This is going to be a weird Budget Day. After seven days of pre-Budget announcements from the Treasury Politico has summarised the announcements made:
HMT [has] already committed to increasing the minimum wage … ending the public sector pay freeze … £7 billion on new transport links … £6 billion more on the NHS backlog … £5 billion on science research and development … £3 billion on skills … £2 billion on new housing … £2.6 billion on special educational needs schooling … £1.4 billion on boosting foreign investment … £700 million on borders and £500 million on families.
No wonder the Speaker is a little annoyed with Sunak. No budget has ever been leaked this much.
Now we also know that the Office for Budget Responsibility has increased its growth forecasts for the year to 7%, suggesting the country will be back on pre-Covid track soon. This, supposedly, gives Sunak up to £30bn more to spend, or save. I suspect the latter: there will be a new fiscal rule after all, requiring that the current spending budget be balanced whilst borrowing remains permissible for capital costs - which many of the pre-announced sums will be deemed to be.
We are also told today that this is a Budget for a new optimistic era. It’s widely presumed that an announcement on universal credit will try to assist the mood; the most likely change is to reduce the taper rate so that as people move into work they are not penalised so heavily by losing their benefit payments. We will see.
I personally still expect a Tory crowd pleaser. A cut in inheritance tax would do that.
I do not expect any change to capital gains tax, which the Guardian has focussed on today.
But what strikes me most about all this is its totally lack of reality. Sunak can say there is a new mood of optimism, but there isn’t. Retail sakes have fallen for five months in a row. There is discussion in more Covid restrictions, which most people want. There are 50,000 Covid deaths a year right now, at current rate. The NHS, like many public services, is overwhelmed. We can’t even manage sewage any more. And there is economic disruption as a result of Brexit causing inflation, which other factors like gas prices are boosting.
None of this reads like grounds for optimism to me. They read like the exact opposite.
Sunak is gambling his political future on growth when that’s going out of fashion. He’s ignoring climate change. He’s presuming that he can read runes better than the country can, when the very strong evidence is that ordinary people read economies better than politicians do. He’s hoping there is a rabbit to pull out of the hat when it’s not at all clear that there is.
There might well be recession and downturn instead. Supply chain disruption will not end. Price increases might end next year, but if pay most likely does not fully adjust people will be worse off anyway. The universal credit problem that indicates a chronic poverty problem in the UK is not going away. And the signs of optimism will fade with every reduction in the chance of what people think to be a normal Christmas happening, and even the turkey is in doubt this year.
Sunak has, I think, got his reading of the economy wildly wrong. We have an economy far from over Covid, and far from being on a real rebound. It is out of sync with itself. Brexit stops it being in sync with the world. Investment is needed, but much more by the state than private sectors. The private sector is not going to invest for climate change as the government believes. People will despair (literally) about that.
This Budget is by far the most trailed ever. Brand Rishi is pushing it hard. But the position Sunak is taking is so extreme this Budget could unravel very quickly, starting with public reaction to an unnecessary increase in interest rates that might happen very soon, which will be intended to dampen any mood of optimism, and surely will.
Sunak is playing a high stakes game. I think he has seriously misread the hand he has been dealt. The trouble is, we pay the price for that.