Chancellor Rishi Sunak’s Budget confirmed the sea change in British politics, apparent since the general election of 2017, that the era of austerity has drawn to a close.
Ever since Boris Johnson became prime minister back in summer 2019, this has been a Conservative administration committed to consistent spending increases. The 3% average annual spending increases over the next three years, totalling £150bn, are lower than the 4% average increases under New Labour, before the financial crisis hit. And they are nothing like enough to repair the damage done by ten years of Tory austerity, as the Institute for Fiscal Studies shows on the graph below.
Nonetheless, the increases are real. Alongside Sunak’s longer-term ‘fiscal rules’, they show that the new consensus in British economic policy looks strikingly close to Labour’s economic programme of 2017. Labour’s ‘Fiscal Credibility Rule (FCR)’ then offered a rolling target for day-to-day spending to match taxes inside of five years. It allowed borrowing for capital investment – spending on things like new railways, or research. It had a target for debt to GDP to fall at the end of Parliament. And it had a knock-out rule so that, in a deep recession, the whole FCR would be suspended to allow the government to spend as much as was needed to stabilise the economy.
