Rishi Sunak was facing a backlash against his big-spending Budget today as experts warned it ‘it is not going to feel great’ for taxpayers amid a cost of living crisis.
Experts said the scale of the spending he announced yesterday would see the state expand to its biggest size since the late 1970s, before Margaret Thatcher conducted a decade of reform to bring it under control.
The Chancellor poured cash into hospitals and Boris Johnson’s ‘levelling up’ agenda – declaring the Tories were now ‘the real party of public services’.
There was also more money for an increase in the minimum wage to £9.50-per-hour, and he eased a cut to Universal Credit by tweaking the taper rate to lessen the impact on the working poor.
But thinktank the Resolution Foundation said he was setting the country up for a flat recovery for living standards, as wages fall in real terms next year.
Mr Sunak sought to reassure Tory MPs that he aims to cut taxes before the next election after unveiling his Budget. In a meeting of the 1922 Committee of Tory backbenchers he said he wanted to use ‘every marginal pound’ in the future to lower taxes rather than increase spending.
But he was more coy on television today, telling Sky News it was his ‘ambition is to lower taxes for people’ and refusing to confirm he would cut income tax.
Paul Johnson, a respected economist at the Institute for Fiscal Studies, told the BBC today that large tax rises were coming, adding: ‘I think the worry for the Chancellor is that he was very upbeat, he talked about a new age of optimism. But the high levels of inflation going forward, the fact there are very big tax rises coming and the growth is still pretty poor means we are not going to feel it.
‘The average incomes are barely going to rise over the next years and indeed on the forecast yesterday, average earners will be worse off next year than they are this year, so this is not going to feel great.’
He added: ‘I would be very surprised if the tax burden in a decade’s time is less than it is now, indeed I wouldn’t be at all surprised if it is more.’
The Chancellor signalled to Tory backbenchers that tax cuts would come before the next election after he made changes that will increase the burden on everyday Britons to to its highest level in 70 years.
Paul Johnson, a respected economist at the Institute for Fiscal Studies, told the BBC today that large tax rises were coming, adding: ‘I think the worry for the Chancellor is that he was very upbeat, he talked about a new age of optimism. But the high levels of inflation going forward, the fact there are very big tax rises coming and the growth is still pretty poor means we are not going to feel it’
The Chancellor was mobbed last night as he headed to the pub hours after giving booze duty the biggest shake-up in 140 years by cutting the price of ale and prosecco in a £150billion Budget spending spree. Rishi Sunak was pictured surrounded by crowds of drinkers outside the Two Chairmen in Westminster late on Wednesday evening after delivering his speech in the House of Commons in the afternoon
The Chancellor used his Budget to set out a new Draught Relief policy which will see beer and cider duty reduced by five per cent. He said that amounted to the biggest cut on the tax on beer in 50 years and the ‘biggest cut to cider duty since 1923’. Above: Mr Sunak with Boris Johnson in a visit to the Fourpure Brewery in Bermondsey, south-east London, on Wednesday
Elsewhere in his keynote speech, the Chancellor poured cash into schools, hospitals and Boris Johnson’s ‘levelling up’ agenda – declaring the Tories were now ‘the real party of public services’
Budget 2021: key points
- Rishi Sunak said he was creating ‘a stronger economy for the British people’
- He warned of continuing challenges from Covid
- Office for Budget Responsibility says inflation expected to average 4 per cent over the next year, was 3.1 per cent in September.
- Sunak: ‘The pressures caused by supply chains and energy prices will take months to ease.’
- He outlined the ‘most radical simplification of alcohol duties for over 140 years’ that cuts number of rates paid from 15 to six. The stronger the drink the higher the rate, as some high-percentage beverages are ‘under-taxed’
- New ‘small producer relief’ to include small cidermakers and other producers making alcoholic drinks of less than 8.5% alcohol by volume (ABV).
- ‘Draught relief’ – a new, lower rate of duty on draught beer and cider.
- Fuel duty rise cancelled for the 12th year in a row
- Vehicle excise duty for heavy goods vehicles is frozen for a year
- Suspension of HGV levy extended for another year
- OBR says economy will return to pre-Covid levels at the turn of the year, earlier than expected
- Forecast 6.5 per cent growth this year, up from 4 per cent, then 6 per cent in 2022.
