Sun, 23 June 2024

Newsletter sign-up

Subscribe now
The House Live All
Why the future of business is mutually beneficial Partner content
The next UK government must ensure health, safety and wellbeing standards are upheld Partner content
Parliament Unwrapped: What did the 2019-2024 Parliament mean for workers’ health, safety, and wellbeing? Partner content
Five-point manifesto to support people and families living with obesity Partner content
Britain’s Chemical Industry Fuelling UK Growth: A Plan for the Next Government Partner content
Press releases

The Breakfast Briefing: Rishi Sunak’s grim options revealed as economy shrinks

The latest ONS data shows that the economy took a 2% hit in the first quarter of the year.

3 min read

Your essential morning guide to what’s moving in Westminster from the PoliticsHome team

The British economy shrank at the fastest pace since the 2008 financial crisis in the three months to March, just-published new data from the Office for National Statistics reveals.

In the first official growth estimate since the country’s coronavirus lockdown kicked in, the stats body found that the UK economy contracted by 2% in the first quarter of the year - and, with that data covering just a sliver of the shutdown - this is only a flavour of the grim economic figures likely to come.

The stark ONS numbers come as ministers face another grim “menu of options”. A Treasury document leaked to The Telegraph reveals this morning that Rishi Sunak may have to hike income tax, end the pensions triple lock and freeze public sector pay to shore up investor confidence in the face of a £337 billion budget deficit caused by the coronavirus crisis.

For context, the March Budget saw Britain on course for £55bn deficit - and the eye-watering “base case scenario” will, the document warns, require a signal pretty soon that Britain has a plan to stabilise the public finances after pumping billions into previously-unthinkable programmes like the Coronavirus Job Retention Scheme.

It’s hard to see how another public sector pay freeze squares with the Government’s rhetorical love-bombing of those on the frontline

A one percent hike in income tax, slaying the Tory sacred cow of the pensions triple lock, and a two-year freeze to the public sector wage bill are among the measures floated, the ace scoop by Gordon Rayner and Anna Mikhailova confirms.

Any one of those options would be politically toxic, of course - and it’s hard to see how another public sector pay freeze in particular squares with the Government’s rhetorical love-bombing of those on the frontline of the Covid-19 fight.

Labour’s Shadow Chancellor Anneliese Dodds - who is already demanding that Sunak and Boris Johnson distance themselves from the incendiary leak - says the last round of austerity “has made it harder to deal with the challenge of coronavirus” and says there “must be no return to a society where we lack that resilience” in key services. Expect this line to get an outing at PMQs later.

This is, of course, only advice, and the job of officials is to thrash out all the options, however audacious, before ministers make that all-important political judgement call. A Treasury spokesperson says the Government’s focus “is on supporting families and businesses through this difficult period”, with the finance ministry pointing to the more-generous-than-expected boost to the furlough scheme announced by Sunak yesterday as a case in point. 

But the very fact that a Government that won office just months ago by promising a decisive break with the Cameron-Osborne years, by audaciously pledging to pump money back into the public sector while avoiding tax rises, is now facing these choices shows just how far the coronavirus pandemic has upended British politics. 

Sign-up here and get the FREE Breakfast Briefing delivered to your inbox by 8am every weekday morning, PLUS our Sunday edition and a new evening update on the coronavirus response

PoliticsHome Newsletters

PoliticsHome provides the most comprehensive coverage of UK politics anywhere on the web, offering high quality original reporting and analysis: Subscribe

Engineering a Better World

The Engineering a Better World podcast series from The House magazine and the IET is back for series two! New host Jonn Elledge discusses with parliamentarians and industry experts how technology and engineering can provide policy solutions to our changing world.

NEW SERIES - Listen now

Partner content
Connecting Communities

Connecting Communities is an initiative aimed at empowering and strengthening community ties across the UK. Launched in partnership with The National Lottery, it aims to promote dialogue and support Parliamentarians working to nurture a more connected society.

Find out more