Certain Budgets have gone down as landmarks in British political history because of the significance of their measures or the controversy they provoked.
Perhaps the most notable was the People’s Budget introduced in 1909 by radical, charismatic Welshman Lloyd George, whose scheme to pay for a new welfare state by heavy taxes on the rich led to a bitter but ultimately victorious battle in Parliament.
Jeremy Hunt’s statement on Wednesday will not be in that category. In keeping with the unostentatious nature of his Chancellorship, his plan is likely to be distinguished by its restraint rather than its boldness. In place of a grandiose vision, this will be a Budget that is designed to keep Britain on a steady course.
In its prosaic quality will lie its virtue, for steadiness is exactly what our nation needs. Hunt’s predecessor Kwasi Kwarteng produced his unorthodox mini-Budget last September, dominated by massive unfunded tax cuts. The result was an utter disaster.
But the arrival of Hunt at the Treasury acted as a soothing antidote to the turmoil, particularly when Rishi Sunak – a pragmatist who, like Hunt, understands business and finance – moved into No 10.
The pair swiftly brought back calm, fuelling the first signs of economic recovery. The whole outlook has been transformed since last autumn. It now seems recession will be avoided this year, while public finances are in a far better position.
On Friday, the Office of National Statistics reported that GDP growth in January had been 0.3 percent, significantly higher than forecast. In similar vein, the Institute for Fiscal Studies on Tuesday stated government borrowing will probably be £30billion lower this year and next year than predicted.
Yet Hunt’s success has also provoked criticism on two fronts. On one hand, detractors say he has been a lucky Chancellor because energy prices – the key engine of inflation – started to fall soon after he entered office. But it ignores the reality that his tough decisions have helped the economy take advantage of the more favourable circumstances.
On the other, many Tory MPs, especially on the Right, demand he use the fiscal headroom he has created to cut taxes. But such a policy could backfire, undermining economic gains of recent months. We still have huge debts, much of the public sector remains mired in crisis and the financial system is fragile. This is a time for continuing reassurance, not audacity.
The one area where Hunt’s critics may be right is their opposition to the likely corporation tax rise from 19 to 25 percent. Many businesses have vociferously complained it will increase burdens and rob Britain of its competitive advantage over other European countries. “It will take us in a drastically anti-investment direction,” according to BT.
Even so, it should be recognised that this tax rise could bring in as much as an additional £18billion every year, a huge sum when our public services are crying out for more cash. And Hunt might dilute the impact by offering businesses generous tax relief on investment.
Otherwise, it looks like the thrust of his Budget will be in measures to help people back to work and boost their earnings.
The Work Capability Assessment may be abolished, with disabled people allowed to keep their benefits if they take up jobs. In addition, the system of sick notes from GPs will be reformed and more skills training will be offered to the over-50s. There will also be more support for young families by increasing the amount parents on Universal Credit can claim for childcare.
To encourage savings, the annual limit on pension contributions will be raised to £60,000 and limits on pension pots will increase.
From more money for potholes to a £5billion cash injection for defence, this will be a sensible, solid package, reflecting the character of its architect.