The chancellor’s speech was all about the next election, stupid
Rishi Sunak’s budget and spending plans were about politics rather than economics. His Commons statement was designed to frame the arguments in the run-up to an election rather than dealing in a substantial way with a post-Covid, post-Brexit, transition to a net zero economy. However Mr Sunak knows that voters want a break with the recent past. The chancellor sought to insulate the government from politically toxic claims it is enacting austerity, by spending money to reduce waiting times for NHS patients and bringing up per-pupil education spending in England to levels last seen under a Labour government. He also signalled to “blue wall” voters that he has a heart, not just a head – by vowing eventually to restore the UK overseas aid budget to 0.7% of GDP. The hidden economics of the budget can be found in the small print: most of the extra money for public services disappears in two years’ time.
Increasing government expenditure is necessary, but this temporary hike won’t be enough. Local councils will see a sharp rise in funding next year, but this is inexplicably frozen in the following two years. Mr Sunak spoke to his own tribe by confidently cutting taxes for domestic flights, freezing fuel duty and splurging on roads – in breezy defiance of the prime minister’s green messaging ahead of climate talks at Cop26. Mr Sunak spent twice as much in tax cuts for bankers than Covid catch-up lessons for schoolchildren. While the economy has made a recovery from the pandemic, the Office for Budget Responsibility warned that the UK’s supply crisis has been made worse by post-Brexit immigration rules and trade barriers.