- But lower rates of 2.1 per cent in 2023, 1.3 per cent in 2024 and 1.6 per cent in 2025
- Unemployment forecast to peak at 5.2 per cent, lower than expected
- Foreign aid budget will go back up to 0.7 per cent on GDP by 2024/2025, having been cut to 0.5 per cent
- Every Whitehall department will get a ‘real terms rise in overall spending’ as part of the Spending Review, amounting to £150 billion
- Borrowing as a percentage of GDP is forecast to fall, from 7.9% this year to 3.3 per cent next year, then 2.4 per cent, 1.7 per cent, 1.7 per cent and 1.5 per cent in the following years.
- A levy will be placed on property developers with profits over £25 million at a rate of 4 per cent to help create a £5 billion fund to remove unsafe cladding
- The national minimum wage will increase from £8.91 to £9.50 from April next year.
- An extra £6billion will be given to the NHS to pay for new equipment and new facilities to clear the Covid backlog.
- Brownfield sites covering the equivalent of 2,000 football pitches could be turned into plots for housing as part of a £1.8billion injection.
- A £2.6billion pot of funding will be set up to help children with special educational needs and disabilities.
- Levelling up transport outside of London will benefit to the tune of nearly £7billion, paying for a range of projects, including tram improvements.
- The Department of Health and Social Care will receive £5billion over the next three years to fund research and development in areas such as genome sequencing and tackling health inequalities.
- A cash injection of £3billion will be given to both post-16 education but also to adults later in life.
- £850million will be spent over three years to ‘breathe life’ back into cultural hotspots like London’s V&A museum, Tate Liverpool and the Imperial War Museum in Duxford.
- Ageing Border Force vessels will be replaced by new cutters as part of a £700million investment to improve the safety of Britain’s borders.
- An 8 per cent cut to the Universal Credit taper rate meaning recipients keep more benefit money as they work
The Chancellor was mobbed last night as he headed to the pub hours after giving booze duty the biggest shake-up in 140 years by cutting the price of ale and prosecco in a £150billion Budget spending spree.
Rishi Sunak was pictured surrounded by crowds of drinkers outside the Two Chairmen in Westminster late on Wednesday evening after delivering his speech in the House of Commons in the afternoon.
The Chancellor used his Budget to set out a new Draught Relief policy which will see beer and cider duty reduced by five per cent.
He said that amounted to the biggest cut on the tax on beer in 50 years and the ‘biggest cut to cider duty since 1923’.
The Chancellor added that his overhaul to duty would deliver the ‘most radical simplification of alcohol duties for over 140 years’, resulting in a ‘simpler, fairer and healthier’ system.
Some Tory grandees last night questioned the decision to embark on even higher spending at a time when the national debt is already heading towards £2.5trillion.
But Mr Sunak said investing in a more innovative, high-skilled economy is ‘the only sustainable path to individual prosperity’.
And he vowed to start bringing taxes down by the end of this Parliament, saying it was time for the Tories to start making the ‘moral’ case for a smaller state.
Late last night, he went further in an address to Tory MPs – promising that every spare pound would now be diverted to a war chest designed to deliver tax cuts before the election.
The Chancellor was boosted yesterday as the Office for Budget Responsibility (OBR) forecast that UK growth will now be 6.5 per cent this year – much higher than its previous forecast.
It means the economy is now expected to recover to pre-pandemic levels by the end of this year – six months faster than expected.
The Chancellor said Britain still faced ‘challenging months ahead’ – with inflation a looming threat.
But he said it was now time to start ‘preparing for a new economy post-Covid… an economy of higher wages, higher skills and rising productivity.
‘Of strong public services, vibrant communities and safer streets. An economy fit for a new age of optimism.’
His consumer-friendly package of giveaways included a fuel duty freeze, a reform of alcohol taxes that will cut the price of many popular drinks, a major business rates cut for shops and pubs and reform of Universal Credit to help the lowest paid.
However, yesterday’s official forecasts also warned that inflation could soar past 5 per cent next year, the highest in three decades.
And the OBR modelled an increase in interest rates from 0.1 per cent to 3.5 per cent by 2023 – a move that would add hundreds of pounds a month to a typical mortgage.
