What kind of conservative is Rishi Sunak? This time last year, there was a clear answer: he was a fiscal hawk who was worried about how much the government had to borrow to fund the Covid crisis. As chancellor, he was always fighting with the prime minister over high spending. When Sunak tried to raise the national insurance rate, he did so partly to send his party an important message: the borrowing and spending has to stop.

Now Sunak is in No. 10 and Boris Johnson isn’t around to demand more spending. There has been a Budget and a list of priorities – and Sunak’s agenda is starting to emerge. It includes a tax burden not just higher than any time in the 1970s, but any time in postwar history. A record proportion of the workforce are paying the higher rate of tax. These are government interventions that Tories would have once mocked. Now they are happening every day under Prime Minister Sunak.

On the surface, it seems as if few British politicians embody the capitalist spirit more than Sunak. He is the richest MP ever to become prime minister. He is a graduate of Stanford business school and a former Goldman Sachs man. He has been called ‘out of touch’ by his opponents for his various luxuries, such as his £180 temperature-controlled ‘smart mug’ and his heated swimming pool at his constituency home. But he doesn’t shy away from talking about the merits of markets and money. He reveres Silicon Valley and speaks unabashedly about ‘economic freedom and prosperity’.

How did this ultra-capitalist find himself anywhere near one of the most economically illiterate proposals on the planet – price controls on ‘basic’ supermarket items? No. 10 insists that no compulsory plans are afoot, but the idea of a ‘voluntary’ price cap keeps being brought up in Whitehall as a supposed answer to skyrocketing food-price inflation (19 per cent on the year at the last count). Even Labour has been mocking this kind of economic interventionism. Jonathan Ashworth, the shadow welfare secretary, labelled him a ‘latter-day Edward Heath’.

Let’s be generous and assume that No. 10 was just planning to ask supermarkets to cap the price of certain goods. Even this suggests ministers believe prices are high because shopkeepers want them high. In a competitive market, the reverse is true: shops want more customers and appeal to them by offering lower prices.

You don’t need to go far back in British economic history to see that price controls are a devastating mechanism. A price cap is less likely to ensure costs go down and more likely to mean that people can’t get basic goods at all.

Sunak knows these economic laws better than anyone; he is perhaps the most financially literate politician ever to sit in No. 10. But it was the Conservative party that ushered in price controls on units of energy in the autumn (announced by Liz Truss, extended by Sunak).

A tendency is emerging with the Tory government: to politely ask businesses to do something, and if they don’t oblige, command them. When Sunak was chancellor, he asked energy chiefs to invest more in the UK. The threat of a windfall tax on North Sea oil loomed over them if they didn’t. At the time, his allies thought this was a bluff. Surely Sunak, an evangelist for liberal economics, wouldn’t actually impose such a levy?

He did – and an even bigger one than Labour was calling for. The results have been predictable. Harbour Energy, the biggest energy producer in the North Sea, says its tax bill ate up nearly all of its profits in the last tax year, so its returns were ‘all but wiped out’. Harbour employs 1,500 people in the UK and is now shedding hundreds of jobs (it also recently dropped out of the FTSE 100). TotalEnergies, a French oil and gas giant, blamed Sunak’s tax for its decision to cut North Sea investment by £100 million. Once, Conservatives understood that the arbitrary confiscation of profits would lead to less investment and make everyone poorer. But instead of modifying the tax raid, Sunak doubled down. In November, he extended the levy – which amounts to an effective 75 per cent tax rate – to 2028.

Politically, these tax raids have a knock-on effect. Keir Starmer, who’s never shy about outflanking the Tories, has now said he wants to ban all new production in the North Sea. Given Labour’s popularity in the polls, it’s not hard to see why the energy giants are deciding to invest in other countries.

It’s the same story with corporation tax: the government is pro-business until government and business stop agreeing. When, as chancellor, Sunak announced in his March 2021 Budget that corporation tax would rise from 19 per cent to 25 per cent, he claimed it was an emergency post-pandemic measure. Now it is a core part of his agenda.

