Next week’s Budget marks one of the final major set pieces for Rishi Sunak’s government.
It’s a cut-through-guaranteed event which every news outlet will be frantically live-blogging, while Tory HQ strategists will be hoping against hope it can turn the tide of the polls.
But Wednesday, March 6, is also a constitutionally significant moment for the British state, or the public purse, as the government tells us what it plans to do with taxpayers’ money.
As ever, the tension lies in the dual nature of the Budget’s purpose: a high wire vote winner, or a sober balancing of the books? Or, via some sleight of hand, can – should – it be both?
Jubilant post-Christmas hints we might see a further round of tax cuts, in a bid to lay out that all-important ‘retail offer’ to the great British public, have ebbed away in recent weeks.
Instead, as headroom estimates narrowed and we slipped into a recession, expectations have coalesced around a slimmer offering, funded by longer-term public spending cuts.
Those cuts, priced in for the 2028-29 financial year, according to the Resolution Foundation, get the government to a point where it is complying with its own fiscal rule to have debt falling as a share of gross domestic product (GDP) in five years’ time.
Resolution Foundation researchers warned funding for any “crowd pleasing” tax cuts “rests in large part on major cuts to public service spending pencilled in after the next election”.
James Smith, research director, said planned spending rises of one per cent in real terms – with certain departments such as health, defence and education ringfenced – would mean cuts of up to 17 per cent could fall on areas such as justice, housing and the Home Office.
“Given the dire state of public services, a fresh round of austerity doesn’t seem plausible,” he added. “The next government is going to need to find extra revenues to boost spending.”
The magic trick, of course, is that by then this all might be the other lot’s problem. Fiscal rules, since Gordon Brown’s era, have left politicians boxing themselves in in a bid to prove to voters they can be trusted with the public purse.
“And crucially to the bond markets,” Karl Williams, research director at the Centre for Policy Studies (CPS) stressed. “This is the dilemma Hunt is stuck in.
“He’s got to keep the bond markets on side, but he also wants tax cuts now – so he has to find spending cuts at the back end of the forecast.
“And then you have the broader question about what is a sustainable way of running the British state in the long-term and that ends up playing third string, as it were.
“This is partly why he is so focused on improving public sector productivity, which could only be a good thing.”
Westminster will be watching closely come next Wednesday for any fiscal rabbits Hunt pulls out of the magician’s hat.
But in the longer-term, perhaps we should be asking, however tempting, whether the Budget is an appropriate place for magic spells at all?