Image Credit: Pippa Fowles
By the time Rishi Sunak, or ‘Dishi Rishi’ as he is now best known, came to outline the budget on Wednesday 3 March, its most newsworthy content had already been splashed across the morning papers. Delivering new policy through leaks to the media, whether deliberate or a sign of a disobedient Cabinet, is becoming a distinctive characteristic of Boris Johnson’s approach to governing.
The Chancellor of the Exchequer’s budget wasn’t a conventional Conservative Party budget and neither did it receive a reception which was customary for the party Theresa May once described as the “nasty party”. Sunak’s latest budget reveals a Chancellor who isn’t afraid to stray from the principles governing the Conservative Party’s economic philosophy.
The extension of the furlough scheme was unsurprising, although the government’s commitment to paying 80 percent of furloughed employees’ wages until September demonstrates how the Conservatives have become the party of the ‘big state’. When Sunak originally conceded he was willing to do “Whatever It Takes” to help protect the economy the promise was met with scepticism. There was little faith in a party which clings to austerity and financial reticence.
By no means has the Conservative Party completely departed from its instinctive preference for targeted and limited spending, as proven by the uplift of only £20 a week for those relying on universal credit. Though, don’t be surprised if this social security payment is replaced with an alternative once the increase reaches its six-month expiry date, as the system of payments is frequently at the brunt of criticism from the Opposition parties.
Conservative backbenchers started to feel uneasy and squirm in their seats, as the Chancellor announced a rise from 19 to 25 percent in the rate of corporation tax. The party has always lived up to its reputation for protecting ‘big business’, although Sunak admitted that the “past several years” of low rates hadn’t encouraged any greater capital investment. The business community hasn’t delivered ‘on their side of the bargain’ and Sunak has therefore wasted no time in targeting the ‘windfalls’ which many corporations have been privy to during the pandemic.
Sunak’s main motivation for ditching the low rate of corporation tax is the realisation that his party’s chances of re-election in 2024 remain slim if its reputation for fiscal competence is hampered by a reluctance to make tough decisions. Raising corporation tax is a calculated decision, which avoids disillusioning the Tories’ newly won northern voters and their core support from pensioners. The Labour Party were left baffled by Sunak’s urge to raise taxes, as shown by the pace with which the shadow chancellor Annelise Dodds U-turned over providing opposition to the increase.
Writing in The Guardian, Dodds accused Sunak of taking an approach to the economy which was “economically illiterate” at best. However, the Chancellor’s willingness to digress from the Conservative Party’s status quo of not raising taxes should not come as a surprise. In the Financial Times, Camilla Cavendish, a former Director of Policy for David Cameron, brought to attention the party’s tendency to embrace pragmatism when the situation requires it. It is this pragmatism which explains why the party has retained political hegemony since 2010.
Dodds and Sir Kier Starmer could have been more prolific in their attacks on the budget if they had focused on the freezing of income tax thresholds from 2023. It is now inevitable that a larger share of the working and middle classes will face the burden of paying higher taxes, as the thresholds within which higher taxes are paid won’t be raised in response to growing incomes. This sneaky method of pulling 1.3 million people into the income tax system is part and parcel of a new tax regime in which taxes will be at their highest level since the 1960s. The Conservative Party’s hypocrisy in attacking the ‘Commie’ Jeremy Corbyn for his tax plans, while introducing tax hikes in government only a few years later is an observation which has gone unnoticed.
It is questionable whether Opinium’s 51 percent of respondents would have labelled the budget as ‘fair’ if the Labour Party had dedicated more of their ‘airtime’ to scrutinising the budget’s small print. Sunak hasn’t ‘master-minded’ a new long-term plan for growth and considering the uncertainty the pandemic has thrusted upon the economy this could be seen as understandable. Though the Chancellor has proven his conversion to the Conservative Party’s new underlying principle.
‘Pragmatic when the situation requires it’.