A payday loan of a Budget

The trick is not to give too much attention to the numbers because none of them will hold. This was a payday loan of a Budget, designed to get a hand-to-mouth government from here to the election. Reliant on borrowing, it shifts no fundamentals and the justifiable fear for the Conservatives is that when the loan expires, they will find themselves no better off.

Jeremy Hunt had three political goals in this Budget, all of them short term. The UK chancellor had to do enough to keep his mutinous party from despair and self-destruction; to offer Conservatives an economic story to take to voters; and to frame the political debate in a way that exposed Labour’s weaknesses. To that end, he just about found money for another major tax cut, stealing two of Labour’s three revenue-raising policies in the process and cheerfully leaving his shadow, Rachel Reeves, with the headache of replacing them to fund her party’s NHS promises. It will also limit the scope for Labour’s as-yet-unrevealed crowd-pleasing offers for the election.

Of greatest long-term significance may be Hunt’s first pass at public service productivity reforms: this might begin to deliver the imaginary spending cuts that are supposed to fund the second 2p cut to national insurance in six months. Also important and worthwhile was a UK individual savings account to encourage people to put more of their savings in British business. There was good news in the shape of predicted falls in inflation and signs of improvement in living standards to give Tories a flicker of hope. But part of the price of this Budget’s tax cuts is that debt continues to rise until 2028/9.

Underpinning it all is a political challenge to Labour to explain how, having accepted all Hunt’s tax cuts, they intended to deliver a significant improvement to public services or investment in the country. It is a serious question that the opposition party really is not answering.

For Labour is adopting Muhammed Ali’s rope-a-dope strategy, lying back on the ropes, protecting its body and absorbing the punches till the opponent — or in this case the country — tires. (This metaphor, I accept, is not perfect. Keir Starmer is no Ali and, in this case, George Foreman has spent the last four years punching himself.)

This, though, is the clear campaign strategy. Hunt and the Tories expect to spend their last months throwing punches at the gaping hole that is Labour’s alternative, hitting the same bruise and arguing that the opposition will have to raise taxes to fund its programme.

Yet this (valid) Conservative attack is blunted in two ways. The first is that the Tories are being similarly elusive about the substantial spending cuts their own plans demand. Furthermore, Starmer can counter with the soaring tax burden under this government.

But in truth these are skirmishes. The dividing lines are pretty blurred. Labour is intentionally cautious and neither side appears to be offering a coherent narrative or economic strategy for delivering the growth the country needs in order to fund the public services it demands — without paying more in tax.

Rishi Sunak’s government is reversing the policies of Boris Johnson and inching back towards the economics of David Cameron and George Osborne — except that we have left the EU and face ferocious resistance to immigration. Hunt more than once stressed the importance of expanding the workforce if the country is to turn away from importing labour, a recognition both of his party’s new attitude but also the central contribution migrants make to UK growth.

The most interesting item was probably plans to raise output and efficiency in public services, especially the NHS. Welcome measures to digitalise the health service offer a clue as to how the Tories expect to make savings without cuts but his five-year timeframe for achieving it looks very ambitious.

In a better government, Hunt would probably have been a pretty good chancellor. His misfortune has been to arrive at the Treasury at the fag end of a Conservative government without a clear economic vision, buffeted by external shocks, Brexit and Liz Truss. The best he could hope for is not to be a bad one. This was as sensible a budget as his MPs would allow him.

While the country cannot actually afford his latest tax cut, the politics of offering nothing were impossible. Even so, if it were not so serious it would be funny to imagine the chancellor inheriting his legacy after a shock election victory: “After looking at the books I find things are much worse than I realised.”

So what Hunt is left with is a party which has to deliver savings it does not really wish to find to justify continued tax cuts. Aside from the unrealised public service productivity gains, the Tories go into the election promising huge cuts they will not specify. There is no indication of what they think the state should stop doing or do less. And no plan to make real inroads into public debt. Meanwhile, voters see vital public services already decaying.

In a closer contest, Hunt’s Budget would pose some very hard questions for Labour. A lot of its hopes for growing the economy are being placed on planning reform, which will prove far harder than it feels in opposition. Yet such is the disillusionment with the government that Starmer can probably absorb the blows and still emerge the victor.

The election, therefore, will pit a Tory government pretending it has found painless spending cuts against a Labour opposition requiring only painless tax rises to meet its rhetoric on broken public services. Both sides would probably end up raising taxes after the election.

For all the politics, the Budget was a stop-gap exercise to be revisited once the country has voted. Few Tory MPs sensed salvation at hand; this is likely to prove an expensive way to not shift the political dial.

robert.shrimsley@ft.com