On February 13, 2020 he was – to most people’s shock – appointed Chancellor of the Exchequer. His first Budget came less than a month later, allocating just £12billion to dealing with something called Covid that few had really heard of, let alone understood. Less than a week later, the pandemic moved from a theoretical threat to a real disaster.
Sunak announced a jawdropping £330billion in support for businesses and the new furlough scheme.
Whatever he went into politics to do, it’s unlikely that as a self-proclaimed tax-cutting free marketer he envisaged becoming the Chancellor who, however compelling the reason, outspent even Labour’s 2019 manifesto.
It’s pretty clear that he was right to step in and marshal such huge sums on behalf of the state to protect the economy. By ripping up everything that had been planned, he made exactly the right call.
But one of the few things we know for certain in economics is that there is no such thing as a free lunch. In other words, someone always ends up paying. And that someone is us.
What that means is, on current plans, there will be an increase in National Insurance contributions from next month and a cash freeze in income tax thresholds, to be followed by an increase in Corporation Tax rates next April.
Taken together, this will increase the UK’s tax burden by 2 per cent of GDP (some £46billion).
As the Institute for Fiscal Studies points out: “Boris Johnson and Rishi Sunak have announced tax rises worth 2 per cent of GDP in just two years – the same as Tony Blair and Gordon Brown did in ten.”
But if Mr Sunak might once have thought that the return to something like normality after the initial intensity of the pandemic would give him and the economy some breathing space, Vladimir Putin put an end to that.
The invasion of Ukraine and the impact of sanctions have had a profound effect. In coming months – years, even – that impact is going to heighten.
And all this comes on top of a cost of living crisis that would, even without the impact on energy supply of the Ukraine crisis, have been a nightmare for many.
We may not depend on Russian imports, but the consequent surge in global energy prices matters to us.
According to the Centre for Economics and Business Research, inflation will hit 8.7 per cent next quarter and stay high until at least the second half of 2023.
The Resolution Foundation predicts that if gas and electricity prices remain at their current levels, the energy price cap next winter will be almost £1,000 higher than the already higher level of £1,971 to be introduced in April.
Martin Lewis, the guru of money advice, says things are now so bad he is out of ideas: “Just on energy alone, on a conservative estimate within one year, we’re talking about £1,300 in bills going up (by October). We’re going to have about ten million people in fuel poverty.
“We have a real, absolute poverty issue going to come in the UK, with food banks oversubscribed, and debt crisis agencies do not have any tools. As the Money Saving Expert who’s been known for this, I am out of tools to help people now.”
This is the background to Mr Sunak’s Spring Statement tomorrow.