Yesterday’s Budget and Spending Review represented an uneasy compromise between the Chancellor and Prime Minister. Improved economic forecasts left the Chancellor with an extra £50billion a year to spend.
But Mr Johnson insisted the bulk of the windfall should be spent on shoring up public services after the pandemic and delivering his levelling up agenda.
One ally of Mr Sunak said: ‘It was the Chancellor’s Budget, but it was the Prime Minister’s spending review.’
However, in a highly personal section of his speech yesterday, the Chancellor said it was time for the Tories to start making the ‘moral’ case for lower taxes and a smaller state.
Hinting at rumoured tensions with the PM, he said: ‘By the end of this Parliament, I want taxes to be going down, not up.’
The OBR said Mr Sunak had now presided over the biggest increase in taxes since the Black Wednesday debacle three decades ago.
The Chancellor said he disliked the tax hikes but had no choice in the wake of the pandemic. Last night he told Tory MPs he had ‘set a clear and unambiguous intent to begin the process of reducing taxes’.
But some party grandees said cuts should have started immediately. Ex-Cabinet minister David Davis said higher taxes would ‘undoubtedly’ depress growth and employment.
The Institute for Fiscal Studies said plans that focused on public services, benefits and wages meant the Chancellor’s plans were ‘more similar to Gordon Brown’s than to George Osborne’s’.
Shadow Chancellor Rachel Reeves said the Budget measures were ‘not enough’ to help families facing a cost-of-living crisis and told Mr Sunak: ‘The Conservatives are now the party of high taxation.’
Announcing the booze duty cut, The Chancellor said drinkers would save 3p per pint – the biggest tax cut to beer in 50 years.
The cost of English sparkling wine, prosecco and champagne will also fall, potentially cutting the cost by 53p a bottle.
However, the cuts will not take effect until February 2023.
In a separate announcement, the Chancellor also announced that a planned increase in duty on spirits, wine, cider and beer due to take effect from midnight last night had been cancelled.
Describing pubs as ‘the home of British community life for centuries’, he offered them help to ‘bounce back’ after the pandemic.
He said he was taking advantage of Brexit to deliver the £3billion tax cut to ease the cost of living.
Other measures which will please voters include the helping of the high street on business rates and the giving of support to 2million of the lowest paid
Public sector debt does not rise as high as previously under the latest OBR projections
In a stark assessment alongside the Budget, the Office for Budget Responsibility (OBR) said its central forecast is for headline CPI to peak at 4.4 per cent in the second quarter of year
In both scenarios, CPI inflation could go up to 5.4 per cent, with the OBR saying that the Bank of England base rate would need to soar to 3.5 per cent from the low of 0.1 per cent now
The headline CPI rate of inflation was 3.1 per cent in September, down slightly from the 3.2 per cent recorded in August. However, the Bank of England expects it to top 4 per cent in the coming months
Describing alcohol tax rates as outdated and too complicated, he added: ‘We are taking advantage of leaving the EU to announce the most radical simplification of alcohol duties for over 140 years.’
The Chancellor said the changes would ‘create a system that is simpler, fairer, and healthier’.
Starmer misses Budget after testing positive for Covid… as Tories finally put on masks in chamber
Keir Starmer was forced to pull out of the Budget with Covid today – as Boris Johnson led senior ministers in wearing a mask in the House of Commons.
The Labour leader’s plight was revealed at the start of PMQs – with Ed Miliband standing in and shadow chancellor Rachel Reeves responding to Rishi Sunak.
Mr Johnson was joined by Mr Sunak, Justice Secretary Dominic Raab and Health Secretary Sajid Javid in covering his face in the weekly Commons session.
But other Tory frontbenchers including Commons Leader Jacob Rees-Mogg and Scottish Secretary Alister Jack were among those still declining to take action to prevent the spread of Covid.
It is thought to be the fifth time that Sir Keir has needed to isolate.
Under the plans, duty on draught beer and cider will be cut by 5 per cent to encourage people back into pubs – the ‘biggest cut to cider duty since 1923’.
He also cut the 28 per cent duty on premium sparkling wines such as prosecco and fruit ciders.
However, the changes to duties mean taxes will increase on some higher strength drinks, such as some red wine and ‘white ciders’. Consumers of rosé, fruit ciders, liqueurs and lower strength beers and wines will pay less though.
