Will Jeremy Hunt’s Budget event be as hideous as advertised?

Tax rises are seemingly on the way, but we knew that. What’s going on here is a classic softening-up exercise, writes James Moore

If he’s savvy, Hunt might create a little extra wiggle room for himself by clobbering the energy giants along with us too (PA Wire)

The drumbeat of negativity about what the government will need to do to put the UK's public finances on a more stable footing has been more or less constant ever since Liz Truss yanked the government gear stick into a hard reverse and invited Jeremy Hunt to jam the throttle into the floor.

“Treasury warns of tax rises to fill financial hole,” is in the headlines, pumping up the volume with the government’s fiscal event looming later this month. “Treasury sources” have told multiple outlets that across-the-board tax hikes are “inevitable”.

“It is going to be rough,” they reportedly said. Needless to say, spending cuts are also on the table.

The department has not put a figure on the fiscal black hole facing the UK, but the BBC tells us that it “may be at least £50bn”. That is a post-Halloween horror that you’d have to hire a John Carpenter to direct were you to put it on screen.

But hang on a minute. How is that even news? We have known that are going to be tax rises for some time now, ever since the now-former PM realised that she had no choice but to act with the UK economy falling apart around her.

The appointment of Hunt, and the promise of a new fiscal event, made them certainties, not least because there is precious little fat left in the public services to trim beyond slashing investment spending. Unless, that is, you’re going to, I don’t know, start charging parents a tenner a day to send their kids to school?

Every media outlet worth their salt has reported some variation on the same theme and more than once. I suppose you could argue that coming from an unnamed “Treasury source” gives this particular intervention added significance. Except, it doesn’t.

What’s going on here is a classic softening-up exercise. Let’s be clear here, we should expect such stories and commentators regularly fall for this sort of thing. Before you ask, I’m not denying that I might have been guilty in the past. There is more than enough navel gazing done by the media but even so, we might at some point want to ask ourselves whether willingly playing along with such government games is the best we can do for the public.

Here’s what we know. Since the Hunt-instigated hard reverse on the Truss policies, things have got a little easier. Gilt yields have declined because the Tories did the sensible thing and elected the vaguely competent Rishi Sunak rather than going for a retread of Johnsonian chaos or rolling the dice on the untested Penny Mordaunt.

They also declined to offer the choice of leader to – using a well-known phrase – the “swivel-eyed loons” that make up the modern Tory Party membership, having definitely taken note of what that membership did last time (Truss) and, if we’re honest, the time before that ( Boris Johnson).

Sunak might be only vaguely competent because, well, have you been watching Suella Braverman lately? It was Sunak who installed her as home secretary, apparently as part of a sop to the party’s right, with depressingly predictable consequences.

But even with Braverman, Sunak is better than what went before. As a result, he has managed to reduce the “idiot premium” international investors were demanding to lend to Britain simply by standing outside No 10 and waving as prime ministers are wont to do. They feel more confident about putting their money down, which has lowered Britain’s bills. That there is something we haven’t seen a lot of in recent history: solid, unalloyed good news.

The pound has also recovered. A bit. It’s still a weakling in international terms – which makes the job of controlling inflation more challenging. We can expect some genuinely bad news on that front. But perhaps not as bad as had been feared. The Bank of England has lately been talking down the peak of interest rates. A full 1 per cent rate rise was being discussed at one point. The City is now pencilling in 0.75 per cent.

Don’t get me wrong, that’s a big jump and it is going to hurt people with mortgages. But the point remains, we were looking at worse.

Back to fiscal policy and spending. Hunt is going to clobber us, that much is still true. But when he does, the idea is that we will be left saying something like “phew, that wasn’t as bad as we thought, now was it”.

If he’s savvy, Hunt might create a little extra wiggle room for himself, and blunt Labour’s attacks while he’s at it, by clobbering the energy giants along with us (another reversal of Truss) too.

BP has just reported another absurdly bloated set of profits, announced yet more share buybacks, and generally made a marvellous case for itself as the unacceptable face of capitalism. It isn’t just that the revenue from an energy company windfall tax would come in handy. It would be wildly popular and the government could surely use some of that.

We’ll see. Otherwise, take note. What is going on here is an old game governments like to play ahead of big fiscal events – and it is one that we should all be aware of.