Rishi Sunak’s second Budget was a masterclass in marketing and spin, as might be expected from a chancellor whose parliamentary speeches are accompanied by slick marketing videos.

Future increases in corporation tax mean reduced deficit forecasts, while a range of left-wing friendly measures such as a new national investment bank and a green mandate for the Bank of England amount to gesture more than substance. This combination forced Labour to respond with mixed messages.

Under the surface, the reality is big corporate cash giveaways alongside continued cuts to public services. In this sense, the Budget cements the cronyism of the government’s pandemic response. Even as austerity is replaced by a new kind of corporate Keynesianism, the Budget failed to reflect the catastrophe of the pandemic: there is nothing for health and nothing for our broken social care system – only more cuts.

This highlights an important new political dividing line. The argument will shift from austerity versus anti-austerity to a struggle over who benefits from the largesse of the state: big corporates or the social sector?

Despite the Budget marking a “return of the state”, Sunak chose to frame the budget – assisted by eye-wateringly unimaginative journalistic metaphor choices – in familiar terms: we need to ‘pay off debt’ accumulated during the pandemic. This framing is likely to persist, even as the underlying reality shifts, because it provides cover for ongoing cuts to health and social services.

The framing was cleverly set up: in the run-up to the Budget, The Sunday Times reported that Sunak was planning to close a £43bn “black hole” by raising taxes and cutting spending. Although the tax-raising measures announced by the chancellor came in well below this – short-run giveaways largely offset planned future tax increases which reach a maximum of £33bn in 2025-26 – tracing the origin of the £43bn figure highlights the ongoing danger of arbitrary targets being used as cover for cuts to public services.

The figure originates in a report by the Institute for Fiscal Studies (IFS) – a prominent research institute. The report argues that £43bn is the amount required to keep the debt below 100% of national income over the next 40 years. Putting aside the fact that forecasts over such timescales are largely meaningless, an obvious question is how the 100% target was selected.

The IFS report is admirably clear on this. It presents a scenario showing the fiscal tightening allegedly required to constrain debt to 80% of GDP, “approximately its pre-pandemic level”. The authors then observe that “there is no particular reason to require debt to return to this level, so we also show scenarios under which debt would remain at 100% of national income”.

It should be obvious that if there is no particular reason to require debt to return to 80% of national income, then there is likewise no particular reason to require debt to return to 100%. These are arbitrary targets, selected presumably because they are round numbers.

Despite the “money-saving” rhetoric, the substance of today's Budget is the continuation and expansion of pandemic-era spending: support schemes such as the furlough were extended again, alongside substantial new short-term cash giveaways for the corporate sector. For a two-year period, companies will be able to deduct 130% of investment spending from their tax bills: a cash handout of tens of billions of pounds.

Further down the line, from 2023, the chancellor has introduced a large rise in corporation tax, from 19% to 25%. The overall effect of the Budget is therefore to hand out cash to companies now, with the stated intention of clawing it back later on in the parliament.

This raises the possibility of a change in direction before the next general election in 2024: Sunak can enjoy inaccurate ‘paying down the debt’ headlines now (inaccurate because forecasts of the debt are largely unchanged by today’s announcements) but reverse or water-down corporation tax rises as the next election approaches.

This combination – corporate cash giveaways alongside austerity framing supported by arbitrary fiscal targets – is clever, because it provides cover for further cuts to government services. Sunak added to the cuts already announced in the November Spending Review, bringing planned cuts announced since March 2020 to £20bn by 2024-25. It is difficult to see how these planned cuts are feasible, given current strains on public services, and the backlog of cases in the NHS – but Sunak’s framing will allow him to squeeze as hard as possible.

A number of other measures were announced, none of which are likely to have a major impact. ‘Freeports’ are little more than glorified business parks; a green remit for the Bank of England sounds nice but is unlikely to have a significant impact; and the level of funding for the new national investment bank is far lower than required given the challenges of post-pandemic rebuilding and climate change.

Sunak's Budget was a sophisticated public relations exercise: austerity rhetoric, immediate corporate cash giveaways and a continued squeeze on public services all wrapped up in paper-thin, Green New Deal-friendly packaging.

Unfortunately, Labour failed to cut through the spin. The party’s leader, Keir Starmer, fell into the trap set by the chancellor, getting embroiled in an unnecessary row about corporation tax. This could have been avoided by supporting increases on the condition that they are delayed – the position the chancellor eventually settled on. By wrong-footing Starmer, Sunak was able to dictate the tone of media coverage.

If Labour is to compete in a world of Tory state activism, the party needs to raise its game. The chancellor needs to be held to account for corporation tax rises, given the likelihood that he will either reverse them, or introduce further offsetting giveaways ahead of the next election. Short-term spending would be better directed at public services and the care sector than corporate handouts.

The reality is that this was a cleverly marketed but unimaginative Budget that nonetheless marks an important change in direction for the Conservatives. State activism is back – Labour needs to be ready to respond.