Does Rishi Sunak deserve to be detested?

Newspaper headlines have made torrid reading for the Chancellor in recent days. They are unlikely to improve in the short term. While his policy announcements last Wednesday of a 5p cut in fuel duty and an increase in the thresholds for national insurance were welcome, they have been widely derided as insufficient.

Rishi Sunak has gone from being the hero who doled out cash during successive lockdowns, to being vilified for not doing enough to help cushion people from increasing cost of living pressures. His room for manoeuvre is, however, strictly limited. There are after all only two main ways in which governments can fund additional spending: raising taxes or borrowing more.

Sunak has previously announced an increase in corporation tax from 19% up to 25% from 2023 and more recently an increase in national insurance to 1.25%, after extensive haggling with his neighbour, the Prime Minister. The latter “levy” is needed in order to fund investment in social care which successive governments have failed to address. For the next few years much of the additional £12 billion per annum will be diverted to the NHS to deal with a hospital waiting list that has reached 6 million. It would be politically untenable to countenance this number of people waiting possibly years for treatment ahead of a general election.  

The reality of the decision to increase national insurance thresholds, which Sunak announced last week, is that only £6 billion of additional funding will be spent on the NHS next year. Then there are demands for increased spending on defence in light of Russia ’ s invasion of Ukraine, and calls for the restoration of the overseas aid budget to 0.7% of GDP from its current reduced level of 0.5%.

This fails to recognise the harsh economic reality that we face. The UK has just suffered the biggest peacetime shock to the public finances as a result of the pandemic since 1945. The Government has borrowed to keep people in their jobs through furlough and has supported businesses through loan schemes. The public debt is now £2 trillion. Against an inflationary backdrop where interest rates are rising, this is giving the Chancellor sleepless nights. He is acutely aware that a 1% rise in interest rates adds approximately £20 billion a year to the cost of servicing Government debt.  

There is no free lunch. But the public has grown used to the protective arm of state intervention to solve its problems. I believe it was quite right for the Government to take the action it took during the pandemic. It is also right that it should do what it can to help with the cost of living crisis. That assistance should be targeted at the poorest in society. The rest of us are unfortunately going to have to tighten our belts and accept that we are in for a tough few years.

There is a third option — cutting public expenditure — which Jacob Rees-Mogg and Kit Malthouse have called for. The reality is, that after the Cameron-Osborne austerity years, there is no public appetite for it at all.

The personal attacks on Sunak are likely to have raised a wry smile from the Prime Minister, who is reported to have pushed for energy bills to be capped until the end of the year. This was in light of the risk that the price cap could be increased further by Ofgem, the regulator, at the next price review in October, taking average bills potentially up to £3,000.

But while Johnson is known to believe in having his cake and eating it, Sunak is everything he is not. Organised, meticulous, diligent, into the detail and tight-lipped. He is also in his DNA a tax-cutter, as evidenced by his intention to reduce the basic rate of income tax from 20p to 19p by 2024. But, as he made clear in his recent Mais Lecture at Bayes Business School, he wants to lay the fiscal foundations for such tax cuts on the back of solid public finances.

That is sensible, which makes the attacks on Sunak — along with questions about whether his personal wealth makes him unsuitable to be Chancellor as he cannot empathise with those struggling to make ends meet — odd and unjustified. The Chancellor ’ s penchant for a “ smart” tea mug or a certain type of slippers, or his decision to build an extension to his constituency home to house a gym complex, are frankly of no interest to me whatsoever. Nor do I believe that his personal wealth or his choice of a wealthy spouse should be sneered at. His parents, by his own admission, made “ great sacrifices” to provide him a first-class education. He grasped that opportunity and worked hard. He should be judged by what he does, not by what he has.

Sunak has an unenviable task. He also has well documented ambitions to reach the political summit. Being detested by some is a rite of passage for all politicians, necessary to achieve that goal. We will see if he has the stomach for it.

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