Sunak gambles on spending spree to get country motoring

You know when a Budget has hit the G- spot when the opposition leaders are left reeling on the red benches with nothing to say. Nothing. Not a barb or a joke or even a punch or too. Only whinges.

Jeremy Corbyn and his crew were even unable to criticise Rishi Sunak’s first Budget as being another austerity driven right-wing attack on the working classes because it wasn’t. They couldn’t say the nasty Tories were once again doling out money to their friends and supporters because they weren’t. In fact, they were taking it away in some cases, such as the scaling back on Entrepreneurs Relief, and clamping down on those overseas gangsters who use London for their tax avoidance.

They couldn’t even bring themselves to attack the Tories for not spending enough money on the NHS or public services because they are; billions and billions and billions of pounds are being poured into new schools, training teachers, more police and nurses. Perhaps even more money than a Labour government would have contemplated.

They couldn’t even portray the Tories as the uncaring nasty party which only befriends rich bankers because they put rough sleeping right at the heart of the Budget. Rough sleepers will get £650m to provide 6,000 new places for those living on the streets.

Nor could Labour politicians say the downtrodden working classes are being ripped off because they are to be beneficiaries of a multitude of mini- tax cuts: from a rise in the Minimum Living wage to an increased National Insurance threshold. Plus there will be more money in people’s pockets because duties are to be frozen on whisky and wine, and of course on petrol, which is already coming down because of the oil price collapse. And there are to be cheaper tampons too.

As Sunak said to a bellowing roar from his fellow Conservatives behind him on green benches, “we are the party of the working classes now,” with the final flourish that this is a people’s Budget from a people’s government. Indeed, this sort of give-away high spending Budget is one that John McDonnell (remember him) himself might rather have liked to have given – minus the nationalisation plans – and marks the biggest increase in government spending in history.

You have to hand it to Sunak, the 39-year-old former banker delivered this Budget with the panache of someone who had been at the despatch box for decades, not a matter of days. Even his repetitive use of “Get it done” was amusing, because he so clearly was mocking the party’s own mantra. That he was able to joke about himself as being in the job as part of the country’s “jobs miracle” showed a self-deprecating touch we haven’t seen before. And he did it without Yorkshire Tea as a prop.

He was smart and slick, funny and humble and sounded as though he meant what he was saying – and not parroting what his masters at No 10 had told him to say. And he was right; it was a popular people’s Budget – but not populist – that distributed the goods evenly and fairly at a time of potential crisis.

And it didn’t take him long to get to the point. In his first few breaths, Sunak announced a £30 billion immediate fiscal giveaway to fund emergency measures to help households and small businesses to survive the onslaught of the virus. At first glance, they look practical too: more high street lending for small businesses, abolition of business rates for many and help with paying statutory sick pay.

Then, in the next breath, he came out with his bazooka: new spending plans for the next five years which will mount to around £600 billion. As Andrew Neil said while interviewing Labour’s opposition Treasury spokesman on TV, it’s the sort of Budget that would have given Lady Thatcher the vapers because of the enormous sums being spent by government on expanding the size of the state.

But then this Tory government is of a quite different shade of blue to that of the 1980s. Boris Johnson’s Tories have moved firmly centre state, taking on a lighter blue of One Nation Conservatives that believes the size and scope of the state should be bigger and more interventionist. They have been able to take charge of the centre ground, a space left unoccupied for them because of Labour and the LibDems’s move to the hard left edges.

This is the Tory genius, and why the party is one of the world’s most successful military machines in history because of the way it stays in power: by adapting and changing to circumstance. Johnson knows this, as does Dominic Cummings. One of the many brilliant sayings of Edmund Burke, father of modern conservatism, was this: “A state without the means of some change is without the means of its conservation.”

Sunak’s big-spending package to halt the worst disruption of the virus and his new measures aimed at levelling up spending across the regions appear to have gone down well and, more crucially, been taken seriously. The trade ambassadors for the regions, the move of up to 22,000 civil servants as well as parts of the Treasury to the North are visible rather than populist measures. They may not mean much in economic terms, but they do demonstrate the government means what it says. Together with the emergency measures announced this morning by the Bank of England to slash interest rates and inject up to £100 billion into the banks to lend more to small business, he may well have succeeded in showing those Red Wall voters they were right to turn blue.

Yet while the Red voters are changing colour will the new Chancellor’s fiscal stimulus be turning its more traditional blue voters purple because of the recklessness of the spending plans?

There are already mumblings from the more Thatcherite purists left on the benches, mainly about where this famous money tree is growing.

What critics want to know who is going to pay for the money tree, so far Sunak has managed to avoid any tax rises. But they are worried if growth collapses because the virus wrecks even greater havoc on the economy? On one level, the outlook for the UK is pretty bright but this could turn bleak because of the as yet unknown impact of the virus on both supply and demand but because the global economy was already fragile.

The OBR’s forecasts actually look relatively positive: without accounting for the impact of coronavirus, the OBR has forecast growth of 1.1% in 2020, 1.8% in 2021 and then 1.5%, 1.3%, and 1.4% in the following years. Sunak also added that the OBR forecasts a current budget surplus in every one of the next five years, with borrowing increasing from 2.1% of GDP in 2019/20 to 2.4% in 2020/21 and 2.8% in 2021/22.

What’s more, the OBR forecasts that headline debt will be lower at the end of this Parliament than it is currently, falling from 79.5% this year to 75.2% in 2024/25. On that basis, the Chancellor reckons he can keep spending on track and within the fiscal rules.

But it won’t take much to knock growth off track. The double whammy of the virus spreading and collapsing world growth could even dip the UK into recession.

Spending on growth – on raising productivity and bringing growth to the regions – is the gamble that Johnson, Sunak and their economic advisers have decided to risk. It’s a fair gamble, and could pay off if they can get the spades and the shovels quick enough into the ground to get these road and rail infrastructure projects off the ground. To my mind, there is too much money being spent on costly roads. Far better to invest more in rail, and take some of the heavy freight lorries off our roads which are leading to so much congestion.

But the emphasis on investing in better education, R&D, in innovation and ideas, in life sciences and new technologies is bang on the money. There were two big omissions: there should be more practical steps to help councils build new housing and the interest rates on student loans should have been slashed. That hopefully will come in Sunak’s next Budget.

Taking a risk is surely a better bet than the David Cameron’s Conservative government’s gamble on austerity, one of the worst descriptions of policy ever used by a Chancellor and staggering that the Tories survived more or less intact. Sunak appears to have learnt the lesson from George Osborne’s great mistake. Austerity is buried. We will see what comes in its place. Johnson may even have inadvertently launched the career of a new successor in Sunak through his desire to Get It Done.