It seems to me, however, that the real reason why this is not officially an “emergency budget” is that if this were a real fiscal event, the Treasury would have been forced to produce a lot more details, explaining precisely where this money will come from. of.
As it stands, Sunak has just ‘released to the press’ an additional £15bn of spending – while only disclosing a still very vaguely specified windfall tax on the revenue side of the ledger. That’s pretty handy, in the midst of the partygate scandal and ahead of a series of tricky by-elections.
Combined with measures in mid-February, Sunak’s total cost-of-living support package now stands at no less than £37billion, or a whopping 1.5% of GDP, all announced outside conventional budget statements.
For some, the main questions swirling around Sunak’s proposals are indeed about the politics of timing. Have these measures been delayed until Sue Gray’s report is released – shifting the partygate news agenda? If so, millions of households have endured weeks of worrying about government slot service bills.
It may be a question worth asking, but the more important consideration is how Sunak, beyond his windfall tax, will pay for these measures. The answer is definitely higher taxes, more borrowing, and perhaps even more money printing.
And that leads to other extremely important questions. By spending all this newly borrowed money, does Sunak risk fueling inflation even further, worsening the cost of living crisis he is trying to solve? What if the bond market rebels, demanding ever-higher interest rates to lend out that money?
As the Bank of England continues to raise the ‘base rate’ to fight inflation, already at its highest level in 40 years and rising, borrowing costs in the market are clearly set to rise .
As such, the temptation to restart our central bank’s virtual printing presses, using Threadneedle Street’s fictitious money in effect to buy public debt, will grow even greater.
After all, the Bank of England’s balance sheet has grown by no less than £450bn in 2020-21, with more ‘quantitative easing’ during the lockdown than in the decade following the 2009 financial crisis .