Like his recent predecessors at the Treasury, Rishi Sunak is garnering headlines ahead of Wednesday’s Budget. The days when a chancellor who trailed his package in the media had to resign are long gone. Measures that would not command much coverage on Budget day are therefore briefed out in the run-up to the statement.
That does not mean all such proposals are small beer. Mr Sunak’s pre-announcement that 700,000 shops, restaurants, pubs, hotels and other businesses will receive up to £18,000 each from a £5bn fund is welcome – state support is definitely needed. We can also expect him to extend his furlough scheme and help with business rates.
However, the chancellor has to ensure the benefits of economic recovery built on the successful vaccine rollout will be enjoyed by all and tackle the inequalities so cruelly highlighted by the pandemic.
The Treasury hopes a recovery in the second half of this year will be jet propelled by better-off people spending some of the estimated £250bn of savings they have amassed during a year of lockdowns. But Mr Sunak should not forget the many people who have lost their jobs (including some who had to give them up because their children were not in school) or for whom the concept of “saving” is a luxury they have never had and whose daily struggle to make ends meet has been made worse by the pandemic.
Wednesday’s Budget should include measures to avoid what economists call a K-shaped recovery in which one section of society powers upwards but the other diverges and falls even further behind. To try to avoid that scenario in the US, Joe Biden plans to inject $1.9 trillion into the economy, including $1,400 (£1,000) payments to individuals.
Interviewed on the Sunday political shows, Mr Sunak reiterated his commitment to “social justice” and doing “whatever it takes” to get families and businesses through the crisis. It is to his credit that his landmark furlough programme has helped to protect between 9 and 10 million jobs in about 1,000 firms.
But we know that it took opposition from his cabinet colleagues to force Mr Sunak to abandon his original plan to end the £20-a-week uplift to universal credit for 6 million families on 31 March. He wanted to replace it with a one-off payment but is now expected to prolong it.
Hampered by the Conservatives’ 2019 manifesto pledge not to raise the rates of income tax, national insurance or VAT, Mr Sunak may resort to stealth taxes such as freezing thresholds to draw more people into higher bands. There could be an argument made for targeting those paying higher rates, but many people on lower incomes will see an above-inflation rise in their council tax bills next month (April) and most public sector workers will see their pay frozen.
Mr Sunak has also pre-announced a boost for apprenticeships but his package will need to go much further to live up to what is set to be branded a “Budget for jobs”.
A government committed to “one nation” and “levelling up” must ensure the post-Covid recovery does not entrench a two-tier economy and society of haves and have nots.