When the pandemic got started the chancellor, Rishi Sunak, emerged as the Tories’ Superman, not quite the best chancellor Labour never had but not far off it; a shooting star willing to do what was necessary and one with a corona of competence to boot.
His emergency measures mostly worked. There were some bumps and some U-turns and the uncomfortable fact that in Europe only Spain has suffered a worse case of economic Covid-19 than the one the UK has been going through. The national plc is expected to contract by a record-breaking 11.3 per cent this year.
Nonetheless, as no less than the International Monetary Fund has pointed out, it would have been a hell of a lot worse without measures such as the Job Retention Scheme and the other support Sunak has doled out. Unemployment topping out at a projected 2.6m next year looks awful until you compare it to some of the worst-case scenarios doing the rounds.
So to the latest mini-budget, which left Sunak facing a choice: he could continue to play against type by charging up the Keynesian afterburners to get the economy through to a vaccinated spring and maybe better times. Or he could revert to Tory type by listening to the lupine growls of the people at the Centre for Policy Studies who’ve been baying for blood.
They secured it. You can start with a cruel public sector pay freeze that will leave many of the people the chancellor once clapped for with coal dust for Christmas.
He didn’t completely cave into the hard right-wing clamour. As expected, NHS workers will get a raise. But so too will the lowest-paid public sector workers.
Everyone else working for the state, a group collectively 1.5 per cent worse off in real terms than it was ten years ago, is getting levelled down.
Taking money out of people’s pockets is no way to help a consumer economy suffering from a lack of consumption. That’s what Sunak is doing.
Levelling down looks set to become the new theme of his tenure. It’s a charge he’s going to find it difficult to shake off.
The pandemic has hit the north hardest and it is by no means clear that he’ll be able to haul it back up with what’s on offer.
Sure there’s a £4bn “levelling up” fund, which is about the amount freed up by “temporarily” cutting the international aid budget to 5 per cent of national income (a neat and cynical trick that).
But the money will have to be bid for. It’s being doled out from the top. So there’ll be something for the constituencies of loyal MPs and something more for all those politically connected companies that have been doing so well of late.
There’s £55bn extra for government departments to deal with the Covid crisis, which is a huge bung, but £10bn is being shaved from their non-Covid budgets, more than the amount the chancellor saved by cutting the aid budget and the pay freeze, as a number of economists pointed out.
Make no mistake, this is the return of austerity by the back door with Sunak surrendering his superhero status in favour of being re-cast as a big blue meanie, or perhaps the ghost of Number 11 past.
Yes, yes, borrowing. The numbers are huge. They will take the national debt beyond 100 per cent of GDP a point at which economists’ eyes tend to start rolling.
But debt is very cheap to service and Britain’s fiscal position projects to be better than that of several of its G7 peers (with the notable exception of Germany).
Had the chancellor decided to retain his superhero cape he might have been paid off with growth, the lightning in a bottle he so desperately needs. As it is, we’d best get set for an extended winter. And all this might yet be accompanied by a murder hornet sting.
The forecasts put out by the Office for Budgetary Responsibility are predicated on a trade deal with the EU which still hasn’t arrived. Even if it does, Brexit is going to serve an enormous economic carbuncle. Yet Sunak completely failed to mention it. It took his shadow Annalise Dodds to supply the reminder.
They also imply the end of Covid-19 and extra Covid-related spending next year. Is that realistic? Even if it is, even if the vaccines come good, and mass take-up is secured, you can still mark this down as the moment that Sunak’s star seriously started to wane.