The Rishi Sunak and Boris Johnson double act can be a powerful political weapon for the Tories

Rishi Sunak’s second Budget was unusual in that he did not produce the traditional good news rabbit out of the hat. Knowing the Budget day headlines would be about his tax increases, the chancellor pre-announced his feelgood measures, spreading the jam over the previous five days.

He thought his rabbit was his eight freeports but that is an old idea rather than one for the “new economic future” he outlined, and more like a tiny mouse.

Since last Friday, I counted 18 Treasury press releases with pre-announcements in my inbox. Having covered every Budget since 1982 from my ringside seat at Westminster, that feels like an all-time record. No wonder the speaker Lindsay Hoyle quipped just before Sunak’s statement: “I think I already know most of it.”

Even the two tax rises he held back until Budget day had been widely speculated about in advance. Corporation tax will rise from 19 per cent to 25 per cent in 2023. A pill delayed, and sugared by generous tax breaks – namely investment allowances of 130 per cent. Crucially, this sweetie will last for only two years while the extra corporation tax revenue will be permanent.

The other increase is the freeze in personal tax allowances from April next year. The chancellor argued this was “progressive”, though it would have been fairer if he had raised more from higher earners than those with a taxable income of £12,570 who will be brought into the tax net. It would have been more “honest”, to use Sunak’s favourite word, to have raised income tax rates.

The official reason for not doing so is Boris Johnson’s refusal to ditch the Tories’ 2019 election manifesto pledge not to raise the rate of income tax, national insurance or VAT. That did not stop the government breaking the manifesto promise to spend 0.7 per cent of gross national income on overseas aid. It is worth noting that this £4bn cut announced last November took effect immediately, along with the pay freeze for many public sector workers – unlike today’s deferred tax increases.

The dog that didn’t bark was the likelihood of other tax rises. The Treasury has its eyes on capital gains tax and tax relief on pension contributions. Its borrowing forecasts do not on the face of it imply further tax rises, though they do imply very big amounts will be raised by the changes to corporation tax (£47.6bn over five years) and tax allowances (£19.1bn by 2025). The Office for Budget Responsibility (OBR) is more upbeat than it was last November but its Budget analysis suggests a squeeze on public spending that might cast doubt on Johnson’s claims that austerity is over.

The squeeze will be compounded by the need to build resilience into the health system, tackle demographic pressures and reform social care –the latter again a glaring omission from the Budget, along with Sunak’s stubborn refusal to fully compensate low-income people who self-isolate during the current pandemic.

Left to his own devices, Sunak, a fiscal conservative, would probably have announced more delayed tax rises now. But Johnson is a big spender. He will always prefer to put off a difficult decision until another day, as we have seen up close in the Covid-19 crisis.

One question is whether Sunak has pinned Johnson down to more future tax rises or merely secured a vague pledge of action not this day but later. Johnson has a (deserved) reputation as someone whose nods, winks and hints are not bankable. Ever the optimist, Johnson will be tempted to wait and see whether growth can fill more of the hole in the public finances.

The Budget reinforces the impression that Sunak wants to administer the nasty medicine of tax increases as soon as possible (without harming growth) so he has room to cut taxes just before the general election the Tories have pencilled in for mid-2024. Sunak said at the weekend he did “not recognise” media reports that he had dangled the carrot of pre-election tax cuts in private meetings with Tory MPs. But backbenchers certainly recognised them because they were there. They believe such tax cuts would wrongfoot Labour and redraw the traditional dividing line between the parties.

In his immediate Commons response to the Budget, Keir Starmer duly accused the chancellor of basing tax decisions on the “electoral cycle” rather than the “economic cycle”. Starmer has a point, though governments of all hues do it. Labour claims the Tories are “playing politics” might cut little ice with many voters.

More bad news for Labour: some senior Tories believe the Johnson-Sunak combination can offer the country the best of both worlds. It could be a powerful combination. The chancellor can promote the fiscal responsibility he believes has won the Tories the last four elections, reassuring long-standing Tory voters and the financial markets. Johnson, playing the soft cop, can use his optimism and boosterism to appeal to the working class voters he attracted in 2019.

However, the biggest danger for the Tories that many of those new voters do not benefit from the recovery Sunak promised and remain “left behind”.