Normal form when a new Prime Minister comes to office is for the new top dog to ask the Treasury to immediately prepare a Budget, so that they can quickly stamp their mark on the public purse, and signal their priorities to the country. But, as in so many ways, this Prime Minister and this Government is not a normal one – and after more than seven months in power, only next week will they hold their first “fiscal event” as these things are known in Westminster circles.
So what should we look for, as the new Chancellor Rishi Sunak steps towards the despatch box with that battered red box for the first time?
Well there used to be a time when Conservative budgets were somewhat predictable. On public spending, the message would be “restraint”. On fuel duty, the message was it needed to be frozen to help hard-pressed people who rely on their cars. Public sector pay rises, on the other hand, needed to be paid for from efficiencies. Whilst taxes, the scourge of every true Tory, should be cut wherever and whenever possible. Most of all, a Conservative Government should seek to balance the books, operating a prudent and responsible fiscal policy.
But don’t hold your breath for too many of those messages next week. Boris Johnson may be a Conservative Prime Minister, but he is in no way a fiscal conservative. Instead, we may well see fuel duty rise. We may see corporation tax cuts cancelled. And changes to the fiscal rules mean that overall we will see public spending rise in a way it has not done for decades. The Budget will deliver headlines on the direction of travel on these issues, but for some of the finer detail on infrastructure projects in particular, it looks like we will be kept for a little longer. The National Infrastructure Strategy, which was due to be announced at the same time as the Budget, has now been delayed. Despite the Government trying to send the message that it is still business as usual despite a new Chancellor, clearly this is not entirely true, and Sunak needs more than a few weeks in the job before being able to lead on delivering something as significant as a National Infrastructure Strategy.
Over-hanging all of this, though, is the big unknown of the economic effect of coronavirus. With the OECD having said this week that it would cause the biggest global economic shock since the 2008 crash, the impact of the pandemic on growth, tax receipts and the public finances is likely to be substantial. But as discussed in our lead piece in The Word From Westminster, no one really knows how substantial we are talking. Faced with such uncertainty, a “normal” Conservative government would probably implement a cautious budget, leaving lots of money in the kitty to absorb the impact. But will this one? It doesn’t look like it, but that decision is perhaps the biggest call of all that our 39-year old Chancellor has to make by Wednesday lunchtime.