What does Rishi Sunak's government budget tell us about the Conservatives?
And where are the Thatcherites?
This email will help with the political parties topic
Last week Rishi Sunak announced his autumn budget and spending review. As you know, a budget is the government’s announcement on how much they are going to spend in the coming year and years to come and how much they expect to raise in taxation.
Since 2010, up to the pandemic, the Tories maintained what can be regarded as a Thatcherite, low tax and low spend approach to the country’s finances. It’s what became known as austerity – a policy of Cameron and Osborne and it led to quite severe cuts to the spending of welfare, education and other departments. These fiscal conservatives believe in tight control of the government’s finances.
Since the pandemic, the government has been borrowing and spending eye-watering amounts of money (as I have explained in previous bulletins).
The question for the government is what comes next as the worst of the pandemic is (probably) over.
Well, the Chancellor is doubling down on this government’s rhetoric that it will not come out of this crisis through cuts but would ‘build back better’. Of course, this is in reality a lot to do about politics – the Tories need to hold onto and expand their “red wall” gains.
Here are some of the budget measures that you need to know about:
Departments to receive a rise in overall spending, totalling £150bn over the course of this Parliament
Levelling Up Fund will mean £1.7bn invested in local areas across the UK
Extra £2.2bn for courts, prisons and probation services, including funding to clear the court’s backlog
More benefits to 1.9million working for families by cutting the Universal Credit taper rate from 63p to 55p
An increase in the minimum and living wage
Banks get a huge tax cut as the bank surcharge is cut from 8% to 3% - costing the Treasury more than £1bn a year by 2026
£6bn to help tackle NHS backlogs and invest in technology
NHS budget to rise 3.8% in real terms each year for three years
However, despite the tax cuts to bank surcharges, the Office of National Statistics points out that the overall tax burden from this budget is the highest it’s ever been since 1945 (when the Atlee Labour government introduced welfare reforms).
Where are the Thatcherites?
Rishi Sunak has a Thatcherite instinct but his boss, the Prime Minister is not wedded to any particular ideology. Sunak stresses that he intends to bring government finances back on track by 2024 as suggests that growth rates will bounce back (thus increasing tax revenues). A lot of this is hopeful thinking. We haven’t yet seen the full impact of Brexit.
At the moment the backbenchers are quiet, but if the state expands further you can expect more demands for austerity.
Another Labour strand emerges
Labour MP Stephen Kinnock MP has launched a new report called ‘renaissance Labour’. It covers how Labour can find a path back to power. Here’s a good interview with Kinnock. It’s worth a listen, although I do wonder how radical his thinking is.
In reality, the only realistic path back to power is to form a ‘progressive alliance’ between the left-leaning parties where they work as one block against the conservatives. But this takes a lot of sacrifice on behalf of Labour.