Budget

Senate Majority Leader Chuck Schumer knows how to fix inflation: higher taxes. “If you want to get rid of inflation, the only way to do it is to undo a lot of the Trump tax cuts and raise rates,” surmised the New York Democrat to reporters on Tuesday, after meeting with West Virginia Senator Joe Manchin about the budget. “No Republican is ever going to do that. So the only way to get rid of inflation is through reconciliation.” Manchin saw it slightly differently, portraying tax increases as budget reduction tools. He believes debt reduction is “the only way” to fight an inflation problem that threatens to wash away Democratic majorities in Congress.

That the federal budget process is broken is the worst kept "secret" in Washington. The White House and Congress know it. The think tanks know it. A 2010 study from the progressive Center for American Progress called the budget process “not a pretty picture.” The conservative Heritage Foundation said in 2005 that the process “stifles debate, prevents cooperation, and frequently breaks down.” Proposals come along every few years to fix the problem, but nothing ever gets done. “The fundamental reason why the federal process is broken is because Congress doesn’t have a budget,” says Kurt Couchman, a senior fellow at Americans for Prosperity. “Congress doesn’t do a budget. Congress does appropriation bills, there are 12 of them.

Rishi Sunak ended 2021 as the most popular politician in the country. A YouGov poll for the final quarter of the year found that 31 per cent of all adults had a positive opinion of the Chancellor compared to 28 per cent for Nicola Sturgeon and 26 per cent for Boris Johnson. However, ending 2022 in the same situation looks rather ambitious.  As the cost of living crisis worsens, Sunak is under pressure both from the public and his own party to step in and ease the burden on households in tomorrow's Spring Statement. A poll out today suggests he has plenty of work to do to convince voters he has the right plan.

Is Rishi Sunak any good at politics? In recent days Labour sources have been putting it about that they no longer fear the prospect of the Chancellor stepping up to take over from Boris Johnson if he is forced out by partygate. According to one briefing to the left-wing New Statesman, Keir Starmer’s team has concluded that ‘Little Rishi’ is ‘crap at politics’ after observing his response to the cost-of-living crisis and now thinks that Liz Truss may prove a more formidable successor to Johnson in electoral terms at least.

Rishi Sunak thinks Boris Johnson goofed badly when he conspired to upend Commons standards procedures. And he agrees with his red wall colleagues that this appeared to place the government on the side of a privileged elite. That is certainly the standard interpretation of his comment this week that the government needed to do better – and indeed unattributable briefings by an ally say that he regarded the episode as a ‘mistake’ which should be acknowledged by someone of cabinet rank. But if red wall Tories are tempted to regard Sunak as the true keeper of their flame then I suggest they think again. Because while Johnson has indeed gaffed, the Chancellor has also recently announced a decision that may well imperil their re-election prospects.

The Tory party has reached a fork in the road, I say in the Times today. One path involves sticking to the spending plans, hoping to cut taxes before the next election and getting rid of the new perception of them as tax raisers. The other drags them into ever more spending, led by big increases in public sector pay, and ends with them going to the country as a high-tax party. In his Budget speech and his address to Tory MPs, Rishi Sunak made clear that his preference was for the former approach, which should cut taxes before the country goes to the polls again. But sticking to even the spending limits set out this week will require tough choices that the Tories have not wanted to make in recent years.

Is Rishi Sunak a low tax chancellor? He certainly likes to tell anyone who will listen that he is. Yet his actions tend to suggest the opposite. The tax burden is currently on track to reach its highest level since the early 1950s, and while Sunak unveiled one big tax slash in the Budget in the universal credit taper rate cut, the main thrust of Sunak's announcements was spend, spend, spend. Tonight Sunak addressed Tory MPs at a meeting of the 1922 committee. After announcing £150 billion in extra public spending, Sunak sought to convince his party that, despite this, he was committed to lowering taxes.

Which departments will fare the worst from this week's Budget? It won't be the Department for Health and Social Care. Over the past few days, new funding announcements have appeared in the papers meaning the NHS will be handed another £5.9 billion. That's in addition to the £12 billion a year investment it will receive as a result of the health and social care levy. Meanwhile, Whitehall sources suggest that Michael Gove has had some luck in his push for more funds for the levelling up agenda. Where the mood music is less positive is education.