LONDON: Rishi Sunak will this week begin grappling with Britain’s most challenging fiscal blowout since World War II, in what will ultimately become the defining test of his tenure as chancellor of the exchequer.
On Wednesday, the finance minister will unveil departmental budgets for the next financial year on everything from education to defence, providing hints both on his approach to tough choices and his determination to reassert the fiscal restraint anchoring the soul of the Conservative Party ever since Margaret Thatcher in the 1980s.
Against the backdrop of a deficit nearing £400bil (US$531bil), an imminent jolt in trade relations with the European Union, and the need to fund emergency pandemic aid and Prime Minister Boris Johnson’s expensive spending pledges, discerning Sunak’s true priorities may not be easy.
But that won’t stop competing Conservative factions from scrutinising the chancellor’s words to assess his policy preferences, and his steadfastness on reining in the public finances – goals that could help define the party for a generation, just as Thatcher’s did before it.
“The chancellor faces a cat’s cradle of competing pressures, ” said Steve Baker, an influential Conservative who sits on the House of Commons Treasury Committee. “It’s imperative he lets the public know that we continue to believe in sound money and balanced budgets. And yet it’s essential that he doesn’t deliver a hammer blow by contracting spending.”
Fiscal conservatives such as Baker are at the heart of simmering arguments within the party as to what size and role the British state should take after Brexit, including its foreign aid budget. Preventing anyone from reading Sunak’s mind closely is the uncertainty of the pandemic, which has forced him to delay choices on tax increases. — Bloomberg