Jeremy Hunt has shown that he is in favor of postponing the election until the autumn. His second budget has all the hallmarks of a stay-at-home strategy for the government, which hopes to bring good economic news in the summer and leave open the possibility of a new stimulus package in six or seven months’ time. It was
Indeed, there was the much-publicized National Insurance contribution cut that formed the biggest part of the £14bn stimulus package brought forward. Indeed, he took every opportunity to criticize Labor in highly political speeches. This was the last budget proposal before the election, but it hardly seemed like the last roll of the dice for the government.
Mr Hunt did what all prime ministers do on budget day. He emphasized the positives. There was a lot of talk about how the economy had turned a corner, but nothing about what was shaping up to be the first Congress in modern times to see a decline in living standards. He passionately claimed that the average worker’s tax bill had been cut by £900 as a result of last autumn’s statement and this year’s Budget. He forgot to mention that the long-standing policy of threshold freezing means the Treasury will continue to siphon spending power from the economy this year and every year until the end of the decade. The budget tax cuts mean fiscal tightening in 2024-25 will be just over £41bn, rather than the previously planned £56bn.
of budget bureau The government’s spending watchdog, the OBR, also made a number of worrying findings. As a result of fairly modest tax cuts, Mr Hunt has just £9bn in savings, low even by historical standards. The OBR says this amount is only added on the assumption that there is an increase in fuel tax (something that has not happened since 2011) and that public spending per head of population does not increase over the next five years.
In reality, Hunt had only three budget options. The first was to eliminate any perks, quite rightly, because the finances were not in a decent enough state to justify it. He would have done so were it not for the fact that an election was coming up and the Conservatives were a mile behind in the polls.
Option two was to ignore the OBR constraints and go ahead with a lavish package of tax cuts and spending increases paid for by increased borrowing. Liz Truss tried that, causing a mini-financial crisis, which is why Hunt became Prime Minister in the first place.
This leaves option 3. He needs to find a way to fund the tax cut package while sticking to the wording of his fiscal rule that debt as a share of national income will fall within five years. That’s what the Chancellor has done by combining a stealth tax with a post-election public spending plan (which looks incredible), and leaving only the most troubling amount of reserve funding.
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Will it work? Hunt says the economy is improving, and he’s right. Inflation and interest rates are falling, growth and living standards are rising. But the recovery is still in its early stages, and time is running out for the government. Given the self-imposed financial constraints, a second budget was the only budget Mr. Hunt felt he could come up with. But conservatives needed more. They needed a game changer. This was not the case.
