This was an astounding budget. Rishi Sunak is the first Chancellor to raise corporation taxes since Dennis Healey in 1974. He has established a National Investment Bank, fulfilling John McDonnell’s Labour manifesto promise of 2019. During the time he spoke gilt yields rose over a third of one percent, adding some £7 billion to the nominal annual re-financing cost of the national debt in a little over an hour. Rishi audaciously boasted that after 10 years of prudent Conservative Party fiscal stewardship he was able to undertake a massive spending programme, the like of which we have not seen since the post-war era.
That is just not true, in the decade before the pandemic the Tories failed to close the deficit, doubled the national debt and increased the debt to GDP ratio beyond a level which they said would make Britain bankrupt under Labour. The tax burden is now at a level not seen since Roy Jenkins was chancellor.
The last ten years have seen the Bank of England’s quantitative easing allow Tory Chancellors to avoid the imperative of balancing the books. That trick may not work for much longer. Inflation looms and the bond market vigilantes are awakening from their QE induced anaesthesia. This government has convinced itself that what it wants to do, it has to do, which is spend borrowed money.
In 2017 the Tories, including Rishi himself, were proclaiming that it was a fact that higher corporation taxes will reduce the tax take. So why in 2021 is Rishi scheduling the first corporation tax rise in 47 years?
In the year since he became Chancellor, Rishi has failed to meet every fiscal objective and mandate the government set itself. He now intends to oversee a tax and spending regime last seen in the sixties. Tory spinners are briefing this is setting the ground for an electoral strategy; the levelling up agenda, active government intervention in the economy, monumental infrastructure programmes. Perhaps. It is an electoral strategy that owes more to Peronism than Thatcherism…