When historians come to assess the premiership of Rishi Sunak and evaluate his strengths and weaknesses, they could do worse than look carefully at the spring Budget of 2023. The Budget was, of course, delivered by Jeremy Hunt. Treasury officials say it was Hunt who pressed to include many of the announcements while Sunak was inclined to be more cautious (a reversal of the usual prime minister/chancellor dynamic) but the approach still bore the stamp of the First Lord of the Treasury.
There was the avoidance of great risks. This should not be an unusual attribute but after September’s mini-Budget we should at least be grateful for that. Plenty of Conservative MPs were calling for big tax cuts to be announced now, oblivious to what this would do to the credibility of the public finances or the consequences for inflation. As demonstrated with his approach to the negotiations over the Northern Ireland Protocol, Sunak is not stupidly irresponsible.
There is something refreshingly methodical about him. He identifies problems and then works out how to solve them. Again, this is not too much to ask but the pressures of government can be remarkably distracting. A prime minister might start out trying to solve a problem of substance but along comes an internal party row, some discouraging polling or a furore in the press and the priority becomes addressing that. Sunak and Hunt identified low business investment and a tight labour market as real problems and used the limited firepower at their disposal to try to do something about them. Good.
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These are not the issues that are necessarily at the immediate forefront of the electorate’s mind. Ministers will be asked repeatedly about why there was not more help to address falling living standards. There was help – the continuation of the energy price guarantee and the continued freeze in fuel duty – but the biggest items were attempts to address the causes, not the symptoms, of our economic problems.
Some will say that this was not as political a Budget as it might have been, and they might not mean that as a compliment. There is a political strategy in place, which is to spend 2023 doing things which will look good in 2024 rather than straight away. But Sunak is not always a safe pair of hands. There was a perfectly good argument for lifting the cap on the pensions lifetime allowance but scrapping it altogether – at a cost of £4bn – will leave him vulnerable to the charge of helping the rich. If the intention was to keep senior doctors working, there were better targeted ways of doing so.
If Sunak deserves some credit for not taking great risks with the public finances, we should not get too carried away. Hunt has put in place a rather loose fiscal rule – that debt falls as a percentage of GDP in the fifth year of the scorecard – but this is met by a mere 0.2 per cent (£6.5bn). It also depends on fuel duty being unfrozen (Hunt is the fourth chancellor in 13 years to consider and then reject doing so) and departmental spending increasing by just 1 per cent a year after the general election. As it is, the new, more generous capital allowances regime will only be temporary and HS2 has been further delayed to make the sums add up. Whoever is in government after 2024 faces some very tough decisions.
The distortive behaviour caused by the debt target is not, in my view, a persuasive argument for ditching fiscal rules (although this particular rule could be improved upon) but it is an argument for changing our priorities. We could spend in a more growth-friendly way and tax in a less growth-unfriendly way. The government is right in this Budget to want to encourage more business investment (which is why Sunak was wrong to rely so heavily on corporation tax rate increases in the first place) but a more competitive business tax regime ultimately requires finding revenue from elsewhere. There is not the political will within the Conservative Party to do that.
For a Budget that was focused on growth, the Chancellor had little to say about some of the factors that might make a difference. There was very little said about housing, because planning reform is too difficult politically. The OBR looked again at the economic impact of Brexit and concluded that it is still going to cost us 4 per cent of GDP. There was a little bit of good news on growth (marginally higher than the autumn’s dismal forecast), mainly due to lower energy prices but partly due to higher immigration forecasts. Oddly, this point was not made in the Chancellor’s speech.
This is where yesterday’s Budget provides a useful microcosm of Sunak and his government. On the plus side, he is a clever, thoughtful and diligent leader who seeks to solve the country’s problems. He has some achievements to his name: calming the markets last autumn and resisting those in his party prepared to fight a trade war with the EU over Northern Ireland. There are some useful and worthy policies in this Budget. But, in common with Sunak’s overall premiership, it is hard to believe that this Budget will be economically or electorally transformative. Serious and sensible but politically fallible and, in all likelihood, insufficient to overcome the economic and political circumstances; the verdict on the Budget may well prove to be history’s verdict on Sunak.
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