Borrowing lots and spending big: but is Rishi Sunak’s economic package cutting through?

Chancellor Rishi Sunak talks to Deputy Editor Anushka Asthana about Lord Geidt, partygate and whether or not he's gunning for the PM's job

One thing that was clear when I travelled to Nottingham to interview Rishi Sunak - was that the Treasury is worrying about its efforts to tackle the cost of living crisis not cutting through.

The event- a “Treasury connect” - is part of a series in which the chancellor tours workplaces (this was Boots’ HQ) to take questions from workers at all levels about the current squeeze.

It’s been clear at some that folk don’t know about the payments coming their way.

That’s making the Treasury nervous because the measures are costing an absolute fortune - and require hefty borrowing - hardly typical Tory fare.

In fact, one Conservative MP accused the chancellor of throwing red meat to socialists.

Given that Mr Sunak is doing something quite different to what he’d like to do as chancellor (in ordinary times to be fair) he at least wants to get the credit.

But the challenge he faces is that however much the government does (and most would agree that the latest package does go fairly far), it is never going to be enough in the face of what we’re seeing: brutally painful, spiralling inflation.

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Even covering the full rise in energy costs for the poorest families can’t protect them from everything.

And for those just outside means tested benefits - who do not qualify for much of the money (though will get the universal £400) - things couldn’t be more painful.

Food prices are rising, it costs more than £100 to fill up your car, and to try to fix it we’re also now facing higher interest rates.

When I asked Mr Sunak if John Lewis’ boss, Sharon White, was right to say the cost of living crisis is just as serious as Covid - he said, no they are “different” - arguing that you can’t compare a global pandemic that resulted in the entire economy being shut down to the current impact on prices.

But nor would he say this was a less serious period for the country.

Overall, Mr Sunak wanted to stress the money already spent - £37 billion which includes cash payments to millions.

But his claim (that aims to reassure those on the right) that this spending splurge is temporary is unconvincing when you consider what is coming down the line.

If inflation hits 11%, will he really not spend more in early 2023 - when the winter months bite and people are struggling to heat their homes?

And will he really reverse the 5p cut in fuel duty? I’d bet good money that he won’t- and when I asked him, he pointed to the last two years and made clear he was prepared to intervene heavily again.

On tax cuts - he wouldn’t be drawn on when they would come - including whether an income tax cut due in 2024 could be brought forward. The suggestion that he thinks it could be inflationary - doesn’t rule out other options- like VAT - that could be less so.

He quickly stressed the amount already spent - but it was clear he knew the crisis would remain. And his attempts to tackle it leave him in a position I doubt he would have chosen - borrowing lots of money, and spending it, not typical for a Tory chancellor.