Sunak’s spend, spend, spend budget is tough for Labour to attack | UK news

It is a long time since a government came up with a giveaway budget on the scale of that presented to parliament by Rishi Sunak: a £30bn stimulus package designed to demonstrate that the age of austerity is well and truly over.

As the Office for Budget Responsibility pointed out, this was the largest sustained fiscal loosening since the package announced by Norman Lamont in March 1992.

But that was a budget a few weeks before a general election, the traditional time for a government to be generous. Sunak’s spend, spend, spend approach was all the more extraordinary for coming in the first budget after a general election – usually the time when chancellors make unpopular decisions.

There are a number of reasons for Sunak’s different approach. The first is the need to take immediate steps to combat the threat posed to the economy by the Covid-19 outbreak.

The £12bn of measures announced by the chancellor – which dovetail with the Bank of England’s announcement of lower interest rates and incentives for banks to borrow – will not lift the threat of recession in the first half of 2020, but should ensure that growth resumes from mid-year onwards. That, however, will depend on how serious Covid-19 proves to be.

The second reason for the change of strategy is that the intellectual climate has changed. Borrowing money to invest in public infrastructure and in research and development is no longer the taboo it once was in conservative circles. Far from it.

The new mantra is that an era of permanently low interest rates makes it affordable and sensible for finance ministries to bolster spending. Sunak has certainly not held back on this score. Fiscal policy will be eased by about 1% of national output next year, part financed by higher taxes but also by higher borrowing.

Finally, Boris Johnson was insistent that the government deliver immediately on its election promises, which accounts for the other £18bn of stimulus next year. As a result, there was a cut in national insurance contributions and a blizzard of nationwide investment announcements designed to show that that the “levelling up” agenda was under way. The imperative was to get spades in the ground early so that progress would be evident before the next election.

The budget makes life a bit tricky, if not impossible, for Labour to attack. To be sure, there was little in the budget – apart from the time-limited Covid-19 support for sick pay and benefit support – for those on welfare. This was not a redistributive budget and nor, courtesy of the big investment in roads and yet another shelving of a fuel duty increase, was it a particularly green one either.

But this budget was definitely more Maynard Keynes than Milton Friedman. It was a throwback to the days when governments of both left and right thought they could use expansionary fiscal policy to break the economy out of its low-growth, low-investment, low-productivity trap.

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