people here I do not know how to connect with. They are so much more confident than I am.”
Boris Johnson, Michael Gove and David Cameron were all at Oxford at that time. “I had no idea any of these people existed,” he states. “I was Ed Balls’ tutorial partner for a while.” (Balls tells me that, “From the outset Paul’s understanding of economics and policy-making has been second to none. I saw it first-hand. It’s no surprise to me that he’s gone on to have such a stellar career.”) “He was immensely more confident than me,” Johnson recalls.
He was a member of the Labour Club at Oxford, attending meetings with, among others, a graduate student called Keir Starmer. “That doesn’t,” he is careful to emphasise, “necessarily tell you anything about my politics. I genuinely don’t have any affinity with any political party.”
This rigorous impartiality, acknowledged across the political spectrum, is a key element of both the IFS and its director’s brand. I couldn’t guess with any certainty how he voted at the last election. In private, I imagine he is pretty scornful of all parties, given their shared cowardice over presenting the electorate with the harsh truths of the UK public finances and the trade-offs required to revive them.
Graduating with a first in 1988, Johnson considered his career options. “I won’t say at 21 I didn’t fancy the idea of being prime minister, but never to the extent of doing anything about it.” As for going into the City and making a fortune, “It never occurred to me. I was clueless. I didn’t know what a merchant banker was. Everyone else seemed to go off and become one. I didn’t know what a management consultant was. I knew I liked public economics, policy stuff, so I came straight here.” The IFS was then “a fifth the size it is now, above a sewing machine shop on Tottenham Court Road”.
And the IFS is where he still is, albeit with a long hiatus from 1998 to 2011, when he worked variously at a quango, as a civil servant at the Department for Education and the Treasury, and latterly at a consultancy firm. He married a fellow economist, Lorraine Dearden, became a dad at 30 and is now the father of four sons in their twenties. He and Dearden divorced not long ago. His new partner is Nicola Wilberforce, a teacher. Last month he announced he will retire as director next summer, when he will become provost of the Queen’s College, Oxford.
“I’ve been here a long time. It’s fantastic, all-embracing, working with clever young people, but I’ll be able to do that there [Oxford] as well.”
“Paul Johnson is like a plumber who knows how to maintain your ancient failing central heating system like no one else,” Robert Peston jokes. “Which means when he retires, the whole system is bound to collapse.”
Is he planning to make some serious money? He looks startled. “That’s not the intention, no.” We share stories of how all our friends with access to public sector pensions have retired. “It’s ludicrous,” he says. “I won’t be retiring any time soon. Four kids and a divorce and a life in a think tank have not left me wealthy.”
I say I don’t know how it works but can’t he get some directorships or whatnot? “I don’t know how it works either,” he says with a laugh.
I thought you guys all got 100 grand for one afternoon a month at a bank? “Sadly not.” I ask him to pretend to be my financial adviser. What should I do? Buy shares? Cash out my pension pot? “I genuinely have no idea.”
It strikes me that Johnson’s manifest lack of interest in personal enrichment, his enthusiasm for public rather than private finance, is another part of his appeal. Nobody sees or hears him and thinks, “This is a guy on the make.”
Perhaps partly why he is leaving is the fatigue that sets in when you know what should be done, economically, to revive growth and reduce inefficiency and inequality across Britain, but governments consistently fail to muster the political courage to act. Planning reform. Upgrade infrastructure. Build more houses. Invest in early-years education. Invest in vocational training. Sort out IT and poor management in the NHS. Nurture a stable, predictable political environment. Be in a single market with your nearest and biggest trading partners etc. Many purist academics, says Johnson, including some at the IFS, “view public policy stuff as not real economics, the shallow end, because what needs doing is so straightforward, whereas it’s the politics that’s incredibly tough”.
He cites the way the Boris Johnson government binned proposed planning reform after one bad by-election result. “They just gave up. Pathetic,” he says. He was heartened by Keir Starmer’s conference speech telling voters if they want growth, “They will have to accept a pylon in their back garden. I thought that was great.”
Rachel Reeves, he thinks, made a decent start last month. “The most positive thing she did by far is maintain investment as a fraction of national income. Chancellors in her situation usually cut it. In the long run, that ought to have positive effects.” He did not foresee the rise in employer national insurance contributions, “because I thought that would be a clear manifesto break. I understood the manifesto to rule it out. You could interpret the pledge in other ways.” What, in weasly, lawyerly ways, I ask. “Arguably.”
“There were two points in her budget speech,” he says, “where my head literally hit the table. One was, ‘Let’s increase stamp duty even more.’ Let’s make things even more immobile, increase rents even further, increase the most damaging tax we have. Unbelievable. The other was not increasing fuel duties. Ludicrous.”
As for the UK’s prospects, he says things could go either way. On the one hand, the long shadow of the 2008 financial crisis is lifting and the Brexit, Covid and energy spike hits have in part played out.
On the other, defence spending, cuts in which have largely funded the expansion of the welfare state for 70 years, will now rise. The cost of climate change mitigation — all those gas boilers — will involve considerable public money. Petrol duty, worth £25 billion a year, will cease. The number of people claiming disability benefit has doubled in very short order. “That’s not happening in other countries. The UK is unique. I don’t know why, and neither does the Department for Work and Pensions.”
And looming over all this is the biggie: demographics. “Pensions, social care and, massively, health spending are all going to go up. If we don’t want to tax or borrow even more, something else will have to go down. We need to decide what.” As ever, Johnson nails the issue with commendable clarity.