A phenomenon of the 2010s was that the corporation tax rate fell but revenues rose. Most low-tax Tories argue that one led to the other. But Sunak rejects this as a simplistic argument. Better, he thinks, to hike corporation tax and let his chancellor, Jeremy Hunt, micromanage, using tax breaks to force investment. This carrot-and-stick approach is not really working: only half of all companies used Sunak’s original tax break to reinvest. The conditions for investing over the past few years have been abysmal, and it’s hard for Hunt to persuade investors otherwise.

The PM’s supporters argue that circumstances have demanded huge state intervention on his watch. When he ran the Treasury, his job was to fund lockdowns. He borrowed more in ten months than Gordon Brown borrowed in nine years. Last year, his plans to start scaling back spending were interrupted by the invasion of Ukraine.

Sunak has often spoken out against the ever-expanding state. ‘People are asking whether this level of intervention is the new normal,’ he said in his Mais lecture in the City last year, asking if government should be ‘a permanently bigger presence in the market and our lives’. His answer was no: his ‘different vision for our economy’, he said, was a ‘culture of enterprise’ focused on innovation, productivity gain and, crucially, getting the state out of the way.

But governments are judged by what they do, not what they say. And the state under Sunak is becoming larger and more interventionist. Lockdowns and the Ukraine war may have needed drastic responses, but there is a long list of unforced policies, such as corporation tax hikes and windfall taxes.

The welfare bill is expected to surge by 16 per cent over the next four years, to £330 billion. At his last Budget the PM dished out 30 hours of free childcare to middle-class families at a cost of £5 billion. This was seen in No. 10 as politically deft, leaving Labour unable to outbid them. But to low-tax Tories, that bribery equates to intellectual surrender. ‘It seems like we’re selling Tory language with Labour policy,’ says a Tory MP. ‘I suspect the public will eventually pick Labour policy – and it won’t be us delivering it.’

‘To be interventionist and heavy-handed is now a Tory trait,’ laments one minister. ‘I’m not so sure we’re dressing up as Labour. I think we’re morphing into them.’

Starmer likes to complain about how his ideas keep getting stolen by the government. But this allows him to lurch further to the left, proposing compulsory land purchases, even higher taxes on business and smoking bans. As long as the Tories continue to steal Labour’s plans for tax and regulation, they give the opposition more leeway. (They steal their anti-business language too – Hunt even used the phrase ‘unearned income’ to describe economic activity.) If Starmer manages to find his way into No. 10 next year, it’s not clear how the Conservatives might argue against higher taxes or rent controls, given that they gave up the principle of opposing such policies long ago.

The sad irony is that over the past few years Sunak has been more honest about the need for trade-offs than almost anyone else in Whitehall. In the summer’s leadership campaign, he said in an interview with this magazine that he was ‘prepared to tell people that you can’t have your cake and eat it’. He was proven correct in the autumn, when Truss went for tax cuts and huge spending sprees at the same time. His truth-telling landed him in No. 10 eventually. But since he became Prime Minister, we’ve discovered which trade-offs he is willing to make. So far he’s been choosing more tax, more spending and more intervention. His only advantage is that there is, at the moment, no obvious political challenger to the right of the Tories.

At the next election, how is Sunak going to sell the idea that the Tories have a different way of seeing things to Labour? If voters approve of an interventionist tax-and-spend agenda, why not vote for the party that really believes in it?

‘We’re not heading towards the 1970s,’ said Mel Stride, the Work and Pensions Secretary, when challenged about price controls this week. That a Tory has to give this assurance says a lot about how far to the left the party has drifted. He’s right to say things aren’t the same as 50 years ago: the tax rate is higher and the state is twice as big.

In the 1970s, it was the Conservatives that looked at the trajectory of the country and decided that another way was possible. Is there the will to do so again? There are enough five-year forecasts flying around Whitehall to make it clear that this is not a blip: high taxes and high spending seems to be the new Tory normal.