Dani Garavelli: Rishi Sunak’s kid-on budget won’t cure a decade of austerity

Great news. The coronavirus may be on the rampage, panic may be rising, but austerity is dead. Our new Chancellor Rishi Sunak hath decreed it. Goodbye to make do and mend. Farewell to financial hardship. From now on it’s jam today and, likely as not, jam tomorrow. With a wave of his wand and a cry of “obliviate” he is going to erase the damage his party has done over the last 10 years from our collective memory. It will be as if all that suffering never existed.

Rishi Sunak leaves No 11 last Wednesday to deliver his debut budget. Picture: Dan Kitwood/Getty

This is the era of fantasy politics; our Tory leaders expect us to swallow anything: that if we voted for Leave we would gain £350 million a week for the NHS; that they would die in a ditch before they would allow Brexit to be delayed; that they would build 40 more hospitals.

But we know that for a decade the Tories have taken a wrecking ball to the country. The bedroom tax, Universal Credit, cuts to frontline services. DWP sanctions, rough sleepers and food banks. No-one, surely, is gullible enough to believe that Sunak’s fiscal epiphany is going to undo all the misery his predecessors unleashed. No-one, surely, buys into the notion that he is some latter-day Robin Hood.

Sunak’s budget was very much the departure. The mantra that we must stop borrowing and cut the deficit was suddenly dropped in favour of a spend, spend, spend approach. Milton Friedman was out and that bogeyman of the new right, Maynard Keynes, was in. So flash with the cash was Sunak that you began to suspect he’d been possessed by the avenging spirit of John McDonnell.

In that sense, Sunak’s budget was a masterstroke. Where Sajid Javid (who would have proceeded much more cautiously) castigated Labour’s manifesto pledges as reckless, Sunak decided to play the party at its own game, with a £175 billion splurge.

His budget was an effective admission that austerity was a mistake. This is little consolation to Labour, which is consigned to sitting on the sidelines while the Conservatives revel in their new-found generosity, or to those who suffered and even died to prove the point.

Its U-turn on the central role of the state, with a £100bn increase in public service spending, was equally dramatic; although not dramatic enough to justify Boris Johnson’s bold suggestion that Scotland, often criticised for its over-reliance on the state, had a problem with the resilience of its public services. He made the claim despite the fact that, for the last few years, Scotland’s A&E departments have coped better with the winter crises than their English counterparts.

Sunak was aided in his attempt to overturn the party’s resistance to borrowing by the coronavirus; with fear about physical and economic losses rising, the prospect of the government throwing money at the problem was reassuring. Even if the £5bn for the NHS is too little to redress the cuts made in the last decade.

Other measures are also less impressive when you drill down into the details. Sunak promised £7bn for businesses and workers, some of which will be spent on the extension of statutory sick pay and the suspension of business rates for shops, cinemas, restaurants and music venues in England with a rateable value below £51,000.

There will be a £500m “hardship fund” for English local authorities to help vulnerable people in their areas and a “temporary coronavirus business interruption loan scheme” for banks to offer loans of up to £1.2m to support small and medium-sized businesses.

And yet the budget does little to protect the most vulnerable. The low-paid and those on zero hours contracts will still not qualify for sick pay, while, even for those who do, the rate will remain lower than in many other European countries.

Overall, experts seem to agree Sunak’s budget is not as radical as he would have us believe. Last week the Institute for Fiscal Studies (IFS) said much of the longer-term spending rise was from previously announced measures for the NHS, schools, defence and overseas aid.

And even with the £100bn, outside of the Department of Health and Social Care, spending per head would be 14 per cent less than it was pre-2010. With health and social care included, spending per head would not return to 2010 levels until 2025.

It is ludicrous to think the hardship caused by austerity politics could be wiped out overnight. So many people are now living on the breadline that, even with the best interests of the worst-off at heart, any improvements would be incremental.

But the Conservatives don’t have the best interests of the worst-off at heart, nor is this budget re-distributive in the way a Labour government’s would have been.

Though some of this spending is being funded by the slashing of entrepreneurs’ relief, the Chancellor also raised the pension tax threshold by £90,000. This move was aimed at ensuring senior doctors could continue to take on extra shifts without tipping over the threshold, but will apply to all high earners.

A further £650m will be spent on tackling rough sleeping – a problem which has been fuelled by sanctioning, a lack of investment in temporary and permanent accommodation, and a failure to listen to experts on addiction. But there is nothing for the women who lost out from changes to the raising of the state pension age and who were denied the chance to replan for their retirement.

Nor was this a budget fit for a year when climate change is supposed to be at the top of the agenda. To announce £1bn for green transport solutions but £27bn for roads is a real statement of priorities and completely the wrong message to be sending out as the country prepares to host the COP26 climate change conference. Ditto the £300m to tackle air pollution, but no change to the taxation for the oil and gas industries.

After delivering it, Sunak was spun 
as a fiscal wunderkind when really he is just a man able and willing to do Dominic Cummings’ bidding. His policies are born more of a desire to bolster the Conservative party’s popularity than from any ideological conviction.

As for the blind adherence to austerity policies, thank God those days appear to be over. But so many lives were damaged, some of them irreparably. It will take more than one round of loosening of the purse strings to make that right – particularly if no effort is made to target the spending at those who have suffered the most.