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Rishi Sunak’s budget must support the lockdown exit roadmap

The government’s plan for easing lockdown restrictions must be supported by appropriate tax and spending policy

The government’s plan for easing lockdown restrictions must be supported by appropriate tax and spending policy. This will be a crucial task for the forthcoming budget, says Gemma Tetlow

Budgets are normally an opportunity for chancellors to lay out their longer-term plans for policy – announcing permanent tax or spending changes that deliver on the government’s ambitions for the economy and for levels of government borrowing and debt.

But one of the core tasks for Rishi Sunak this time will be rather different. One of the most important things for him to get right will be spelling out how the Treasury will support businesses and households as the country progresses along Boris Johnson’s roadmap out of lockdown.

Tax and spending policy will play an important role in supporting the roadmap

The Treasury has the important task of managing the UK’s economic recovery as it emerges from lockdown, while ensuring economic policies support – and certainly do not undermine – the government’s ability to control the virus.

For example, people’s ability and willingness to self-isolate will depend in part on the financial pressures they face. To ensure people follow the rules, it is important that they have the financial support to do this, either through their own resources, employer-provided sick pay or direct government support.

It is critical that the Treasury’s approach to economic policies is aligned with that set out by the prime minister – as well as with the devolved nations who are considering their own approach to lockdown lifting – and that its decisions are tied to changes in the level of restrictions and prevalence of the virus rather than a rigid timetable.

Sunak must learn from mistakes made last year

During the two attempts last year to reinvigorate the economy – at the end of the summer and then again in the autumn – Rishi Sunak pursued policies that were mistimed or inconsistent with other government initiatives.

The Eat Out to Help Out scheme implemented last summer was inconsistent with the actions of other departments that were, at the time, planning on the basis that a second wave was a real possibility. The government’s leading epidemiologists were not consulted and one subsequently called it “epidemiologically illiterate” to subsidise indoor gatherings. The Treasury’s recent attempt to repair the reputation of Eat Out to Help Out, on the basis of dubious evidence, suggests it has not learned from its mistake.

Then in the autumn the chancellor assumed that further public health restrictions would not be required and tried to start winding down the furlough scheme by focussing support only on ‘viable’ jobs. He continued to hope a second lockdown would be avoided even as evidence mounted that the country was not on the path back to normality, and was too slow to adapt his plans.

The budget must explain how fiscal policy will be tied to lockdown easing

The budget on 3 March needs to lay out plans for economic policy that are consistent with the prime minister’s new roadmap – being clear how tax and spending measures will be used to support the economy as lockdown measures are eased. Failing to do so could undermine the whole plan and risk the country ending up in a fourth national lockdown.

Considerable uncertainty remains about exactly when and how that will be possible. The chancellor cannot expect to embark on an unwavering journey to economic recovery. If there is one lesson he should learn from 2020, it is that he needs to be willing and able to adapt as circumstances change.

On Monday, the prime minister said “the government will continue to do whatever it takes to protect jobs and livelihoods across the UK”. The Treasury performed well in the early stages of the pandemic – rolling out a range of new initiatives to cushion the impact on businesses and households. But on two occasions last year, when trying to start easing the country back to normality, the chancellor pursued economic policies that were either inconsistent with other aspects of government policy or mistimed. This time it is imperative that the Treasury rolls out the appropriate policies at the right time to support the roadmap out of lockdown. Sunak’s budget on 3 March will be a crucial first test of that.

Johnson government
HM Treasury
Public figures
Rishi Sunak
Institute for Government

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