Budget Day — what to expect
I will do a longer blog post later but I thought I would jot some thoughts before Rishi Sunak stands up.
- He is damned if he does & damned if he doesn’t.
It is equally true that Sunak is not spending enough and at the same time spending too much. There will always be people/ businesses who won’t get as much support as they need and of course, there is only so much he can spend and borrow of taxpayers money.
- It’s the debt stupid
There will be big pressure to pay off the record level of peacetime debt but I don’t see tax hikes coming today. For one, its madness to hit firms whilst we are still in lockdown, it will take at least two years to return to 2019 levels.
There is no need to repay the debt now and all things are pointing to that the current thinking in HMT and BoE is that they will pay off the debt with the low-interest rates (or even make money if the base goes negative). The two things which make this strategy work is that the Gilt price (the cost the Government borrows) is still at an all-time low and that the Bank of England base rate is currently 0.1%.
This strategy is a high risk — inflation roulette if you were. The IFS have a good blogpost on the risk of this strategy but we know Bailey is the Tressuar’s friend and is arguably more hawkish than most Tory backbenchers.
-Rishi Sunak will be the only winner
As mentioned above I don’t see a tax hike as been talk up in the press in the coming days. I see much of that talk as a false flag. It will be a good budget, in terms, he will be sending. I suspect if he does raise tax it will be within the publics tolerance threshold. One area he should look at is getting large cap firms to pay more tax. Amazon only paid £290m in UK tax in 2019 as sales surge to £14bn. I suspect Rishi will want to tackle this.
Straight after the budget Rishi will be doing a live TV news conference, which will give him glowing headlines tomorrow as he moves into pole position to be the next Prime Minister. More impressive, is that tomorrow live on ITV at prime time Rishi will have his own Q&A show with Martin Lewis, the Money Saving Expert. This might not get the political lobby excited but far more people will watch this than the press conference or the budget itself.
I will leave you with this accidental Partridge moment when Rishi tell students of his coke addiction.
