The Guardian view on Boris Johnson’s budget: we are all Keynesians now
Rishi Sunak’s first budget reveals a politician who will not squander the opportunity presented by a crisis. The Conservative chancellor has acted to shore up confidence in the economy by rolling out a series of emergency spending measures to support households and businesses in the wake of the global coronavirus outbreak. But he has also signalled a new direction of government economic policy. Mr Sunak used his first of three fiscal events this year to talk up the government’s agenda and send a message that it would not hesitate to use the state. What Mr Sunak wanted voters to hear is that this is a big-spending, big-borrowing administration, which in terms of real spending per person aims to reverse a decade of cuts by the time of the next election.
This change of attitude and the talk of strengthening the safety net to deal with an emergency is a refreshing change for the better. Mr Sunak is correct in sensing that the public won’t indulge Tory state-shrinking instincts. The chancellor is a welcome convert to the idea that the Treasury must borrow to invest with a view to lifting the growth rate of the economy. The cash injection is required to keep the economy expanding, not least because Brexit shrunk it by 2%.
What once was seen as heresy is now a tenet of the Johnsonian faith. The impression, left by Mr Sunak, is that we are all Keynesians now. To paraphrase Margaret Thatcher, never has the road to Damascus been so congested. Mrs Thatcher was crowing in 1996 after four Labour defeats. There can be little satisfaction for Labour in winning the economic argument, only to see the Tories stealing its ideas after four electoral losses.
However, it would be churlish not to think that Mr Sunak’s extra £6bn on the NHS ought to be discounted just because he lifted the figure from Labour’s manifesto. The most troubling opposition to Mr Sunak about public spending may come from his own side. Many Conservatives have not changed their minds and may well view Mr Sunak as having lost his. Tory pulses are set racing by cutting taxes, slashing regulation and talking up wealth creation, not by extolling the virtues of government spending.
Conservatives, however, are prepared to give up their principles for power. It is what makes the party such a formidable political force. On the surface the budget was one for drinkers and drivers. Like most Tories, Mr Sunak believes in clean tech, not hair-shirting. No doubt he thinks a Conservative can become the inaugural West Yorkshire mayor, which is why he is proposing one – and replicate the party’s breakthrough in the north-east of England in 2017. Mr Sunak might claim the Tories are “the real workers’ party” but there’s no sign the state will intervene on the side of labour or redistribute wealth. He conspicuously declined to act as the employer of last resort for the “gig economy” during this crisis.
While Mr Sunak changed the path of policy, he did little to reveal where the Conservatives were going. Voters are in the dark about what he wants to splash the cash on. Under the rubric of “investing in excellent public services” and “levelling up”, the budget spreadsheet has about £60bn of unspecified spending in 2024. Mr Sunak has until the summer to outline how he will spend these sums. Higher government investment will increase the supply capacity of the economy. And higher spending will boost demand. Yet the extent to which these – and any social gains – are realised depends on the mix of the projects chosen. Even before coronavirus hit, Mr Sunak faced a slowing world economy and a Brexit that leaves the country poorer. The Bank of England has little conventional ammunition left and is already lining up £100bn in emergency credit lines. It will be months before we will know if the UK and the EU are to agree on a trade deal. He may strut around the dispatch box, but Mr Sunak is clearly anxious to keep his powder dry.