Rishi Sunak will today vow to create a ‘new age of optimism’ after Covid as he is handed Budget firepower with growth forecasts set to be nearly doubled.
The Chancellor has a bit more money to deploy due to the strong bounceback from the pandemic – with the independent Office for Budget Responsibility expected to say UK plc will grow by 7 per cent this year instead of the 4 per cent it pencilled in in March.
The ferocity of the global recovery has sparked materials and labour shortages, causing inflation to surge and posing other serious headaches for the government.
But as a result borrowing so far this year is well over £30billion below previous estimates, and the long-term damage to the British economy could be less than originally feared.
Rumours are swirling that Mr Sunak will deploy some of the headroom to ease the pressures on families and businesses from raging inflation and supply chain chaos.
He has already declared that the minimum wage will be hiked, and the public sector pay freeze is being axed.
There is speculation of a boost to universal credit when he unveils the full fiscal package this afternoon, while alcohol duty could be cut to help pubs.
However, the Chancellor has also stressed the need to balance the books after the £400billion cost of the pandemic, with Tories raising alarm about the massive £2.2trillion debt and the looming threat of inflation driving up interest rates.
Mr Sunak will hail his Budget as ushering in a ‘new economy’ after the pandemic as he confirms billions of pounds for the NHS and wage rises for millions of workers.
During his speech, Mr Sunak is expected to say: ‘Today’s Budget begins the work of preparing for a new economy post-Covid. An economy of higher wages, higher skills and rising productivity of strong public services, vibrant communities and safer streets.
‘An economy fit for a new age of optimism. That is the stronger economy of the future.’
The easing of lockdown restrictions and the vaccine rollout mean the economy is in better shape than was expected at the time of the last financial statement in March.
Growth forecasts for this year will be revised from 4 per cent potentially to as high as 7.5 per cent.
The OBR watchdog’s prediction for the ‘scarring’ from the pandemic – the permanent loss to the economy – could also be lowered.
That will give Mr Sunak more leeway to pump money into public services as he sets out spending plans for Whitehall departments for three years.
However, the biggest-ticket item – the £12billion a year NHS and social care boost funded by an eye-watering national insurance hike – has already been revealed last month.
In a further positive bit of news for Mr Sunak, there are claims today that the chances of ‘Plan B’ Covid restrictions have fallen dramatically after the surge in cases levelled off.
On a big day in Westminster:
- Ministers unveiled a new funding model to encourage more British investment in nuclear power stations – squeezing China out but risking higher home energy bills;
- Commons Speaker Sir Lindsay Hoyle complained Mr Sunak was treating MPs in a ‘discourteous manner’ by pre-briefing some of his Budget announcements;
- Union bosses demanded all public-sector workers should be given inflation-busting pay rises;
- It was warned that a new inflation forecast could reduce household incomes by £1,000 next year in real terms;
- The Budget is set to include a freeze on fuel duty – but not a cut on VAT on energy bills;
- MPs have been urged to wear masks during the Chancellor’s Budget speech by a World Health Organisation Covid expert.
In the Budget today, Rishi Sunak will declare Britain is ready to enter a ‘new age of optimism’ and a ‘post-Covid’ economy. Pictured: Mr Sunak with his pet puppy Nova
Rishi Sunak was pictured in one of his trademark grey sweatshirt, as well as American-style footwear that comes with a hefty £95 price tag
Mr Sunak was seen poring over his Budget plans in the photographs issued by the Treasury this afternoon
Mr Sunak was in one of his famous grey zip-up jumpers – although it is unclear what the side zip would be used for
The Treasury has pledged green investment and policies to take advantage of post-Brexit freedoms and has touted nearly £7billion of new funding for local transport.
Mr Sunak will also set out new fiscal rules, which are expected to include a commitment to stop borrowing to fund day-to-day spending within three years.
It is thought he will also require government debt, running at about 100 per cent of gross domestic product, to start falling by 2025.
Office for National Statistics figures showed last week government borrowing was far lower than forecast in the first half of the fiscal year.
The budget deficit was £108.1billion between April and September, almost 30 per cent below predictions. However, Mr Sunak will strike a note of caution about how servicing the debt could become much dearer if prices rise.
In March, he pointed out that a 1 per cent rise in interest rates and inflation would cost us over £25billion, adding: ‘Over the medium term, we cannot allow debt to keep rising, and, given how high our debt now is, we need to pay close attention to affordability.’
Former Treasury minister David Gauke told Radio 4’s the World At One yesterday: ‘In the short term there is going to be some good news for the Chancellor as the economy has grown faster than projected.’
But he added: ‘There are still some real challenges.’
Shadow Chancellor Rachel Reeves urged Mr Sunak to ‘take the pressure off working people’.
She added: ‘Labour would ease the burden on households, cutting VAT on domestic energy bills immediately for six months, and we would not raise taxes on working people and British businesses while online giants get away without paying their fair share.’
Tory MP Sir John Redwood said: ‘When do we get the plans to run down the one off pandemic spending? Where is the plan to run railway services for the new pattern of working, to drive down the huge losses? Government needs to spend wisely.’
Mr Sunak will confirm a rise of minimum wage to £9.50 from April however, it was warned that a new inflation forecast could reduce household incomes by £1,000 next year. Pictured: A can of Sprite and a Twix next to Rishi’s red box, he said was his ‘pre-game routine’ for the Budget
Sir Lindsay Hoyle, Commons Speaker, (pictured) complained Mr Sunak was treating MPs in a ‘discourteous manner’ by pre-briefing some of his Budget announcements and said announcements should be to MPs first rather than the media
The Chancellor was being put through his paces by aides in the official images ahead of his Budget speech
No time for flip-flopping, Chancellor!
Rishi Sunak teamed a pair of socks with £95 ‘sliders’ as he put the final touches on his Budget.
In glossy photos released by the Treasury, the Chancellor could be seen sporting the American-style shoes, made by fashion label Palm Angels.
‘Sliders’ are similar to flip flops but without a central toe post, and popular with sports stars.
Another photo showed a can of Sprite and a Twix bar next to his red box – after the Chancellor said he would eat the sugary snacks as his ‘pre-game routine’ pre-Budget.
But the Chancellor, who is teetotal, will not enjoy a sharpener like some of his predecessors as he delivers his speech in the Commons today.
Rishi Sunak teamed a pair of socks with £95 ‘sliders’ as he put the final touches on his Budget
Last year Mr Sunak raised eyebrows after pre-Budget photos showed a £180 travel mug on his desk.
The ‘Ember’ smart mug, a Christmas present from his wife, keeps hot drinks such as tea or coffee at the exact same temperature for up to three hours and comes with its own charging coaster.
Labour’s child poverty spokesman Wes Streeting said last night: ‘I don’t care if the Chancellor chooses to spend £95 of his money on a pair of flip-flops, but I do care that he’s so out of touch that he doesn’t understand the impact of taking £20 a week off low-paid workers and what it means for 200,000 kids pushed into poverty by his policy.’