The most remarkable element of that Budget was a Tory Chancellor standing at the despatch box saying that people had voted to change the ‘economic geography’ of the country and that was what this government was going to try and deliver. It was a sign of how different this government is from its Tory predecessors. Towards the end of the speech, Rishi Sunak boasted about a ‘changed mindset’ in government when it comes to capital spending that would see more projects built outside London and the south. It was another reminder of how this government sees itself as a new regime, not simply the Tories’ fourth term in office.
There were two parts to this Budget. The first dealt with coronavirus and took a very, bipartisan tone — declaring the issue to be above party politics. The £30 billion stimulus package showed how worried the government is about the coming economic disruption. Though it is striking that the government hasn’t bowed to pressure for the state to effectively act as the employer of everyone in the ‘gig economy’ during this crisis. At the heart of government, there is an acute awareness of how difficult it would be to unwind such a step once it had been taken.
The second part of the Budget was about levelling up. We saw how the Tories think they can do this. It is essentially a combination of better infrastructure – both physical and digital – more money on research spending and better skills. But the real test of this approach will be if it succeeds in bringing more private sector money into these areas. Trying to level up just through public spending is not going to be sustainable.
Sunak’s Budget today was delivered within the fiscal rules. But he has announced a review of these rules ahead of the Autumn Budget. Given that the OBR has, again, downgraded productivity, I suspect that this review will suggest that spending on skills should be shifted from current to capital to try and boost productivity. By the autumn, we will also know both how severe the coronavirus disruption has been and how likely the UK and the EU are to agree on a trade deal. Sunak’s second Budget will reveal even more about his approach than his first one did.