Spring Budget: Jeremy Hunt is ferreting down back of sofa

The English local, police commissioner and mayoral elections, that is – including for the mayor of London. That’s more than 2500 seats up for grabs in some 107 authorities across England and Wales.

There is no way the Tory government can escape this date with political destiny – whatever rabbits Chancellor Hunt tries to pull out of his rather battered hat on Wednesday.

On present opinion polls, the Tories are running at a measly 20% with lacklustre Labour soaring at 46%. That suggests a massacre for Sunak come May – a stunning, public rejection he cannot hide from.

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Which explains the panic headlines over the weekend regarding the internal debate the Tories are having over what tax bribes the Chancellor can afford to offer in his Budget. Back at the end of last year, Chancellor Hunt was dropping big hints that he was going to cut income tax by 2p. This was to be funded by £19 billion in so-called “head room” that had suddenly appeared in his forward spending plans. Of course, this dubious plan was all smoke and mirrors anyway.

It was premised on the hope that the Bank of England was going to cut interest rates – now at a 15-year high – and the economy grow a bit. But come the New Year, the UK economy is in recession and the independent Bank of England is showing no signs of cutting rates soon.

This leaves Hunt and his Budget up the proverbial spout. As it is, the burden of tax as a proportion of economic output is still slated to rise over the next few years. This courtesy of static tax thresholds propelling more earners into higher bands. But Hunt was hoping lower interest rates would also cut the Government’s own debt repayments, and that he could use this wiggle room for some fiscal giveaways.

Assuming, of course, that the voters are supremely gullible. But the gloomy economic picture has nixed that plan.

So what can Hunt do on Wednesday to save the day?

Answer: not a lot. Judging by the latest string of Treasury leaks, he seems to be ferreting down every threadbare sofa in Whitehall looking for spare change. Witness rumours that he intends to steal Labour’s planned abolition of tax advantages for 68,000 foreigners domiciled in the UK (so-called “non-doms”).

This could raise an extra £2 billion per annum (assuming, of course, the non-doms don’t all migrate to Switzerland). Labour intend to spend this money on the NHS – something voters might actually prefer to pre-election tax bribes from the Chancellor.

Even if Hunt does find a few coppers to knock a penny off income tax, this is hardly likely to shift voter opinion very much. Any modest tax or National Insurance cut is going to be swallowed up for the many being sucked into higher tax bands.

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Inflation may be decelerating but the cost of living crisis is still biting. And – above all – the UK economy is still underperforming badly compared to our competitors. Inflation in services – the most important measure of domestic inflation – stands at 6.5%. This compares to 4% in the Eurozone and 5.4% in America. Don’t expect big rate cuts any time soon.

This adds up to voters being really pissed off and a Conservative massacre on May 2. That will inevitably trigger fresh plots to oust Sunak as Tory leader and replace him with somebody more populist, or at least capable of saving a few Tory seats. Of course, at this late stage in the game, another bout of Tory infighting is more likely to seal the party’s electoral fate rather than improve matters. But then, when did common sense ever stop Conservative backbenchers plotting?

So what will Sunak and Hunt do?

One option would be to go for broke and call the General Election for May 2 as well. That might raise voter turnout enough save a few Tory local council seats and let the party live to fight another day. It also cuts off the prospect of a rebellion against Sunak. And Hunt could just offer a lot of daft tax cuts on Wednesday without needing to think how to make the books balance.

On current form, Mr Hunt looks certain to lose his parliamentary seat anyway, so why should he care? This possibility explains why Labour have gone on an election footing this past week.

Against this stands the fact that Rishi Sunak is a cautious technocrat rather than a political gambler. Which implies he might hang on till October hoping for something to turn up. Modest economic growth could return by the autumn and interest rates might turn down a whisker. And Labour might experience more troubles of their own (witness the debacle in Rochdale).

And if Rishi does hold on till January 2025 – the last possible date for an election – his sojourn in Number 10 won’t look too modest. On balance, I think this why Sunak will stay on a bit longer, even if the Tory local election results are dire.

The real indictment of Hunt is that his Budget this Wednesday will be more about Tory election prospects than dealing with Britain’s chronic, long-term economic decline. This month we are remembering it is 40 years since Mrs Thatcher defeated the miners’ strike, opening the path for the deliberate dismantling of Britain’s heavy industries as the means of destroying trade union power – power that kept wages in line with price rises.

The post-Thatcher economy became a vast casino based on financial and property speculation. Result: productivity has nosedived, growth is anaemic and millions have been driven out of the labour market to subsist on invalidity benefit.

A serious chancellor and a serious Budget would prioritise fixing the economy for the long-term. That means raising investment dramatically to boost productivity. You achieve that by ending the independence of the Bank of England to set interest rates, then impose state support for investment in manufacturing and house construction – policies an independent Scotland could and should pursue were it able. 

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A serious chancellor would impose energy price caps at source as a way of dealing with the cost of living crisis rather than the current, insane policy of the government borrowing more money to subsidise the energy monopolies. A serious chancellor would broker national wage bargaining to raise incomes and incentivise people back into work.

Of course, repairing the economy takes time. Alas, the UK Budget process has been politicised and turned into a game of electoral bribery that has little to do with serious economic management anymore.

Wednesday will be spectator sport rather than statesmanship.

Labour’s shadow chancellor Rachel Reeves will add nothing to the event. She has reverted to spouting Treasury orthodoxy about “balancing the books”, forgetting that a Budget is an economic toolbox, not an opportunity for Labour to show it will tow the City line.

I have sat in a rowdy House of Commons watching a variety of Tory chancellors play their inevitable and predictable fiscal games. It was always a pantomime and a not very good one at that. This Wednesday will be no different. Roll on May 2.