No one will welcome spending cuts or tax rises, but strengthening the economy is now essential
At the T20 World Cup final, a fan held up a sign declaring: “I love Rishi Sunak.” Perhaps the supporter enjoyed the squeeze applied by England’s bowlers, or appreciated the cuts played by the batsmen. But in Downing Street, there is realism that the Autumn Statement on Thursday will bring the Prime Minister little love.
Instead, the watchword is competence, and here Sunak confronts two serious challenges: the stream of migrants crossing the Channel and the dire economic situation. The economy is shrinking, interest rates are rising, the Bank of England predicts a two-year recession, there is a £55 billion shortfall in the public finances, and inflation, depending on how we count it, is running at between 8 and 12 per cent.
And so we face a painful squeeze. Departmental spending will be held down below inflation, and taxes will rise. Some compare the situation with 2010, when David Cameron and George Osborne began what they called the “age of austerity”, but there are important differences between now and then.
First, Cameron and Osborne had spent two years arguing that spending cuts were necessary, and even Alistair Darling, then Labour’s chancellor, accepted something similar. Now, the Prime Minister and his Chancellor, Jeremy Hunt, have had little time to prepare the public for the pain that is coming.