From February 2023, there will be just six duty rates on alcohol, down from 15, guided by a ‘common-sense principal’ of ‘the stronger the drink, the higher the rate’.
Mr Sunak said it was not a temporary measure, but a ‘long-term investment in pubs of £100million a year and a permanent cut in the cost of a pint by 3p’.
There will also be a new ‘small producer relief’ which will include small cider makers for the first time, as happened with small brewers’ relief. Duty is also being cut on fruit ciders to bring it in line with apple ciders.
Industry figures welcomed the moves, but questioned the need for a delay.
Emma McClarkin, chief executive of the British Beer & Pub Association, said: ‘The Chancellor’s decision to freeze beer duty… is to be warmly welcomed.’
She said it would help secure 9,000 vital jobs across the country. On the cut to draught beer and cider duty, she added: ‘Pub-goers will also be toasting the Chancellor today for announcing a 5 per cent lower duty rate on draught beer.
‘However, the overall beer duty rate in the UK remains amongst the highest in Europe.
‘It is vital for brewers, a world-class, home-grown manufacturing success story, that the overall beer duty burden is reduced – not just duty on draught beer in pubs.’
Miles Beale, chief executive of the Wine & Spirit Trade Association, said the decision not to raise duty was a ‘huge relief’.
Public sector net borrowing will be lower than had been expected in March, thanks to the improved overall economic picture
The tax burden is going to its highest level since the Second World War, despite Rishi Sunak’s promise that he wants to cut it
But he said the new regime would still be unfair to people who enjoy wine and spirits, adding: ‘We are mystified by a proposal that embeds unfairness between products, meaning that beer will be taxed between 8p – 19p per unit, wine increases to 26p per unit and spirits remain at 29p per unit.’
Andrew Carter, chief executive of the English sparkling wine company Chapel Down, said the delay to change the tax rules on fizz was surprising, adding: ‘We would have preferred it to be sooner.’
John O’Connell, chief executive of the TaxPayers’ Alliance, said: ‘Punters, publicans and producers will be raising a glass to these reforms and cuts. Shaking up alcohol duties has been a long time coming.’
However, Shadow Chancellor Rachel Reeves said: ‘At least the bankers on short-haul flights sipping champagne will be cheering this Budget today.’
VICTORIA BISCHOFF: This was the budget that literally leaves pensioners out in the cold… and young families will feel the pinch, too
Family finances are being pushed to breaking point. A perfect storm of relentless bill and price hikes, along with looming tax rises, means households are on the cusp of the biggest spending squeeze in a decade.
Inflation is now predicted to soar to as high as 5 per cent next year. Yet few workers will receive big enough pay rises to counter this.
And this means the pound in their pocket will simply not stretch as far.
Energy bills could soon rocket by an eye-watering £400 for the average household, after gas prices went through the roof.
Petrol prices are at a record-high, despite a 12-year freeze on fuel duty.
Food prices are spiralling ahead of Christmas.
And if interest rates rise as expected, it could also push up mortgage costs for homeowners who are not on fixed deals.
A National Insurance hike for workers next April, together with the freezing of income tax bands, will then pile yet more pressure on to overburdened budgets.
Rishi Sunak (pictured) failed to mention the word ‘pensioner’ once in his hour-long Budget speech yesterday
But of all households, few are facing a tougher time than the millions of pensioners on fixed incomes.
Yet Rishi Sunak failed to mention the word ‘pensioner’ once in his hour-long Budget speech yesterday.
In fact, it’s fair to say retirees are likely to wake up this morning feeling utterly abandoned.
There was just nothing in the Budget for them. Reforms to Universal Credit won’t help them, and neither will the increase in the living wage.
Yet it is widely recognised that pensioners are almost always hit hardest by rising prices.
How your household will be affected by the Budget depending on your total income (listed top, horizontally) and family arrangement (listed left, vertically)
This is because for those aged 65 and above, food and energy costs represent a far bigger proportion of their typical household spending – largely because they spend more time at home and so need the heating on more.
These bills account for around 18 per cent of their typical monthly budget compared to 11 per cent for those under 30, according insurer Aviva.
So it is a particularly scary time for the millions of people who rely on the state pension to make ends meet – especially the poorest who have no other income.
But after the triple-lock promise was axed, the state pension is now expected to increase by only 3.1 per cent in April.
