£150bn spree is the biggest splurge since the Seventies

Warning over national debt as spending soars

RISHI Sunak yesterday vowed to spend now and cut taxes later in a strategy designed to win the next election.

Mr Sunak said his £150billion investment, which encroaches heavily on traditional Labour territory, showed the Conservatives were now ‘the real party of public services’.

Experts said the scale of the spending 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 tax burden will reach its highest level for 70 years.

There was some unease at the spree as national debt edged ever closer to towards £2.5trillion.

But Mr Sunak said it was right to ‘invest in a more innovative, highskilled economy – because that is the

‘Recovering faster than major competitors’

only sustainable path to individual prosperity’.

And, in a deftly delivered Budget, the Chancellor cheered voters with a consumer-friendly package of giveaways, including a fuel duty freeze and a reform of alcohol taxes.

The alcohol reforms amount to an overall giveaway of £125million a year. However, the price of some stronger drinks, including port and many red wines, will rise.

The spending splurge came after the Prime Minister insisted there could be no return to the austerity of the last decade. But, in a highly personal section of his speech, the Chancellor also said it was time for the Tories to start making the ‘moral’ case for lower taxes and a smaller state.

The high spending means Mr Sunak is forecast to have just £17.5billion spare cash in 2024 if he is to meet his fiscal rules – a sum that could be blown away by even a modest interest rate rise.

Last night, he told Tory MPs every spare pound would now be diverted to a war chest designed to deliver tax cuts before the next election. As a ‘first step’, he announced an effective 8 per cent tax cut for working families on Universal Credit, by slowing the rate at which they lose benefits as their pay increases.

The move, worth £2billion, partially offsets last month’s decision to end the £20-a-week uplift to the benefit, which was put in place during the pandemic.

In an upbeat assessment, Mr Sunak said stronger than expected growth meant the UK was now ‘recovering faster than our major competitors’.

The economy is now expected to recover to pre-pandemic levels by the end of this year – six months earlier 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.’

Mr Johnson insisted the bulk of a £35billion windfall from the economy roaring back faster than anticipated should be spent on shoring up public services and delivering on his levelling up agenda. An ally of Mr Sunak said: ‘It was the Chancellor’s Budget, but it was the Prime Minister’s spending review.’

In a pointed intervention, Mr Sunak stressed the limits of the state, saying the Government should not be expected to bail out every struggling business or solve every problem.

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 said he had been left with no choice in the wake of the damage caused by the pandemic. Last night he told Tory MPs he had ‘set a clear and unambiguous intent to begin the process of reducing taxes’.

The Institute for Fiscal Studies said the decision to invest in public services, a more generous benefits system and increase wages meant the Budget and Spending Review were ‘much 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.

Paul Johnson, director of the IFS, warned rising inflation meant real wage increases would be ‘almost non-existent’ in the coming years.