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Why there could be trouble ahead for Rishi Sunak

Many Tory MPs are at best uneasy and at worst actively disgusted by much of this Budget.

By Stephen Bush

Big day for Ed Miliband yesterday: Keir Starmer’s case of coronavirus meant that he had to fill in for the Labour leader at PMQs, and then he got to deliver the Budget afterwards.

OK, I exaggerate – but you get the point. Rishi Sunak’s budget was much more expansive than expected, as he opted to use almost all of the additional wriggle room that the Office for Budget Responsibility’s improved growth figures created within his fiscal rules to increase departmental spending. And to increase it in real terms too.

“The biggest spending rise in a decade” is what the Chancellor said. “The only real-terms spending rise in a decade” is closer to the truth. While the state will be larger than at any point since the 1970s, what it does is very different: it spends far more on pensions and healthcare, a consequence of our ageing population and scientific innovation, and spends less on housing, working-age benefits and transport.

Taxes are higher than at any point since 1950, though the burden on the median working-age taxpayer is higher and that on businesses and the richest is lower.

Are there any signs of trouble ahead? Yes, there are both internal and external threats facing the Chancellor. Internally, the fact that many Tory MPs are at best uneasy and at worst actively disgusted by much of this Budget may cause problems for Sunak and Boris Johnson sooner or later. Externally, that the cut to Universal Credit remains in place (and for most, the reduction in the taper will soften rather than eliminate the blow), that the Department for Education has done particularly badly out of this spending round compared with other departments, and the record-high tax burden might all sour the perception of this budget.

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[See also: Rachel Reeves’s Budget response shows she can compensate for Keir Starmer’s weaknesses]

It leaves both parties making a similar bet: Labour’s big argument is that, yes, it’s great that the Conservatives are undoing some of the cuts they’ve made over the past decade, but the reason why taxes have had to go up so much to pay for it is the stagnant wage growth over that time. Sunak’s big argument, both to his party and to the voters, is that wage growth will mean that taxes will be able to come down in short order.

Labour, of course, is betting that the Conservatives don’t have a plan to deliver sustained wage growth, and won’t find one between now and the next election. And that an election fought on the question of funding the public services is comfortable and fruitful terrain for them.

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The Conservatives, however uncomfortable it may make many of them privately, are betting that either through good strategy or good fortune, the stagnant wage growth we have endured will come to an end, and that rather than having to make a trade-off between increasing public spending and cutting taxes, they will be able to go into the next election having just cut taxes – terrain that is usually comfortable and fruitful for them.

[See also: How generous was Rishi Sunak’s 2021 Budget and Spending Review really?]

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