Budget 2023: Restraint now, reward later?

The paradox of Rishi Sunak’s premiership is that even though he became Prime Minister because of the economy, it’s the issue on which many of his party disagree with him the most. He resigned as chancellor not because of partygate but because his fiscal conservatism was ‘fundamentally too different’ to Boris Johnson’s stance on the economy – tax less, borrow more. He lost the leadership contest last summer after he played down the prospect of imminent tax cuts. MPs flocked to his rival Liz Truss and only when her experiment imploded was he asked to clean up the mess.

Almost five months on, the Chancellor takes the view that the Tories’ only chance at a fifth term in office relies on making Labour seem the riskier bet on the economy: in other words, the government must not rock the boat with the spring Budget. ‘No one will be wowed by this,’ says one adviser, with an almost admirable lack of spin.

And so Jeremy Hunt has erred on the side of caution. One of his biggest splurges is on defence – £11 billion – but even this is about half of what the Ministry of Defence wanted. There is a focus on immediate help for those struggling with the cost of living – extending the £2,500 Energy Price Guarantee for an additional three months from April to June on what is viewed as a temporary and final measure before Ofgem’s price cap drops to around £2,000 in July. Wholesale gas prices are now less than a quarter of what the Treasury feared when the scheme was designed.

The good news for Sunak and Hunt is that the economic outlook is also far rosier than when the Office for Budget Responsibility gave its gloomy forecast in the autumn.