What is Rishi Sunak’s ‘summer economic update’?

Prepare for an official reckoning of the vast cost of the Treasury’s support for jobs and businesses during lockdown, writes John Rentoul

The chancellor faces his biggest challenge since landing the role (Getty)

Everyone has completely lost track now, because the annual Budget was moved from spring to autumn in 2017, when Philip Hammond had two Budgets. He then had a Budget in October 2018, but there was no Budget last year because of the election, so Rishi Sunak, the chancellor, delivered a post-election one in March this year.

It was overtaken by the coronavirus crisis as it was being delivered, and Sunak followed it up with three fiscal statements, of increasing drama and scale, over the next few days. So what is happening on Wednesday, after prime minister’s questions, is not called a Budget, but it is another Budget. The usual Budget remains pencilled in for the autumn (although in the past the Treasury’s definition of the season has stretched to early December).

This week’s statement is called a “summer economic update”. In other words, an interim Budget to adjust spending plans and taxes as the emergency coronavirus measures start to be wound down.

Even though the statement is not formally a Budget, Sunak will have to set out the latest forecasts for the economy, which will be the official reckoning of the vast cost of the Treasury’s support for jobs and businesses during the lockdown. And the chancellor will set out the next stage of the government’s plan to get the economy back to something close to normal.

Boris Johnson set out the themes of the government’s approach in his “build, build, build” speech last week. He said the Treasury would bring forward £5bn of capital spending on hospitals, schools and transport. He announced that he and Sunak had set up Project Speed to cut red tape and relax planning rules to “get things done”. But he also set out plans for an Opportunity Guarantee, “so that every young person has the chance of apprenticeship or an in-work placement”.

Sunak will no doubt set out the details of this and other schemes designed to respond to rising unemployment. He is expected to announce the recruitment of more job centre staff and more funding for careers advice.

The big decision on Wednesday will be whether the chancellor agrees with the Labour Party that the furlough scheme should be extended for sectors that continue to be badly affected by the lockdown – the aviation industry in particular. But the prime minister did warn in his speech: “We know in our hearts that the furloughing cannot go on for ever.”

Sunak has been besieged by advice: to cut VAT to encourage spending; to cut employers’ national insurance contributions to encourage hiring; to subsidise high-tech environmental jobs to encourage a “green recovery”. He is also under pressure to bail out local councils, many of which risk going bust, not to mention to provide more money for the NHS, schools, and further and higher education.

So far, Sunak has been riding high in the opinion polls, having delivered a vast and complex support scheme to try to preserve jobs, which he did with poise, having been promoted unexpectedly to the job just three weeks before the coronavirus crisis struck. He started to wind down the furlough scheme a few weeks ago with a careful announcement that kept the opposition and the Trades Union Congress on board.

But on Wednesday he is likely to have to announce some tough decisions that will start to test his durability in a more unforgiving political climate.