This might sound generous on the surface, but it works out at just a meagre £5.55 a week rise in the full new state pension to £185.15.
And it will not come close to matching rising inflation.
The state pension is one of the worst in the developed world, as a percentage of a person’s pre-retirement take-home pay.
Had it risen in line with earnings, it would have increased by 8 per cent.
This was a missed opportunity to give pensioners a real boost and help keep it in line with the soaring in the cost of living.
All but the poorest have already lost their free TV licence.
Yet the Chancellor couldn’t even find it within himself to increase any of the vital benefits that help the most vulnerable pensioners with energy bills, such as the winter fuel payment, cold weather payment or warm homes discount.
On top of this, rising prices mean private pension pots are at risk of running out faster.
Savers have already suffered more than a decade of rock-bottom rates and there is now not a single account that can match let alone beat inflation.
Even Rishi’s long-awaited ‘world first’ green bond turned out to be a damp squib, offering just 0.65 per cent interest to savers who tie up their cash for three years.
Investing is now the only way to prevent savings from being eroded by inflation – but this may involve taking greater risks than many feel comfortable with.
Of course, the Chancellor cannot help everyone. And the Government is under pressure to tighten its belt.
But for the millions of pensioners desperate for some reassurance they have not been forgotten, this Budget only delivered bitter disappointment.
They have been left out in the cold – quite literally.
STEPHEN GLOVER: This was a Boris Johnson’s Budget splurge… but Rishi Sunak’s Tory instincts mean there’s a big fight ahead
There were two voices present in yesterday’s Budget statement, two political figures locked in an occasionally uncomfortable embrace.
One of them was the man who delivered the speech, Rishi Sunak. He did so with aplomb and elegance, and a mastery of detail. It is he who has burnt the midnight oil, and made the sums add up.
But this wasn’t the address he would have made if left to his own devices. The impulse behind this high-spending Budget came from our boosterish Prime Minister, who has an inclination to splash the cash — and a political interest in doing so.
For the time being, Boris Johnson has bent Mr Sunak to his will. This was a Budget that the world would have accepted without surprise if it had been unveiled by a Labour Chancellor.
And for the most part — until the very end, when he seemed to disown much of what he had previously said — Mr Sunak announced countless spending increases with apparent conviction, even gusto.
Prime Minister Boris Johnson (right) with Chancellor of the Exchequer Rishi Sunak during a visit to Fourpure Brewery in Bermondsey, London, after Sunak delivered his Budget to the House of Commons
The Chancellor (Pictured) has reduced what he called the ‘tax on work’, whereby working people on Universal Credit pay 63p on every extra pound they earn. This will be reduced to 55p, and nearly two million families will keep, on average, an extra £1,000 a year
Many of the Thatcherite economic orthodoxies that have dominated the Tory Party for the past 40 years have been jettisoned. Under Boris Johnson, the Conservatives are becoming a high-spending, high-tax party.
Consider Mr Sunak’s boast that the Budget’s total departmental spending will go up over this Parliament by an enormous £150 billion. He informed MPs that this was the largest increase this century, amounting to 3.8 per cent a year in real terms.
I can think of few, if any, recent Tory chancellors who would have crowed about raising public expenditure so rapidly. The Labour benches were often stunned into silence. They might have been listening to one of their own.
Huge sums of money are, no doubt rightly in many cases, being thrown at the NHS, new roads, railways, housing, cladding, the courts, schools, museums and galleries in a comprehensive repudiation of the austerity promoted by David Cameron and George Osborne.
Even foreign aid will revert to 0.7 per cent of GDP by the end of this Parliament — diverting several billion pounds of taxpayers’ money overseas which might have been spent, or saved, at home.
At the same time, although there were welcome concessions for drivers and drinkers, as well as short-term help over business rates, there was nothing in the way of significant tax reductions for ordinary people.
Hardly surprising, given that the Chancellor had already announced sharp increases in National Insurance, which will take effect next April. Companies will have to face their own share of the pain when Corporation Tax rates soar in 2023.
The upshot, as the Chancellor wryly noted, is that ‘taxes are rising to their highest level as a percentage of GDP since the 1950s’. Actually, most economists reckon that we have not been so squeezed for taxation since 1948, when Labour was in power.
