Rishi Sunak’s big-spending budget may redraw the terms of British politics

The Guardian, by Martin Kettle
11th March 2020

The chancellor has loosened the fiscal shackles – so Johnson’s Tories can no longer be dismissed as compulsive austerians.

On 11 March 1952, Rab Butler unveiled the first Conservative budget since the second world war. It was also the first Tory budget since Labour’s creation of the National Health Service. It marked a political turning point for the Tory party. In that budget, not only did Butler become the first and last Tory chancellor of the postwar era to raise the basic rate of income tax – he also began the Tory party’s steady accommodation with key aspects of Labour’s postwar settlement, which lasted until Margaret Thatcher in the 1980s.

Butler ended his budget speech with words that have a very contemporary ring. “Restriction and austerity are not enough. We want a system that offers both more realism and more hope.” The Tories were to win the next two elections and remain in power for 12 more years.

Rishi Sunak did not raise taxes on Wednesday. But the about-turn on public borrowing was almost as spectacular. For a Tory chancellor to say, as Sunak did, that “investment and higher growth mean more jobs and higher wages” is a U-turn. The burying of austerity (though not yet of its effects) is decisive. The role of the state was central to everything. Sunak said enough to suggest that his 2020 budget may even be a political turning point on a par with Butler’s, if it is carried through.

Like Butler’s, Sunak’s budget marks the beginning of an end to an era. Like his, it signals an accommodation with the expanded role of government, and suggests a significant change of ideological direction for the Tory party. The 2020 budget may redraw the terms of British party politics more significantly than any budget in a generation. It is an immense intellectual and political challenge to the post-Corbyn Labour party.

During his speech, Sunak turned to his predecessor, Sajid Javid, sitting on the backbenches. This budget, said Sunak, will get the job done on Javid’s support for further education. It was a curiously restrained and specific piece of homage – and with good reason. Javid would not have delivered most of this budget. He is more of an apostle of austerity than Sunak, more of a small-state man. Sunak has delivered the bigger-state, fiscally unshackled budget that Boris Johnson demanded in the wake of the 2019 election, and that Javid would have struggled with. We saw on Wednesday the real underlying reason why Javid was forced out last month.

Until this week, it had seemed as though events might conspire to blunt the change of direction that Sunak announced. And the budget was certainly dominated by the health emergency. The first third of Sunak’s speech dealt with little else. He pledged £30bn upfront on the NHS and on measures to protect businesses and workers. What a contrast a century makes. Anticipating an epidemic-dominated budget, I dug back into Hansard this week to read Austen Chamberlain’s 1919 budget speech, given at the height of the Spanish flu epidemic that killed nearly 230,000 Britons. Influenza got one extremely oblique mention. There wasn’t even a health minister then, never mind a health service. It was another country.

Yet while the coronavirus measures will grab the headlines, it’s the investment in infrastructure that marks this budget as different from those that went before. An extra £175bn over five years, claimed as the biggest fiscal boost in 30 years, is serious new money. Significantly both Javid, in a Times interview, and Philip Hammond, in a Today programme interview, had lobbied publicly for fiscal caution in the run-up to the budget. Both former chancellors were ignored by Sunak. Javid’s fiscal rules will be formally “reviewed” over the next six months. The reality is that the rules are dead. The Treasury green book, basis for the calculation of previous public spending, is to be reviewed too. Austerity as a way of economic life is over.

Nevertheless, it would be a mistake to pretend that the Johnson Tory party is somehow finding its way back to the political tradition embodied by Butler, who gave his name – along with Labour’s Hugh Gaitskell – to a centrist Keynesian era in British public policy in the 1950s and 1960s. Times have changed. Politicians, let alone different generations of politicians, never step into the same river twice. Thatcher’s counter-revolution against Butskellism changed the game for ever.

Yet this feels, even so, to be a significant turn of the tiller in the Tory party’s slow and uncertain journey away from Thatcherism. Thatcher successfully banished the Butler consensus towards tax-and-spend and the role of the state in economic and social policy. David Cameron continued much of the economic thinking of Thatcher but jettisoned most of her social illiberalism. Theresa May hinted at a more social market approach to economic policy but was unable to deliver it. Johnson has now carried his own social market instincts into action.

Yet he has no more converted the Tory party en masse to a pristine and coherent new form of social market economic thinking than Thatcher instantly succeeded in converting it to her ideology of possessive individualism. Part of Johnson’s problem here is that he himself remains uncertain about what, other than his own success, he really believes in.

The Tory party itself also remains a very variegated organism. It has fractures between the primacy of economic interests and those of nationalism, between nostalgia and future focus, between government activism and anti-state individualism, and between conservatism and liberalism, as well as over post-Brexit Britain’s place in Europe and the world. Its leader is a mix of much of the above.

But Johnson is moving the Tory party back on to the territory of government activism nonetheless. It is now lazier than ever to dismiss the Tories as mere neoliberals, compulsive austerians or even as the same old, same old – a big challenge for Labour. Something new is emerging in the Tory party. This important budget is proof that it has the upper hand. Call it, perhaps, Johnsonism.