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Budgets are essentially confidence tricks. Above anything else, every Chancellor’s biggest aim on the day is to project surety. To us the voters, and to the debt markets so they keep lending.
That’s why Chancellors bang on about their prudent plans, their strong and stable plans, or Rishi Sunak’s buzzwords today, his plan “for a new age of optimism”.
On Budget day, Chancellors also treat us to a barrage of future projections to back up their precise courses of action.
The problem with today’s Budget is that it is built on sand. Why? Because this year there are a ludicrously large number of future uncertainties that both houses in Downing Street know they will have to contend with —indeterminables whose outcomes will each have a sizeable influence on the economy’s trajectory, and thereby the state of the public finances. I count 10 of them, though there are probably more:
The state of the virus: will Covid’s current surge fade as immunity expands, or will there be a need for Plan B restrictions, or worse? Plan B alone would mean a £18 billion hit to the economy, the Treasury calculates.
The pandemic’s legacy: how deep is the scarring from the past 18 months? We don’t yet know, for example, how many of the one million people on furlough when the scheme wrapped up will end up unemployed.
Future growth: on this, so much depends. Yes, it’s better than thought in March, giving Sunak his mini-spending spree today. But enjoy it while it lasts. What will growth look like in two years’ time? Growth boosts tax receipts, which keep the Treasury’s ever vaster outlays affordable. Pre-pandemic, flatlining productivity made it sluggish for nigh-on a decade. What’s changed?
Supply and energy price crises: will they ease within six months as a post-Covid world catches up with demand? Or are there now structural issues at play that will make both last longer? Again, nobody knows.
Tax rises: could they choke off growth? Sunak/Johnson are imposing the biggest tax burden in seven decades. This plunges the UK down the competitiveness league and horrifies most Conservative ministers and MPs.
Inflation: will it be gone in six months, or remain at five per cent or higher for a year or two? That would blow a giant hole in the public finances, with benefits, pensions and the cost of servicing our £2.2 trillion debt mountain all linked to it.
Interest rates: the Bank of England will almost certainly raise rates next month, by 0.15 per cent at first. If that doesn’t curb inflation, the Bank will have to keep going, putting huge pressure on indebted businesses and mortgage payers.
Climate change: will technology advance fast enough to keep the green transformation affordable? Big chunks of the Government’s net zero plan, such as carbon capture or hydrogen boilers, rely on just that.
Demographics: we are getting older as a nation. Can the NHS get a grip on the resulting mountain of extra work and stop the health service becoming a bottomless pit for funding? Of course, it must eradicate its Covid backlog at the same time.
Brexit: it’s still not done. If Northern Ireland negotiations or the haggling over fishing quotas turn bad, the UK could slip into trade sanctions with the EU, damaging exports and hacking back growth.
Now, one or two of these 10 indeterminables are in the Government’s hands to resolve, such as Brexit. The majority of them are not.
As former Treasury minister and Goldman Sachs economist Lord O’Neill put it: “In 40 years of thinking about the economy, I have never known a time in which there were so many big issues where the outcome could go in different ways. That makes it fascinating.”
For observers, yes. For the practitioners, it’s terrifying. The Government need almost all of these indeterminables to go their way, or they could be in big trouble.
Boris Johnson has been a lucky Prime Minister so far. Now he needs his Chancellor to be both lucky and good to come through the next 12 choppy months successfully, or we’ll all be paying a lot more.
In other news...
Sunak brood make a key decision
The Chancellor made a Zoom call early this morning to put the finishing touches to his Budget presentation. It was to a house in North Yorkshire. His own in fact.
That’s where his two daughters, Krishna and Anoushka, are. As he revealed to me on T&G on Sunday, his routine before big Commons moments is always the same.
It begins with putting on the cotton bracelets that Krishna and Anoushka made for the occasion as good luck charms. Then comes the tie selection, again presided over by his daughters.
And just before he goes into the chamber, he demolishes a Twix and a can of Sprite dutifully left on his desk by an assistant, to manage his “sugar problem”.
Except this week is half term, and the rest of the Sunak brood are at the constituency home. Hence the Zoom consultation.
With all this intimate sharing, my co-presenter Katy Balls decided to push her luck and ask Rishi if he also has a lucky pair of underpants? “Now that’s getting quite personal,” the Chancellor replied with nervous laughter.
The revelations that made me delete Facebook
It was sickening to hear the appalling picture Facebook whistleblower Frances Haugen, below, painted of her former employers this week.
She told a Commons committee how squillionaire Mark Zuckerberg’s sites facilitated child bullying to follow them all the way home from school to their bedrooms, how Facebook promotes hate by algorithms designed to push people towards the extremes, and how it’s corrupting an entire generation to think ill of each other. And all for even bigger profits.
So last night I did what I’ve been telling myself to do for years. I deleted my Facebook account. Only when the market speaks will they listen.
Tom Newton Dunn is a presenter and Chief Political Commentator on Times Radio
What do you think about Rishi Sunak’s Budget? Let us know in the comments below.