New PM Rishi Sunak (Beresford Hodge/PA)
(Picture: PA Wire)Rishi Sunak is set to become the UK’s next Prime Minister. His focus will no doubt be on balancing the books and, while he is right to restore the public finances to good health, he should not do so at the expense of the most vulnerable and should still go for economic growth.
Sunak’s first challenge will be restoring confidence in the UK’s economy. The very fact that he is set to become Prime Minister should reassure the markets and he can build on this by immediately announcing that he intends to keep Jeremy Hunt as Chancellor. Going forward he should confirm that there will be a full statement on the nation’s finances on October 31st accompanied by a forecast from the independent OBR where he will commit to reversing the fiscal policies set forward in the so-called mini-budget. He should also look again at the support package to deal with high energy costs and instead think about introducing a more targeted scheme which focuses on helping low income households.
Although it will be deeply unpopular with Tory voters, he should also take a look at the pension triple lock. Although it is right that we look after the elderly, the books should not be balanced on the backs of younger working people. Sunak should ensure that the poorest pensioners (alongside other benefit recipients) receive an increase in line with inflation, this should not be the case across the board.
Sunak will no doubt face pressure to slash the foreign aid budget in order to save money. This would be a mistake. The UK should stand by its commitment to the poorest people in the world by maintaining spending on international aid at the current level. Not only is this good for the planet’s poorest people, it also helps bolster the UK’s international standing.
Truss made many mistakes in her short spell as Prime Minister, but she was right to focus on economic growth. Sunak should go for economic growth but do so in a fiscally responsible way. Truss’ major error was to pursue growth through fiscal policy when what was needed was major structural reform to the economy.
The first step should be liberalising the planning system. The country is in desperate need of more homes, offices, science labs, nuclear power plants, wind turbines, solar panels, and transport infrastructure. Sunak should do whatever it takes to ensure that we get far more of all these things.
The country also needs far more immigration. Post-Brexit the UK has a relatively liberal system when it comes to high-skilled immigration, but this is not the case when it comes to low-skilled workers. Sunak needs to open the borders and allow people from all over the world to come and work here.
Both liberalising the planning system and increasing immigration will likely be deeply unpopular, especially with Conservaitve MPs. However, they are the two measures most likely to bring about economic growth without actually costing the government any money.
Sunak needs to balance the books while also supporting the most vulnerable and bringing about economic growth. To do so he needs to be fiscally conservative, provide targeted support for the very poorest, and implement radical supply side reforms.
