Rishi Sunak has a chance to prove himself in this week’s mini-Budget

On Thursday, Jeremy Hunt will continue where Rishi Sunak left off before he was rudely interrupted by Liz Truss’s meteoric government – using meteoric in its true sense of burning brightly and briefly before falling to earth.

When Sunak as chancellor last presented what was in effect a Budget, in May, he announced help with energy bills: a bit for everyone, a little more for people paying council tax in bands A to D, and a cash payment for those on benefits designed to cover the whole of the average expected cost.

Since then, a lot has changed. He resigned; Boris Johnson fell; politics was in turmoil. Meanwhile, the energy crisis became much worse, meaning that by the time she became prime minister Truss had to announce a vast government subsidy to freeze gas and electricity bills. That unfunded and uncosted spending destabilised the public finances, already under pressure from her campaign promises to reverse Sunak’s tax rises. She and Kwasi Kwarteng, her chancellor, then destroyed their government by cutting taxes by even more than she promised, causing a meltdown in the financial markets.

She U-turned, sacking Kwarteng and reinstating next year’s rise in corporation tax and then, the day after declaring that she was a fighter not a quitter, she decided that she was a fighter and a quitter.

Now politics has slowed down again, as Sunak and Hunt apply the calm balm of Bipartisan Reasonableness, restoring everything that Truss tore down and taking their time over the next fiscal event, officially called the autumn statement but in effect another Budget – a Budget for Putting Things Right.

This is undoubtedly a big moment. One of the reasons Sunak delayed the Budget from its original Halloween deadline was that he wanted to get it right. (The other reason is that, the longer he waited, the more time he gave the markets to settle, and the fall in long-term interest rates made it easier to produce a five-year forecast that showed debt falling as a share of national income.) Sunak and Hunt cannot afford unexpected problems to derail the presentation of what is in any case a difficult Budget to sell. The markets and most economists are likely to welcome a Budget that returns from what Michael Gove called a “holiday from reality”, but the political problem is that voters like holidays and they dislike the tough choices forced on them by reality.

Sunak’s calculation is that people will accept difficult decisions as long as they think that the burden is being fairly shared. That is why most of the options being considered for the Budget are tax rises that fall more heavily on the better-off. The main “stealth tax” will be the failure to raise tax thresholds in line with inflation, which drags more income into the tax net. Although this means some low-paid people will pay tax when they would otherwise have escaped, the overall effect is to take more money from the higher paid.

When the Budget documents are published, we can be sure of one thing: that the “chart of everything”, which shows the effect of all measures together, will show that the rich are losing more than the poor as a share of their income.

That will make it difficult for Rachel Reeves, the shadow chancellor, to respond. She and Keir Starmer are desperate to paint Sunak as a right-wing Tory, hell-bent on squeezing public spending for the sake of an ideology of the small state. In my conversations with people around the leader, they refuse to accept that Sunak is a compassionate, one-nation Conservative – but their evidence that he is right wing consists of Suella Braverman, his support for Boris Johnson’s hard Brexit and his tone-deaf spring statement in March.

This last was certainly a mistake, when Sunak failed to provide additional help to people on benefits hit hard by inflation. It confirmed that Sunak is a politician of erratic judgement, reinforcing the impression given by his Budget in October 2021, when he raised taxes and cut them at the same time, devoting the first half of his speech to the need for prudence and the second half to Trussian fairy tales. But what was significant was that he corrected the error of the spring statement two months later, announcing more generous help with energy bills, partly paid for by a windfall tax, which Labour had advocated.

Despite Brexit (which is ambiguous in left-right terms) and Braverman (which is little to do with economics), there is a strong case to be made for Sunak as a centrist – and it is certainly what a lot of his opponents in the Tory party believe, denouncing him as a “socialist” in hock to charts showing the redistributive effect of fiscal measures.

That gives Labour a problem in trying to frame the Budget as a conspiracy to grind the faces of the poor. Apart from tinkering with trivial sums, such as VAT on private school fees and ending tax breaks for non-doms, the Budget will be essentially what Starmer and Reeves would have done in the government’s place.

Labour will try to have it both ways, condemning the Budget as a new era of austerity without specifying where they would spend more and how they would pay for it. It shouldn’t work, but it probably will, because Starmer and Reeves have done such a good job of presenting themselves as an unthreatening and competent alternative.

More outrageously, Labour might be tempted to argue that Sunak and Hunt are pushing Britain further into recession, raising taxes and cutting spending at the wrong time of the economic cycle. They shouldn’t get away with that either, because we have just had a real-world experiment that should have demonstrated beyond reasonable doubt that cutting taxes and raising spending is a bad idea when the public finances are in such a perilous state.

A more plausible-sounding variation of that argument is that the Conservatives’ economic record has been poor because growth has been low over the past 12 years. It has a surface appeal, which is why Truss used it against the government of which she had been a member in the Tory leadership election, but it is no guide to the policies that ought to be pursued to increase prosperity.

The most convincing ways of raising productivity are to increase private-sector investment and to improve education, which are difficult long-term challenges, and on which Sunak has just as much chance of making a difference as Starmer.

Labour’s attacks on Sunak might just work, however, simply because the Conservatives have been in power for too long. The prime minister might do everything that the markets and the opposition demand of him, and he might even do it in a competent and measured way, striking the best of a difficult balance between protecting the vulnerable and getting borrowing under control, but find that the mood for change has cut the ground out from under him.

That said, the situation is different from that of 1995, two years before the last time Labour came to power. Labour starts from a much lower base, with a less inspiring leader up against a more inspiring one. If Sunak and Hunt can get it right on Thursday, they give themselves a chance of producing the most extraordinary result at the next election: a fifth consecutive election victory.