Sunak’s Spending Spree: Engine MHP Budget 2020 panel
MHP Public Affairs, Account Director, Natasha Egan-Sjodin reflects on the 2020 Budget
Today Engine MHP bought together leading voices from politics and business to analyse new Chancellor Rishi Sunak’s first Government Budget. Hearing from James Kirkup, Director of the Social Market Foundation & the former Executive Political Editor of The Telegraph; Katy Balls, Deputy Political Editor at The Spectator; Matthew Elliott, former CEO of the Vote Leave campaign; and Steven Fine, CEO of Peel Hunt, our panel discussed how the announcements had played out with politicians and business alike.
Yesterday’s Budget demonstrated a marked change in approach to Government spending, with new Chancellor Rishi Sunak seemingly “ripping up” the fiscal rule book to provide additional funding and investment for public services and infrastructure development. Perhaps acknowledging that many on both sides of the House – and beyond the halls of Westminster – think the decade of austerity went a bit far, the shift in approach to spending was noticeable and seems to have gone down well with political parties, pundits and the public alike.
Clearly, this was a Budget heavily influenced by the impact of the COVID-19, with a number of measures specifically focused on mitigating its effect. The view from the panel, then, was that the Spending Review would provide greater insight in to whether the fiscal rules have been fundamentally changed in the longer term. Climate change and social were noticeably absent from yesterday’s Budget and will need to be addressed in the Autumn. In Katy’s words: “all eyes will be on Autumn”.
Beyond the measures to mitigate the economic impact of Coronavirus, the main takeaway was the bending of fiscal rules to find money which had seemingly previously alluded the Conservative Party; their own magic money tree. But as Matthew Elliott noted, this fundamental shift in spending habits has been broadly welcomed, and this is appearing to be driven by how the money is being spent. The big difference between new borrowing under the Conservative Government is its to be spent on infrastructure, whereas in the Blair and Brown years, borrowing was for day-to-day spending.
There was a consensus that this uptick in public spending is intrinsically linked to the Conservative Party’s ambition to retain the Red Wall seats they secured in the 2019 General Election. And it appears that the Labour Party have missed a trick in their response, as the increase in spending presented an opportunity for them to welcome the uptick but point to where money could be better spent. All eyes will be on the next Labour leader to see how the response changes.
The ongoing debate about who is pulling the fiscal strings – No10 or the Treasury – also played out yesterday, with some assigning responsibility (and thanks) for the evolving approach to spending and borrowing to Dominic Cummings, a view echoed to some extent by Social Market Foundation’s James Kirkup. The Prime Minister and his advisor are keen to show that they will invest where money is needed, and this was evident in the Budget. Katy Balls, however, said that we shouldn’t fully buy in to that idea, and that Sunak’s reassurance at the end of the Budget was being delivered within the fiscal rules of the Manifesto shows that there is still a need to balance the books,
Beyond the political, Steven Fine, CEO of Peel Hunt, also reflected that the increase in Government spending was well timed in an economic sense. Business and individuals being encouraged to borrow whilst interest rates are low, thus making sense for Government to do the same.
Despite the current challenges – both global and domestic – currently facing the Government, there is a sense that the Sunak’s first Budget was well received, with both Conservative MPs and those sitting on the Opposition benches welcoming the increased spending and borrowing, and business welcoming measures aimed to support them through the Coronavirus. Looking forward, the review of the fiscal framework Mr Sunak announced yesterday will set the tone for future spending. This is a clear sign that the debate of Government spending vs national debt will continue to dominate for some years to come.
For further analysis of yesterday’s Budget and a summary of the key announcements see MHP Public Affair’s Budget Analysis: