When Rishi Sunak sets out his Budget on Wednesday, his credentials as Chancellor will undergo their first real public examination. He is faced with the unenviable task of overseeing the UK economy’s recovery from the third national lockdown, with the economy having been in various stages of closure for almost a year.
The country’s finances are in crisis, with national debt at its highest point since 1963. This is mostly thanks to the costs of the furlough scheme, which pays up to 80% of salaries for workers who are unable to work during the pandemic.
Unemployment has risen to 5.1% in spite of the Job Retention Scheme, with young people accounting for 46% of the fall in employment despite making up just one ninth of the workforce.
Yet, despite the dire straits the economy finds itself in, the mood in the UK is largely optimistic. The encouraging signs from the NHS vaccine rollout, as well as the Prime Minister’s roadmap out of lockdown promising that all restrictions could be lifted by the 21st June, has cultivated enthusiasm as the country looks towards the summer.
It is up to Sunak to balance the public’s optimism with the harsh realities of the economic situation. His Budget must support the reopening of the economy while remaining realistic about the capabilities of Britain’s already stretched finances.
The Chancellor has enjoyed widespread popularity since his appointment last February. He has been praised for his free-spending approach to recovery, initially announcing the furlough scheme, before unveiling a number of support packages for businesses and the arts industry.
His willingness to hand out cash earned him such acclaim that Sunak began to take personal ownership of his coronavirus support packages, using his own branding rather than the government’s.
The best example of this was the now-infamous ‘Eat Out To Help Out’ scheme, which subsidised customers’ meals with a 50% discount up to the value of £10 in August. At the time it was heralded as a masterstroke to kickstart the ruined economy, but there are now suggestions that it directly caused a sixth of Covid clusters last summer.
Far from facilitating economic recovery, the scheme necessitated a national lockdown in the month of November, causing the same businesses it was designed to help to lose out on an entire month’s worth of income.
Since the November lockdown Sunak has been conspicuously quiet, rarely fronting the government’s Covid briefings and posting far less on social media than at the height of his popularity. This Budget will see him reemerge into the public eye as he looks to regain their approval.
He has promised to provide support to the nation as restrictions ease, but faces a dilemma as to exactly how best to do this. He must contend with Conservative backbenchers who oppose any sort of tax raises, as well as Keir Starmer’s Labour Party seemingly opposing rises to corporation tax. Yet the funds needed to reduce borrowing and begin to ease the national debt must be drawn from somewhere.
The public will also treat his budgetary offerings with more scrutiny than they afforded the Eat Out To Help Out and furlough schemes, now that they are alive to the risks of opening the economy too quickly.
One could be forgiven for thinking that Sunak has an impossible job on his hands in striking the necessary balance between caution and recovery, without stifling the country’s optimism. In addition to the small matter of guiding the country back to normality, Sunak’s Budget will tell us what the political future holds for the Chancellor.
Sunak is at a crossroads in his career. He yearns to be a political heavyweight and nurtures prime ministerial ambitions, but first he must rise to the challenge of this Budget. His reputation and very future is on the line.