We need a Budget for growth not tax rises

Rishi Sunak’s second Budget today follows a year of unprecedented levels of peacetime borrowing and an economic slowdown greater than at any time for 300 years. Yet the Chancellor may well be in a position to look forward to a boom later this year when the pandemic restrictions are lifted, provided he does nothing to hinder recovery.

That means resisting the pressure for tax increases to pay off the debt. Companies and employees whose livelihoods have been hit by the lockdowns need continued support and look certain to get it. Kwasi Kwarteng, the Business Secretary, said the furlough scheme that was due to be wound up last August would continue until September.

The Chancellor is also expected to extend the £20-a-week top-up to universal credit for six months to help struggling households and to freeze fuel duties for another year. In addition, a £400 million package of assistance for museums, theatres and galleries in England is expected to help them to reopen when Covid restrictions ease. A further £150 million will be allocated to communities wanting to take over pubs in danger of closing.

These are moves that will underpin Mr Sunak’s popularity but there must come a point when all of these massive financial undertakings will have to be withdrawn. There is always a danger, too, of propping up businesses that would have gone under if there had not been a pandemic. How those are to be identified is anyone’s guess.

When he took over at the Treasury from Sajid Javid in February last year, Mr Sunak cannot have imagined that in his first year he would be spending some £250 billion more than the Exchequer has taken in taxes. All previous calculations have had to be abandoned to deal with the crisis.

He will still be obliged to give forecasts of borrowing in his Budget that will be nothing more than guesses. He and Boris Johnson have promised a Budget for growth but that requires a programme of targeted tax breaks, VAT holidays as well as payments to struggling companies to help with cash-flow problems.

As Lord Hague said in this newspaper yesterday, a time may well come when the country has to pay for the costs of supporting an economy shut down for the best part of a year. But that time is not now.