Admittedly, the enormous expenditure resulting from the pandemic has put the Government in an economically parlous position. It is choosing to get out of it by boosting public spending — and raising taxes.
This is a new kind of Tory government such as we haven’t seen for nearly half a century. Boris Johnson’s determination to ‘level up’ necessitates higher spending on infrastructure, as well as offering a helping hand to the lower paid.
Mr Sunak’s (Pictured) boast that the Budget’s total departmental spending will go up over this Parliament by an enormous £150 billion. He informed MPs that this was the largest increase this century, amounting to 3.8 per cent a year in real terms
So the Chancellor has reduced what he called the ‘tax on work’, whereby working people on Universal Credit pay 63p on every extra pound they earn. This will be reduced to 55p, and nearly two million families will keep, on average, an extra £1,000 a year. This is obviously a thoroughly good thing.
But whether Boris Johnson’s high-spend, high-tax recipe will be as beneficial to the country in the longer term is quite another matter. He hopes it will placate his ‘Red Wall’ former Labour voters, and give the Tories another handsome majority at the next election.
It may well do so. This was a Budget with a clever eye on an election in a couple of years. The increase in the national living wage to £9.50 an hour, and the ending of the public sector pay freeze, were other measures partly calculated to please ‘Red Wall’ voters.
But what happens after the election? Much as I may want the Tories to win it, I don’t want every policy to be subordinated to that overriding aim. One depressing aspect of the Budget was the very modest growth forecasts produced by the independent Office for Budget Responsibility (OBR).
Following a post-pandemic rebound this year and next, the OBR foresees much slower growth of only 1.3 per cent in 2024 and 1.6 per cent in 2025, which are low by almost any historical yardstick.
Granted, all such forecasts, whether by the OBR or anyone else, invariably turn out to be wide of the mark. Nonetheless, it is striking that the OBR should think our prospects for growth in the medium term are so abysmal.
My explanation is that a lower-tax economy — in which taxpayers and companies are allowed to keep more of their money — is much more likely to produce sustained economic growth. That is the lesson of Britain in the 1980s, and of countless other countries since then.
And yet this is the path on which Mr Johnson has defiantly turned his back. For the time being Mr Sunak feels compelled to go along with his master. But there were hints in his statement that he is far from being wholly happy.
For one thing, he mentioned the Prime Minister six times in his speech, which is a very unusual thing to do in a Budget statement. I can’t recall any Chancellor doing so before.
He cited ‘the Prime Minister’s economy of higher wages, higher skills, and rising productivity’, and he lauded Mr Johnson’s ‘historic reforms to social care’.
Following a post-pandemic rebound this year and next, the OBR foresees much slower growth of only 1.3 per cent in 2024 and 1.6 per cent in 2025, which are low by almost any historical yardstick
Sucking up? Perhaps. Establishing that he recognises who is ‘top dog’ for now? Probably. But I suspect that Mr Sunak was also granting Boris Johnson authorship of policies which he knows could ultimately disappoint — and from which he may one day distance himself.
In the Chancellor’s peroration, he came close to disavowing Boris’s high-taxation, high-spending tendencies when he spoke of ‘a different kind of moral dimension to the economic challenge we face now’.
He suggested the State had grown too big — having just announced several measures which made it bigger — and asked: ‘Do we want to live in a country where the response to every question is: ‘What is the Government going to do about it?’ ‘
Or, he wondered, should we ‘choose to recognise that government has limits? That government should have limits?’ Then he added: ‘My goal is to reduce taxes. By the end of this Parliament, I want taxes to be going down, not up.’
As, no doubt, does Mr Johnson, and every sensible Tory — if there is enough money left in the kitty, as some economists believe there will be. But the Chancellor wasn’t merely expressing an aspiration. He was stating a fundamental belief.
For the time being, he appeared to be saying, it will be done Boris Johnson’s way, but one day it will be done my way. When Rishi Sunak is stronger and tougher, there is going to be a big fight ahead.
Welcome to the Two Rishis: One threw around cash, the other was sober and responsible. But ex-Chancellor NORMAN LAMONT reveals the crucial detail that will decide his fate
No chancellor can ever foresee what dramatic events he may have to face, and certainly Rishi Sunak has faced a very deep challenge indeed – first a global pandemic and then a recession.
