Budgets resemble the old French saying about taxation — the aim is to produce the maximum amount of fiscal feathers from the goose with the minimum amount of hissing. However, hissing is what a disgruntled and reactive Conservative party does best right now and the public-finance goose is a skinny, under-nourished beast.
That unpromising combination ensures that the Chancellor’s Budget tomorrow is an event high in risk to his reputation for sang-froid: a turning point, which now looks like a swansong.
The chore which confronts Jeremy Hunt is both numerical and figurative. On the numerical side, he has only a very limited amount of “fiscal headroom” to play with if he wants to stay within guidelines the Government set itself to underline its reputation for spending discipline. Then there’s a less robust economic outlook than was conceived last autumn, when a Nigel Lawson-style boom engineered via tax cuts was talked up — and certainly not discouraged by Hunt himself.
A polling trough of new depths — the Evening Standard/Ipsos results yesterday show the Conservatives on a 40-year low of 20 per cent, 27 points behind Labour — kiboshes remaining hopes that the losing streak can be reversed. “It’s not Lazarus territory anymore,” said one of the many MPs set to lose his seat despite a majority which would once have been deemed safe. “It’s the zombie apocalypse.”
Income tax cuts are the political Viagra despairing MPs want. This Budget is targeted at keeping Tory voters from defecting
It is true that this research also contains the nugget to which Tory strategists cling — a sizeable number of people have not finally made up their mind who to back. So this Budget will be firmly targeted at keeping erstwhile Conservative voters from heading to the Lib Dems or Labour.
Income tax cuts are the political Viagra despairing MPs want and the Chancellor is searching for a prescription that will not catapult him, as one former Treasury official neatly puts it, “into the Truss/Kwarteng league of financial fantasists”. For sure, this is not how Hunt would want to exit the stage at the election. He is the longest continuously serving senior figure — with a brief hiatus when he lost patience with Boris Johnson and vice versa.
I have known Hunt since his Oxford days and the vibe has always been the same — a conscientious figure with a degree of charm and affability and a steely desire to get to the top of Conservative politics (so much so that he twice tried for the leadership). He is not one for giving up easily, so we might expect more than just the promised “prudence and caution”.
Indeed, so grave have his warnings about the dangers of extravagance been that I wonder if we have been sold low expectations, in order for Hunt to magically exceed them. Getting up tomorrow without a 1p in the pound on the basic rate of income tax cut up his sleeve would cause such a slump in Tory morale as to invite another backlash in an already fractious party.
A 2p in the pound cut on the same tax would certainly be a “wow” factor for Tory backbenchers, but also as in “wow: I wonder how he scraped together the maths to get that one through the Office for Budget Responsibility.
In the end, the Chancellor has avoided this risk by taking the National Insurance cut route – less costly because it applies only to those in work and less likely to feed inflation, if less thrilling to backbenchers than the magic words, “big tax cut”.
Even to get to this figure, Hunt will come perilously close to bumping his skull against the “fiscal headroom” limits (an irony since it was the government that made such a play of this as the guarantee of its probity – and targeting nicotine vapers, wealthy non-doms and more modest second homeowners who rent out properties.
These groups do not have much in common, except that other voters are unlikely to feel much sympathy for them. It also means skimming from the planned increases in spending on public services, which is a less edifying prospect, and a sign of just how tight the wriggle room has become.
Whatever happens at lunchtime on Wednesday, this Budget looks like a legacy event for a Chancellor who has been successful in the task he was allotted by Rishi Sunak — getting inflation down and with a better prospect in the spring months for that benign trend to accelerate. Yet Hunt and Sunak confront the unhappy truth that the latest National Insurance cut, which kicked in at the start of the year, did their popularity no good at all. The Ipsos poll is startling evidence of the deep unpopularity the Government now attracts.
Tax cuts may in fact land better with beneficiaries than those who oppose them like to acknowledge — a gamble, but probably the last shot in a depleted Tory locker. The chances of success are not so great as to give the diehard Chancellor grounds to raise that traditional Budget day whisky glass in good cheer.
