FINANCE

Who will win the battle of the Budget?

The new chancellor has eye-wateringly little headroom in the Budget, says Michael Burton - so will he opt for more spending to 'level up' the regions or keep the books balanced? There are 50 parliamentary seats at stake, he warns.

Chancellor Rishi Sunak is having one ear bent by red Tory backbenchers and the other by true-blue Tories. The former, many of them in previously Labour seats, want lots of public money spent in those 50 ‘red wall' constituencies that enabled Boris to win a landslide election. The latter believe in small state Conservatism and balancing the books. The price of getting it wrong is losing the next election if the newly-won constituencies revert back to Labour having decided promises by Boris are hot air.

It is not an enviable situation for a new chancellor. Despite years of cuts, the public finances are still delicate, debt is too high and although the headroom in 2022 is £10bn, this is eye-wateringly low. As an example, this is a third of the average revision to borrowing forecasts by the Office for Budget Responsibility; so, in other words, very little headroom at all. Think-tank the Resolution Foundation (RF) proposes tax rises – or at least not reducing them – as a means of funding spending promises but this is not the traditional Tory way. Former Treasury chief secretary David Gauke told a RF seminar this week that cutting spending was always politically easier than raising taxes.

Michael Burton

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