Rishi Sunak is going to start spending again – he has been given the excuse he needs

Any misgivings the chancellor has about rising inflation will be set aside, argues James Moore

Rishi Sunak has the economic headroom to spend more (AP)

Rishi Sunak is about to turn the money taps on. The latest government borrowing figures – for December – show that the chancellor issued £16.8bn worth of IOUs on our behalf. That number is quite a bit lower than the £18.5bn the City had pencilled in. It is also £7.6bn lower than the same month in 2020.

The total budget deficit racked up between April and December stood at £146.8bn, which is a huge amount, but still £13bn less than the Office for Budgetary Responsibility had forecast.

The economy has come through for the chancellor. Omicron’s impact has proven to be less serious than feared. This time the gamble the government took with the nation’s health, and people’s lives, with its slow move into plan B and its early lifting of Covid-19 restrictions in England, appears to have paid off in a way that previous rolls of the dice did not.

However, it isn’t quite time for No 11’s staff to be knocking on the door of No 10 to see if they can borrow some of the party kit left over from the lockdown events next door. While borrowing fell, interest payments rose to £8.1bn, a six-month high. In part, that’s because some of the government’s debt is index linked. This rises with inflation, which now stands at an uncomfortably high 5.4 per cent. The market’s view on interest rates – they’re expected to rise and they’re expected to rise soon – doesn’t help either.

But any misgivings the chancellor has about that will be set aside, as will his talk about returning to fiscal responsibility after the spend-a-thon forced upon him during worst of the pandemic.

The cost of living crisis is looming ever larger. It’s going to complicate life for Boris Johnson’s successor, who will be clearing up the mess in No 10 sometime this year if the bookies have it right, and result in a rapid end to any honeymoon with an unhappy electorate.

Inflation is making its presence felt in people’s food and other bills with the next energy price cap poised to deliver an even bigger blow. As for the worrying situation in Ukraine? Russia’s bellicose behaviour – and the fists the British government is waving in its direction in an attempt to district from the bills and the parties and all the other stuff that’s going wrong – is just more wood being added to the bonfire burning underneath wholesale gas prices.

Amid defections, restive backbenchers, and poor polling results, it now looks like a question of when not if the chancellor sheds the sober, grey, fiscally responsible Tory suit he wanted to adopt in favour of dusting down his Father Christmas outfit. Fiscal gifts may be on the way.

Every day there is a new story about the current favourite way of reducing people’s heating bills, largely because none of the options are very good. Removing VAT is apparently back in vogue. Tomorrow there’ll be another wheeze in focus.

Preparation is also being made for a U-turn on the planned national insurance rise, which was Boris Johnson’s big idea for fixing the NHS and the social care crisis too. That problem will be kicked back into the long grass where it has long resided. The government can ill afford to further squeeze people’s income with wages moving up at the speed of a weary sloth.

The discussion about the fiscal headroom the borrowing figures provide Sunak with is really rather academic. The chancellor is going to spend again. He’d probably do so if they were a good deal worse. There will be a lot of energy expended in debating the numbers, and the economics of whatever decisions he makes. But the politics rule.