He has handled the situation with great skill. But yesterday, as he delivered his budget, it seemed to me that we were watching a very polished double act – ‘The Two Rishis Show’.
There was the expansive Rishi, leading us into a Promised Land flowing with milk and honey, exhilarated by his own optimism and by the increases in public spending he announced.
And then, popping out from behind him from time to time, there was the fiscally responsible Rishi, the man with a reputation for caution, who says he wants to take away the Prime Minister’s credit card.
No chancellor can ever foresee what dramatic events he may have to face, and certainly Rishi Sunak (pictured yesterday) has faced a very deep challenge indeed – first a global pandemic and then a recession. He has handled the situation with great skill
Parts of his speech belonged to an electioneering Budget. Impressive and highly detailed proposals followed each other in rapid succession.
We heard lots of references to an ‘infrastructure revolution’ and of course the big headline – an increase in public spending of £150billion by the end of the parliament.
And he was careful to outline several measures that are possible only because of the benefits conferred by Brexit.
These include the simplification of taxes on alcohol, which ought to prove both popular and efficient, as well as changes to taxes on shipping. Here, he was reaping the advantages of Brexit and was rightly determined to make sure his audience knew about it.
But after highlighting the largesse on offer, the more conservative Rishi stepped forward – not to dampen the euphoria but to make it clear that he will ensure that we live within our means. He announced new fiscal rules, to bind the Government to sustainable levels of borrowing.
But yesterday, as he delivered his budget, it seemed to me that we were watching a very polished double act – ‘The Two Rishis Show’. There was the expansive Rishi, leading us into a Promised Land flowing with milk and honey. And then, popping out from behind him from time to time, there was the fiscally responsible Rishi, the man with a reputation for caution
The charter for these rules will be presented to the House for a full vote, which is probably a crafty way of trying to trap Labour into a guarantee of responsible behaviour.
For many Conservative MPs, the most important part of the speech – what they were waiting for – came when the Chancellor declared he was not comfortable with keeping taxes at their highest level since the Attlee Labour government.
Government spending now accounts for more than half the economy, he said. It’s plain that goes against all Conservative instincts. By the next election he wants to see tax falling.
The question one has to ask is whether this is consistent with the spending announcements. There’s one statistic above all that has to be considered.
Former Chancellor Norman Lamont (pictured) writes that a Chancellor can never ignore the relationship between national debt and national income
A Chancellor can never ignore the relationship between national debt and national income – how much the country borrows each year, against its gross domestic product, or how much money it generates.
At the moment, the stock of debt is forecast this year to be 85 per cent of GDP. Next year, it will be up, at 85.4 per cent… and up again, the following year, peaking at 85.7 per cent.
In theory, if the Chancellor’s predictions are right, the national debt will start to stabilise and fall. For that to happen we must have a really substantial growth of our economy.
But the Office for Budget Responsibility predicts that growth at the end of the survey period will be less than 2 per cent.
The Chancellor also warned us of rising inflation, which was 3.3 per cent in September and is forecast to average 4 per cent next year.
Inflation, as older readers will remember only too well, is profoundly unpopular. It can lead to the phenomenon of stagflation – slower growth plus inflation.
The only real counter to inflation lies in the hands of the Governor of the Bank of England, Andrew Bailey. The Bank has the power to raise interest rates. But the Bank is independent of the Treasury – and Mr Bailey is not part of anybody’s double act.
Interest rates are currently so low that the Bank may be reluctant to raise them much above 1 per cent – too little to make a dent in inflation of 4 per cent.
The Bank suggests the spike in inflation will be ‘transitional’. But how long is ‘transitional’? If international oil prices rise from $84 today to $100 a barrel and disruption to global supply chains continues beyond 2022, then high inflation could be with us for much more than just a few months.
We all want to believe in the new, post-Covid ‘age of optimism’. Let us hope that the forecasts are right and it is the conservative Rishi Sunak – rather than his free-spending alter ego – who prevails.
HENRY DEEDES: The sort of hell-for-leather spree a footballer’s wife might go on if her fella’s been caught in flagrante
By Henry Deedes for the Daily Mail
As Rishi Sunak sat down to loud roars yesterday, row upon row of giddy eyeballs behind him began to bobble about in their sockets. Tory MPs were excited.
