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Despite a notable return of facemasks on the government frontbench, Sunak sought to step out of the shadow of the pandemic and herald a “new age of optimism”. The government, he said, had done whatever it took – and would switch its focus to many of the pledges on which it was elected two years ago. But this Budget was designed not only to draw a line under the last 18 months – Rishi Sunak seemed determined to reverse the austerity policies which so defined George Osborne’s long tenure as chancellor.
The 2019 pledge to level up was – he told ministerial colleagues in advance – a “golden thread” running through the autumn budget and the spending review. More notable by its virtual absence was mention of the government’s net zero ambitions, despite Cop26 being just a week away. Fuel duty was frozen again, while Air Passenger Duty – despite being raised on long-haul flights – was cut for short flights across the UK despite low-carbon alternatives being available.
Sunak’s overall positivity was aided by the fiscal windfall he was handed by the Office for Budget Responsibility, the independent fiscal forecaster. There had been widespread speculation in advance of the budget that good news was coming. But in the end, the windfall was even larger than most had predicted – borrowing lower in every future year by at least £30 billion.
Much of this Sunak banked – building in a cushion of more than £25 billion a year against his new fiscal rule, that he will borrow only for investment in normal times. He, no doubt, hopes that this safety net will not be needed and he can instead use it to fund tax cuts before the next election. He tried to burnish his credentials with low tax Conservatives on Wednesday by lamenting the fact that taxes are set to rise to their highest share of national income since the 1950s and saying “government should have limits”.
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There were also some giveaways. There was extra money for public services, especially over the next couple of years. Many lower-income households will benefit from a reduction in the taper rate for universal credit – reducing the disincentive for some to take on more hours of work or better-paid jobs. There was also good news for motorists, plus drinkers of many types of alcohol. And there were cuts to business rates and to the corporation tax surcharge for banks. The only notable takeaway was from the pre-announced reduction in the generosity of state pension increases next April.
But underneath all the positivity and talk of support for working families and addressing business concerns, there was actually only a small amount of action to help businesses and households through what could be a tough winter of high energy costs and rising prices elsewhere. Perhaps the biggest gamble Sunak took in this budget is that these small concessions will be enough to see off political pressure this winter.
Stepping back to look at his plans in the round, Sunak’s “new age of optimism” looks rather more like a bygone era. Many of the changes Sunak heralded – cutting the Universal Credit taper, increasing per pupil school funding and increasing spending on local services like youth centres and libraries – are reversals of policies implemented by his predecessor George Osborne. While Sunak continues to extol the virtues of fiscal discipline that Osborne also prioritised, this budget is another reminder of just how different this Conservative government is to the one in office six years ago.
Gemma Tetlow is chief economist for the Institute for Government