Rishi Sunak’s second Budget of the year will focus on “looking to the future and building a stronger economy for the British people”, the Chancellor has said.
Mr Sunak’s previous budgets in March 2021 and 2020 had been heavily focused on supporting the country through the coronavirus pandemic.
But now the Chancellor is keen to focus on skills, innovation, and economic growth, as he said it was key that public finances were returned to a stable footing.
Speaking to Times Radio on Sunday, Mr Sunak said that “(over) the last year, I’ve been focused on delivering our plan for jobs, protecting people’s livelihoods, their incomes, their jobs”.
But he added it was now time to shore up the economy to weather any future storms, telling BBC One’s Andrew Marr Show: “That means strong investment in public services, driving economic growth by investing in infrastructure, innovation and skills, giving businesses confidence, and then supporting working families.
On Wednesday next week I’ll deliver the Budget and Spending Review on the same day.
Watch this video to find out more about what they are, how they work and why we’re doing them 👇
— Rishi Sunak (@RishiSunak) October 22, 2021
“Those are the ingredients of what makes a stronger Budget and that’s what we will deliver next week.”
But the Chancellor faces a number of challenges, not least a warning from the Bank of England’s new chief economist that inflation could rise above 5%.
Mr Sunak said that would “certainly feed into my thinking about what the right approach to the country is”.
But he indicated that the rise in inflation was down to factors out of his control.
He told Andrew Marr: “If you take the last inflation number, which was just over 3%, which is obviously higher than we normally target, and you look at what’s causing that, the bulk of that increase is down to two things.
“One of those is the fact that as economies have reopened rather rapidly after coronavirus, that has put pressure on global supply chains, and then the other part of the increase is very much just down to energy prices.
“Both of those factors are global factors. We’re not alone in experiencing those problems, I don’t have a magic wand that can make either of those things disappear.”
Mr Sunak added that “compared to most other countries – advanced economies – a much larger percentage of our outstanding debt is directly linked to inflation, which means it’s something that I have to keep probably a slightly closer eye on than others”.
Some £20 billion of spending has already been committed across 11 announcements from the Treasury over the weekend, including £7 billion for transport infrastructure outside of London.
Mr Sunak said £4.2 billion of the £7 billion spread over five years had already been allocated, but the pot had been topped up by an extra £1.5 billion.
He told Sky News’s Trevor Phillips On Sunday: “It’s a great example of levelling up in practice, and it’s ultimately just going to create growth in all of those places.”
Asked whether it was a mistake to close Sure Start centres introduced under Labour, in light of his announcement of £500 million of investment in early years, the Chancellor insisted the new scheme was different.
He told Trevor Phillips: “So what we’re announcing is funding to create a network of family hubs which are broader than the Sure Start centres, and they bring together lots of different services for new parents, and for the first time, we’re going to roll those out.”
Despite the swathe of pre-Budget announcements, Mr Sunak would not be drawn on whether he could rule out tax rises before the next election.
Asked to do so on the Trevor Phillips show, he joked: “You’re asking me to do my Budget live on your show… I’ll do it in Parliament on Wednesday.”
And asked about a letter from England footballer Marcus Rashford in the Sunday Times calling for an extension of free school meals, Mr Sunak told Times Radio: “You wouldn’t expect me to comment on these things in advance of next week.”
James Smith, research director at the Resolution Foundation think tank, said the cost of living crisis would be one of the key issues on Wednesday when Mr Sunak delivered his spending review.
Speaking to BBC Breakfast, he said: “There’s lots on Rishi Sunak’s plate at the moment as he comes into this Budget.
“The big thing that he needs to deal with, and the thing that will really create opportunity, is the focus on the living standards crisis in front of us.
“So we have huge cuts in benefits… we have higher inflation and we have rising taxes, and all these… effect incomes, particularly the incomes of those at the bottom end of the distribution.
“That impact is something the Chancellor must factor into his decision-making this week.”
Meanwhile, shadow chancellor Rachel Reeves said if Labour was in power “our priority would be easing the cost-of-living price crisis, helping businesses who have had a torrid 18 months, and addressing some of the long-term challenges that we face with the climate crisis, but also our plans to buy, make and sell more in Britain”.