Rishi Sunak, UK chancellor, has paved the way for a tough Budget this month by declaring that excessive public borrowing is “immoral” and hinting that future tax cuts could be possible if spending is brought under control.
Sunak’s first in person speech to the Conservative party annual conference as chancellor on Monday barely mentioned the supply crisis that has hit energy, fuel and food. He admitted there was no “magic wand” to deal with it.
Instead, Sunak presented a future for Britain based on sound public finances after the explosion of coronavirus-related public spending, building on the “flexibility” provided by Brexit to embrace new technology.
Brushing aside images of long queues at petrol stations and the recent collapse of energy companies, he insisted: “I believe we’re going to make the United Kingdom the most exciting place on the planet.”
Sunak said he was a pragmatist on economic policy and that “mindless ideology is dangerous” but came out firmly on the side of fiscal discipline after the vast public spending needed to counter the effects of the pandemic.
“We need to fix our public finances,” he said, adding that borrowing excessively and making unfunded promises was “not just economically irresponsible — it is immoral”.
Sunak is expected to set out new fiscal rules in this month’s Budget, ending borrowing to fund day-to-day government spending. He reminded his party that national debt stands at 100 per cent of gross domestic product.
Although the chancellor increased national insurance contributions by £12bn last month, he hinted that fiscal discipline could provide scope for future tax cuts, which Tory MPs hope can be delivered before the next general election.
“Yes, I want tax cuts,” he told the party conference in Manchester. “But in order to do that our public finances must be put back on a sustainable footing.”
Answering Tory critics who wanted him to maintain the £20-a-week temporary uplift to universal credit to alleviate a cost of living crisis, Sunak suggested the Conservative answer was better work rather than more taxpayer help.
Referring to families struggling to get by, he said: “Is the answer to their hopes and dreams just to increase their benefits?”
Sunak’s speech came against a backdrop of labour market shortages in important sectors, including in the HGV industry, surging energy prices and fuel shortages. David Morris, a Tory MP, has warned of a “winter of discontent”.
But the chancellor barely mentioned the issue gripping the country. “We are facing challenges to supply chains not just here but right around the world and we are determined to tackle them head-on,” he said.
There were no new policy prescriptions for tackling the supply problems, which Sunak admitted could last until Christmas.
Sunak said earlier on Monday that “pragmatic controlled immigration” could be part of the short-term solution; he told the conference that “good work, better skills and higher wages were the ultimate goal”.
He said he was “proud to back Brexit”, claiming that “the agility, flexibility and freedom provided by Brexit would be more valuable in a 21st-century global economy than just proximity to a market”.
Business leaders have expressed bemusement at Sunak’s claim that rising wages will drive productivity gains. “That’s usually an argument from the left,” said one.
Other business leaders warned that the labour market’s “period of adjustment” after Brexit and Covid-19 would last well beyond Christmas. One said: “The disruption won’t last two months — it could last two years.”
Sunak confirmed he was expanding his pandemic “plan for jobs” into 2022 with an extra £500m to help young people find jobs and to keep older workers in employment.
He cited his formative years “working around technology companies in California” as having given him a glimpse of the future. But he claimed the UK already “attracted more venture capital investment to our start-ups than France and Germany combined”.
Sunak announced that he was creating “2,000 elite AI scholarships for disadvantaged young people” and doubling the number of Turing AI research fellows.