Rishi Sunak cannot avoid the subject of higher taxation forever

Editorial: The chancellor was wrong on some of the harshest measures in his spending review, but the Tory leader of the day will have even tougher choices to make before the next election 

Polished and plausible as ever, Rishi Sunak once again put the best, most reasonable-sounding spin he could on a set of numbers that represents the biggest economic shock to the public finances since the war. A public borrowing requirement of £394bn for this fiscal year is indeed a peacetime record, with another £164bn to come next year, and £100bn per annum to the mid-2020s. And all funded at record low interest rates, albeit partially through the creation of money by the Bank of England, and subdued inflation. Not so much a magic money tree, then, as a vast rain forest of plenty, a practically inexhaustible source of cheap money. In passing, and in all fairness, begs a few questions about what Conservative ministers said concerning Labour’s “unaffordable” fiscal plans at the last general election. 

Awesome as all of that sounds, it would be even higher, as the chancellor argued, had the government not supported the economy through the furlough schemes and similar expensive measures. Even so, unemployment will still hit 2.6 million next year as the full after-effects of the Covid crisis and Brexit (bizarrely not even mentioned), work themselves through the economy. In human terms that can only mean more long-term poverty, family breakdowns, and poorer health. That is the social and economic “scarring” of the nation that is only now starting to be felt during lockdowns.

Yet Mr Sunak was stunningly unconvincing on the meanest measures in his statement. Given that the economy will need support next year, there seems little sense in a partial public sector pay freeze next year. The chancellor’s argument is that because private sector staff and the self-employed have suffered worse pay cuts, furloughing, and job losses, it is “unfair” for firefighters, teachers, the police, and others outside the NHS to have a 2 per cent increase – which would still be a freeze in real terms. There is no necessity for those in the public sector to suffer a cut in their living standards because those in parts of the private sector, such as hospitality, have endured hardship; freezing a headteacher's wages does nothing for an unemployed chef. Indeed more money being pumped into the economy through a stable public sector would boost activity in pubs and restaurants, so long as they can stay open.

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