It was, said Rishi Sunak, a Budget and Spending Review for a “new age of optimism.” These were the words of a man who is already thinking more like a prime minister than a chancellor. While Gordon Brown built his economic policy around the importance of prudence, George Osborne embraced austerity and Philip Hammond relished his status as an Eeyore, Sunak was positively Tiggerish this week. He behaved like someone preparing for a move to Number 10, rather than a politician steeped in the culture and attitudes of the Treasury.
This was an intensely political Budget from a chancellor with an eye on the MPs who will help choose the next Tory leader and the voters who will secure that future premier’s position in Downing Street. Nobody was in any doubt that Sunak wants the top job—but it is now clear that he is actively preparing the ground to fulfil his ambition and setting out to remove some of the potential obstacles to him taking over from Boris Johnson.
For months there has been speculation about tensions between a prime minister who wants to spend and a chancellor who is determined to save. Yet Sunak has refused to allow himself to be portrayed as “Dr No” to the prime minister’s “Mr Yes,” adopting the language of “boosterism” favoured by Johnson. Instead of appearing to be forced into making unpopular choices, he announced real-terms spending increases for “every single department,” claiming the Tories were the “real party of public services” with a £150bn plan.
Many of these spending commitments reversed changes introduced by his Conservative predecessors over the last 10 years, of course—in fact, some of them overturned announcements he himself had made since taking over at the Treasury. But the chancellor was unapologetic. This seemed like an exercise in removing what Lynton Crosby might call the “barnacles on the boat” of Sunak’s desire to become prime minister. Indeed, it may be no coincidence that the chancellor is said to have been consulting the “Wizard of Oz,” as the Australian political strategist is known.
Superficially at least, there was something for almost everyone in this Budget. Within minutes of the chancellor finishing his speech in the House of Commons, Conservative MPs were tweeting their thanks for the money being lavished on projects in their constituencies through the “levelling up” fund. From cash for potholes to money for new roads, Sunak sprayed resources around the country, with the generosity of a politician trying to win friends rather than make enemies.
The chancellor suggested that international aid would return to 0.7 per cent of GNI by 2024, reversing his own policy that provoked a rebellion among Tory MPs—although the cut will remain for another three years at a time when the world’s poorest countries are in dire need of support.
Sunak also softened the blow of the end to the Universal Credit uplift—which has been criticised by dozens of Conservative MPs whose voters depend on the benefit, as well as the influential footballer Marcus Rashford—by making changes to the taper rate which will give more help to those in work. The chancellor made a point of stressing that he was returning to the plan originally drawn up by Iain Duncan Smith when he was work and pensions secretary—and blocked by George Osborne.
Sunak is often portrayed as the high-minded yin to Johnson’s low-brow yang, but this was a Budget with a populist edge. One Whitehall source says: “The whole thing was totally cynical. Rishi is shameless, even more shameless than Boris.” The cut in alcohol duty—3p off the cost of a pint—could have been tailor-made to generate an approving tabloid front-page headline and several duly obliged, using the carefully staged photo op of the teetotal Sunak and Johnson pulling pints to illustrate the story.
In fact, the chancellor spent more time in his Budget speech on the reforms to taxes on champagne, prosecco and cider than on his plans to help schools recover from the pandemic. Cancelling the alcohol duty rise cost the Treasury £3 billion, more than the additional £2 billion allocated to schools to schools to help children recover from the pandemic. Education appears to be a blind spot for the chancellor, who was educated at Winchester College. That the funding for state school pupils will, by his own admission, only be returning to 2010 rates shows how much budgets have been slashed. Luke Sibieta of the Institute for Fiscal Studies said that core spending per pupil would be about the same level in real terms by 2024 as it was 15 years earlier—“a truly remarkable squeeze [that] will make it harder for schools to contribute to levelling up.”
There was no long-term strategic vision underlying this Budget, which in places appeared at odds with the government’s wider aims. Just days before the COP26 summit, at which the prime minister is supposed to be showing global leadership on climate change, the chancellor made domestic flights cheaper and scrapped a planned rise in fuel duty.
The social care crisis will not be fixed by Sunak’s plans. The rise in the minimum wage and the end to the public sector pay freeze were eye-catching announcements, but are likely to be swallowed up by tax rises and inflation. According to the IFS, average earners can expect to see their real incomes fall next year.
The policy priorities may be skewed, but the politics were perfectly pitched at those Sunak must win over to become leader. The real tension in recent months has been less between the chancellor and the prime minister than between the competing demands of the new Tory electoral coalition—made up of former Labour voters in red wall seats who rely on public services, and the wealthier traditional Conservative supporters in the southeast who favour the free market and a smaller state. This week, Sunak has ptried to keep together the alliance that won the Conservatives their 2019 election victory. While chancellors are usually obsessed with balancing the books, Sunak is already focussed on levelling up political support for himself. Reality, however, may soon catch up with him.
