In his forthcoming March Budget we may well learn a bit more about what the real Rishi Sunak is all about. So far, he has tried to be all things to all men and women. He dishes out money like there is no tomorrow – and uses his rather strange personal logo to shout loudly about it on social media. No wonder he gets good ratings from the public relative to most other politicians. But he plays the other side too. Those of a more frugal disposition, especially on the Conservative back benches, like the sound of the rumours that Sunak is itching to start the fiscal cutbacks as soon as he can – or at least they like it until they hear that it may include tax rises, not just cutting back on manifesto promises like overseas Aid.
So, Sunak has to navigate these tricky political and personal ambition waters. But what would be the right things to do at this point in the Covid and economic situation? Her are three elements of what a sensible Chancellor would do.
First, he should continue to support the economy with fiscal measures. At the very least he should commit to keeping many of the exceptional measures going for at least another 5 or 6 months. To not do so onto only prematurely removes support from those whose jobs and businesses are in a precarious situation, but takes a hammer blow to confidence and anyone’s ability to plan. He should also make clear that public services will be properly funded in the 2021 Spending Review so that they can plan: the mini Spending Review in November 2020 gave very little to crucial local government but also tried to hide a cut of some £10bn in spending relative to the March 2020 Budget by departments outside the ‘protected’ ones (like Health).
Second, while it is fine to say that at some point when we are all through this, we will need to look at ways to get the debt under control, he should be wary of doing anything at all at this point, making clear that nothing will happen until recovery is well and truly underway. And further, he should avoid saying too much on what measures he may take for fear of affecting behaviour now. The trouble is that the minute you say what you will do when recovery has been secured, people behave as though you have acted already. At this point we want nothing to dampen any emerging confidence as we see the vaccine taking hold.
Third, he should make clear that to the extent he wants to make fiscal consolidation, it will not be like the Coalition and Tory austerity where the biggest hit was on spending. He should make clear that tax will play it full part. And that those taxes will be fair – affecting the better off most – and will also support the net zero efforts. Exactly what these taxes should be is matter of debate. There is clearly a case for at least a one-off wealth tax to mop up some of the unexpected savings that the better off have built up during the crisis. And the public mood is there for some political bravery to finally grasp the nettle on certain areas: reforming council tax to make it fairer; ending the absurd situation where the richer you are the bigger pension tax relief you get; and ending the ability of the better off to reduce their tax liability via switching income into capital gains.
These are strange and unusual times. Sunak could be a brave and reforming chancellor. Or he could keep his eyes on the next election, party unity and his own personal position and go down in a history as a man who missed the moment. We will see.