Sunak’s tax-and-spend gamble on recovery

IT’S probably just as well that, as a teetotaller, Rishi Sunak was unable to follow the long tradition of Chancellors who enjoyed a glass of whisky while delivering their budgets.

Given the terrifying economic news he had to report, he might otherwise have been tempted to reach for a very large one indeed.

The most calamitous fall in national income for 300 years. More than £400billion spent on Covid support measures so far. Public borrowing of another £234billion next year.

An extra 700,000 unemployed with many more likely to come. Five million still languishing on state-funded furlough. National debt at £2.7trillion by 2024. The economic mountain we have to climb is not merely steep, it’s positively vertiginous.

Mr Sunak’s mission was to provide a Budget that would get Britain moving again and give some idea of how we might one day balance the books, while at the same time protecting jobs and businesses.

As usual, it was a smooth and engaging performance. Mr Sunak has the knack that all politicians seek but so few achieve. He makes his audience like him.

we will see whether that still holds when he stops giving away money. However it was plain yesterday that that time hasn’t arrived yet.

He shelled out another £65billion to add to the debt pile – in extended furlough, grants for the self- employed, more VAT discounts and business rate holidays.

Not very Conservative, on the face of it. But these are strange times.

Even less Tory-sounding were the Budget’s tax bombshells. The first was a five-year freeze on thresholds, which will bring an extra one million people into taxation and 1.3million more into the higher band.

The second was even more of a shock, a massive hike in corporation tax from 19 to 25 per cent. when Labour suggested a similar rise in 2015, Mr Sunak vociferously opposed it, saying it would ‘damage jobs and growth’. Following an apparently Damascene conversion, he has now bumped it up to its highest level for half a century. This is a colossal gamble.

we do however understand that Mr Sunak has an unenviable juggling act to perform, and in many respects this was a dexterous and politically astute Budget.

Particularly eye- catching was an imaginative scheme for igniting business. Companies buying new equipment can receive a tax break of up to 130 per cent of the cost. These ‘super deductions’ are exactly the sort of spur to innovation and productivity that we will need to thrive in the post-Covid world.

There was also payback for Red wall voters in the North and Midlands who swept the Tories to power as the Chancellor began to fulfil his boss’s ‘levelling-up’ promise.

Hundreds of civil servants will be relocated to a new Treasury hub in Darlington. A £1billion fund is to be shared between ‘leftbehind’ towns, and new ‘freeports’ on Teesside and Humberside are being created to boost green technology production.

And amid all the gloomy numbers, there are green shoots of optimism. The office for Budget Responsibility now forecasts that unemployment will peak at 6.5 per cent, rather than 11.9 as predicted in November.

The recovery is also expected to be swifter and more sustained, so we should be back to pre-crisis levels by the middle of next year – six months earlier than previously expected.

But a rapid bounce-back depends on getting back to business as soon as possible. This is why Boris Johnson must be prepared, if hospitalisations and death rates continue to plummet, to accelerate the lifting of restrictions.

Left too long, the ‘coiled spring’ of the British economy will go to rust. As these Budget figures show, every day counts.