Nothing has changed– that was the message Rishi Sunak sought to convey this afternoon, following the Bank of England’s interest rate hike. Speaking to journalists at one of his ‘PM Connect’ events in Kent, Sunak repeatedly emphasised his determination to battle inflation. ‘Rooting out inflation is not easy, requires difficult decisions, and it doesn’t happen overnight’ he warned, adding that ‘I am absolutely confident that if we hold our nerve and stick to our plan, we can halve inflation.’
That goal was once thought to be the most achievable of Sunak’s five pledges; increasingly it looks like one of the hardest – something the Prime Minister himself conceded earlier today at the Times CEO summit: ‘It’s clearly become more challenging, it’s clearly become harder, but we’re throwing everything we have at it’. He made another plea for restraint in public sector pay negotiations, in a potentially ominous sign for the teaching unions. ‘I’m not going to deviate from the course we have’ he said. ‘Public sector pay settlements have to be affordable, they have to be responsible.’
But the most interesting thing the Prime Minister said today was on taxes: namely they aren’t coming down any time soon. ‘Borrowing lots of money to do things that sound great isn’t the responsible approach’, said Sunak. ‘We cannot in a situation like this borrow too much money because that makes everything worse.’ Asked whether there is a ‘zero chance’ of tax cuts this year, he retorted that halving inflation is the ‘biggest tax cut we can deliver.’
Sunak’s staunch refusal to embrace tax cuts – or even talk up their prospects – is a marked contrast with Boris Johnson, who promised much on this but delivered little. Sunak fears that tax cuts would further stimulate an economy which is already running ‘too hot’ and that even to talk about them would be irresponsible: both for the financial markets, looking for reassurance from the government, and for his own party, weary of broken promises.