No one wants Jeremy Hunt to be Chancellor. Labour doesn’t, obviously — the party has its own candidate, albeit with largely the same spending plans and fiscal rules. Rishi Sunak doesn’t — he wants to be his own finance minister. The Tory Right still pines for Truss-onomics, the SNP doesn’t support any UK chancellor, while the Lib Dems are oddly the closest, in that they desire Hunt’s South West Surrey seat.
Chancellors aren’t predisposed to popularity, what with the public finances to safeguard. Still, Hunt has a boyish optimism about him. No one else thinks the Conservatives, having presided over the biggest tax-raising parliament on record and falling living standards, are 2p off National Insurance away from turning round a 20-point polling deficit. But try telling him that.
At first glance, it would appear that in this pre-election Budget, Hunt wanted to be fiscally irresponsible without actually appearing so. This has a ring of logic to it, but I’m not sure it’s right. For all the individual tax cuts, the fact is that the continued freezing of personal tax thresholds means that most people will scarcely notice the difference. In effect, Hunt has managed to appear fiscally irresponsible without meaningfully reducing the tax burden. That takes some doing.
Vote-buying aside, this Budget had two audiences. The first was the Prime Minister, desperate for his Chancellor to do something to placate unhappy Tory backbenchers. The second was history. Hunt is a man with a sharp focus on his legacy. No doubt, he would like to be remembered as the Chancellor who cleared up a sterling crisis before laying the groundwork for a decade of economic renewal. Think Ken Clarke but without the cigars, jazz or general sense of fun.
Hunt didn’t quite tell the truth on tax and spend but neither did he cause a run on gilts; for that we can be grateful
But Hunt doesn’t enjoy Clarke’s economy. The Office for Budget Responsibility’s (OBR) economic and fiscal outlook, published as the Chancellor sat down, is instructive. It notes that there are “significant risks to the implementation of the Government’s stated fiscal policies”. That is nerd talk for “ARE YOU KIDDING, JEREMY?!”.
As the OBR gently points out — and without getting too far into the weeds — the fiscal forecast is conditioned on the tax-to-GDP ratio increasing by an additional 1.1 percentage points to a post-war high of 37.1 per cent of GDP by 2028-29. This includes the frankly heroic assumption that fuel duty will rise by inflation, something that hasn’t happened for more than a decade.
It gets worse. There isn’t going to be a spending review until after the election, something that drove the OBR chairman, Richard Hughes, recently to suggest that even calling the Government’s spending plans mere fiction was in fact generous, because “someone’s bothered to write a work of fiction”, whereas the Government “has not even bothered to write down what its departmental spending plans are underpinning the plans for public services.”
Welcome to the Big Lie of British politics, of which Labour is similarly guilty. Current spending plans — such as they are — imply no real growth in departmental spending per person over the next five years. Anyone unfortunate enough to have encountered the British state in the last few years will tell you public services are not exactly over-funded.
Yet even within this fantastical fiscal envelope, the Government has committed to an NHS workforce plan that implies real growth of 3.6 per cent a year, keeping defence spending at two per cent of GDP (with ambitions for 2.5 per cent), in addition to other commitments on education, childcare and overseas aid. All this, the OBR suggests, would imply real-terms cuts in every single other department’s budget of 2.3 per cent a year from 2025-26. Good luck with that.
Clearly, this was a Budget dripping in politics, from the jab at Sir Keir Starmer’s weight to the swipe at Labour’s glass jaw on the abolition of non-dom status. But it was also somewhat lacklustre. If anything, it lent credence to the concept that chancellors should show an ounce of self-restraint and stick to one fiscal event a year like the semi-serious, mid-sized, open economy to which Britain ought to aspire.
Much as how the bar for worst-ever German chancellor is set quite high, that of least successful Budget of modern times is fairly lofty. Hunt didn’t quite tell the truth on tax and spend, but neither did he precipitate a run on gilts or a sterling crisis. And for that, we can all be grateful he is Chancellor.