They rubbed their hands, they licked their chapped lips with undisguised glee. ‘More!’ they unisoned. ‘Moooorrrre!’
The Chancellor smiled bashfully and swatted away their adulation. It was as though some big cat dandy had just plonked himself down in a nightclub and announced the drinks were on him.
Rishi’s Budget turned out to be another wallet-busting spendathon. The sort of hell-for-leather spree a footballer’s wife might go on after her fella’s been caught in flagrante with another popsy.
More money for schools, more for transport, more for prisons… more, more, more! Heavens. So this is the sort of Big Spender Shirley Bassey warned us about.
Splashing out: Rishi’s Budget turned out to be another wallet-busting spendathon. The sort of hell-for-leather spree a footballer’s wife might go on after her fella’s been caught in flagrante. Pictured: Rishi Sunak in Parliament yesterday
Will such profligacy jolt our economy from its post-Covid snooze? Who knows. But one thing’s for sure, it sent the wind right up his opponents. Wily Rishi hadn’t just stolen their clothes, but ransacked the entire wardrobe and paraded them all down Whitehall.
By the end, the opposition front bench simply sat in silence, arms folded. You could have been staring into a lifeless waiting room at a provincial train station.
For years they’ve demanded a Treasury splurge. And here it was being delivered, not by some bearded, wonky-specced old Trot, but by an ex-Goldman Sachs millionaire who wears £90 flip-flops. It just ain’t fair!
Mr Sunak spoke for just over 70 minutes. Originally we feared it would be far longer. He arrived carrying a speech as thick as a breeze block. Cue gasps of relief when we saw each page contained only about two dozen words.
Kick-off was delayed a few minutes while Deputy Speaker Dame Eleanor Laing issued the Government another rebuke over the amount of information leaked to the media. ‘Resign!’ yelled Labour MPs.
Rishi shot Madam Deputy Speaker one of those choirboy looks intended to show it wouldn’t happen again.
The Prime Minister wasn’t budging though. He shook his head and exhaled huffily in protest, a goofy mop of hair drooping over his face mask. ‘Ain’t done nuffink, yer honour.’
Speaking of face coverings, the Conservative front bench was largely masked up again. Rishi wore a particularly sharp number. Sleek. Expensive-looking. Hermes probably. Only that icon of devil-may-care rebellion Jacob Rees-Mogg remained without.
More money for schools, more for transport, more for prisons… more, more, more! Heavens. So this is the sort of Big Spender Shirley Bassey warned us about
Sunak’s opening remarks were met with a barrage of away fan noise clearly designed to put him off his stride. Yet he powered on regardless. It’s notable how much more oomph he gives his words than at his admittedly impressive debut two years ago. Incidentally, he’s sprouted a few grey hairs since then. Hardly surprising.
Soon he was into his groove and pinging off soundbites. He was building an economy ‘fit for a new age of optimism’, he said.
He described the Conservatives as the ‘true party of public services’. Loyal cheers erupted from PPS Andrew Griffith (Arundel and South Downs), an ex-Sky boss who radiates ministerial ambitions.
Not everything went down smoothly. A passage about green energy briefly sent us into a coma. Nor was an announcement that foreign aid would be restored met with much enthusiasm.
With Rishi now asserting himself over the chamber, Labour’s benches had quietly slipped into stasis.
The only sign of energy came from shadow energy minister Ed Miliband who kept busily trying to feed response lines to shadow chancellor Rachel Reeves, drafted in after Sir Keir Starmer had been forced to isolate.
Loud cheers met changes on alcohol duty. Predictably not from the SNP. Och, they were moody.
A curious note to finish. After the shamelessly boosterist statement, there came a slight row back.
Rishi reminded everyone that it was not up to him to solve everyone’s problems. ‘Government has its limits,’ he said sombrely. He was committed to lower taxes. He wanted to reward work.
Was he discreetly trying to let us know this was more the Prime Minister’s Budget than his? Certainly one for Westminster’s mischief makers to chew over.
‘Not enough’ was Reeves’s predictable response. Quelle surprise. You could suck the vaults dry and Labour will still demand more spending.
Still, she fared far better than her boss would have done. Even on one of his good days. Ms Reeves’ problem is her opponent never seems to have a bad one.