On Wednesday 11th March, Chancellor Rishi Sunak will deliver his first Budget only 27 days after being appointed. The Chancellor will deliver his Budget as part of a Government with a strong mandate after its comprehensive election victory in December. We can therefore expect him to use this Budget to set an agenda for the next five years. It is neither a pre-election Budget nor against the uncertainty of whether we will leave the EU.
The Chancellor now has a chance to build for the future with public investment but the process cannot yield benefits very quickly and may be hampered if he decides to be constrained by the fiscal rules. He may be further constrained if he allows the economic downturn likely to result from the effects of the Coronavirus to limit his room for manoeuvre. It would be better in our view to scrap these rules and move towards plans to build up net worth in the public sector balance sheet rather the short-term agenda of balanced budgets.
This first section of this report outlines our view on the outlook for weaker economic growth. The second section provides a short overview of the issues raised by the current set of fiscal rules. The third section assesses the issues raised by the “levelling up” agenda and the fourth section examines the extent to which capacity can be augmented by public investment. The final section concludes.