Sunak’s Summer Statement – our take on what really happened today

By Oliver Foster

Wednesday 08th July

Few Chancellors will ever face the challenges Rishi Sunak has since he stood at the Dispatch Box in early March to deliver his first Budget. The fact that the Chancellor has emerged as a leading voice of reason and optimism in the Government, and has maintained his high approval ratings amongst the general public, is testament to his potential.

Today, he sought to consolidate his support by focusing on the levers this Government will use to drive consumer confidence and deliver extraordinary measures that will support, protect and create jobs.

The message underpinning this fiscal event was that we are now entering a new economic phase in the response to Covid-19. Although the Chancellor has spoken to the nation on multiple occasions outlining nationwide schemes to keep the economy afloat, this Summer Statement was as much a traditional exercise in retail politics as it was about the fiscal measures themselves. It followed the Prime Minister’s speech last week where he laid bare his ambitions to echo the post-war programme of FDR for the UK’s ‘New Deal’.

The Chancellor’s task today was to add further colour to that vision without mounting a full scale macro-economic response. Sunak’s Plan for Jobs continues along the same lines, offering unique incentives for employers and consumers to drive economic activity. The evolution of the support the Treasury is providing for furloughed staff could cost up to £9bn if all employers retain their staff until January. This is complemented by investing in training and skills, including a new £2,000 payment for firms to take on apprentices.

The Eat Out to Help Out scheme will grab the headlines but it’s actually the least expensive policy announced. The more audacious, and risky policies are those where the Government has ‘picked’ sectors’ to stimulate. The cut in VAT from 20% to 5% for the tourism and hospitality sectors could have the desired dual impact of protecting employer’s revenues and bringing down costs for customers. Meanwhile, the slash in stamp duty is a leap of faith in homeowners and potential buyers to stimulate the housing market – and thanks to some sensible pre-briefing around it, a better understanding of how much a healthy housing market has such positive knock-on impacts for the wider economy, through furniture sales, renovations and so on. It’s quite possible the results of this huge move could even lead to a permanent position on stamp duty, which ends up only affecting the more expensive properties.

The economic drivers of today’s statement are very clear, but we also must remind ourselves of the political drivers. Boris Johnson has five years to unite the coalition of voters that delivered his majority in December. His chosen Chancellor, and increasingly competent deputy, announced the second phase of the economic recovery plan speaking to the key components of the Conservative coalition: the new Red Wall Conservatives, the traditional Tories in the Shires and the suburban middle class.

It is still surprising to see a Conservative Government continue with such grand spending commitments. These are certainly not aligned with the prudent economic management associated with the party under David Cameron and George Osborne’s leadership. However, Boris – ever the opportunist and with little choice in the circumstances – is utilising the crisis to accelerate his reshaping of the Conservative Party.

In Rishi Sunak, the Prime Minister has a Chancellor that can communicate the details clearly. He has seemingly earnt the trust of the general public by maintaining a considered tone throughout this crisis. Today was no exception to that and he did not shy away from the harsh economic realities that are facing the country as he continued to tell the hard truths.

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