While Labour are miles ahead in the polls, Sir Keir Starmer’s task of delivering election victory next year just got a little bit harder, thanks to the Chancellor’s iron fiscal discipline and improving, albeit anaemic, economic forecasts.
In his first Budget, Jeremy Hunt resisted the siren calls of Conservative MPs to throw his commitment to balanced public finances out of the window and cut taxes.
While there were giveaways – notably on childcare, energy bill help, defence spending, pensions – and the overall decisions raised borrowing by 88 per cent over the forecast period, the Chancellor has remained within the fiscal rules to get debt falling and borrowing under 3 per cent in the next five years.
But Mr Hunt has done this while leaving very little space to meet the rules – with just £6.5bn of headroom – “the smallest amount” any Chancellor has left themselves according to the Office for Budget Responsibility (OBR).
Translated, this means that Sir Keir’s job of promising voters meaningful change while remaining responsible with taxpayers’ money just got a lot harder.
It means he only has £6.5bn to play with to fund any shiny new Labour policies, or he risks facing Tory demands to spell out how he would pay for them, which would force Sir Keir to set out spending cuts or tax rises if he wants to retain the image of fiscal responsibility, while acknowledging the Opposition’s desire to borrow to invest.
The job is made doubly more difficult by Labour’s election manifesto process, which is long and laborious compared to the Tories’ due to the greater levels of democracy in the party, with the broad outlines expected to be completed by the summer.
That makes the decisions Mr Hunt is taking on spending now influential over Labour’s offer to voters at the next election, even if Sir Keir knows the Chancellor is likely to throw caution to the wind with giveaways the Autumn Statement, or 2024 Spring Budget, or both.
Improving, albeit underwhelming economic forecasts, also deliver a blow to Sir Keir if they are borne out.
The UK will avoid an official recession, blunting one of the most powerful attacks Sir Keir and Shadow Chancellor Rachel Reeves were no doubt readying themselves to deploy if the economy went south.
Inflation is also set to fall much more sharply than previously predicted, meaning Mr Sunak can say he has met two of the five pledges he has been hammering home to voters since making them in January.
Meanwhile, Labour was preparing a massive childcare offers to differentiate themselves from the Tories at the next election – a fox which may have been at least partially shot by Mr Hunt’s multibillion pound giveaway for parents of one and two year-olds.
The polls suggest that Labour will still win next year, but its wide path to victory has got that little bit narrower.