Jeremy Hunt: Why the chancellor wants this Budget to be boring

It will be something of a milestone for Jeremy Hunt to actually get to the point, on 15 March, where he can hold the famous red Budget box outside Number 11.

Incredibly, he will become only the second of the past five chancellors to perform this rite. The other was, of course, Rishi Sunak, now his Downing Street neighbour and prime minister. Three of Mr Hunt’s predecessors did not last long enough in their jobs to be able to hold an official Budget.

Given the tumult we have seen in the Tory Party recently, the message that Mr Hunt will want to send with that red box is one of stability. While the Treasury is happy with the progress in financial markets since Liz Truss’s mini-Budget – which sent financial markets into a tailspin and drove up mortgage rates – there are still some lingering hangovers from that period.

Mr Hunt’s first challenge will be to communicate the latest official predictions for the UK economy, which will be released by the Office for Budget Responsibility (OBR), the government’s independent forecaster, alongside the Budget.

On the one hand the current year will look far less malign than it did in the autumn. Falls in energy prices and government borrowing costs will mean a milder downturn, less immediate borrowing, and some scope for one-off giveaways.

But on the other hand, the Bank of England and the International Monetary Fund (IMF) have pointed to medium-term challenges facing the British economy.

The size of the workforce has not recovered from the pandemic, post-Brexit trade barriers have weighed on some parts of the economy and on investment, and the UK is especially sensitive to interest rates going up, after such a long period of them being close to zero.

So far, the UK economy has dealt with the simply awful energy shock sparked by Russia’s invasion of Ukraine far better than expected. This could be because some consumers have been supported by extra savings during the pandemic. Or it still might prove to be a shuffling of the pain into the future through rising credit card borrowing and other types of debt.

Still, it is the UK’s medium-term prospects that determine the path for taxes and public spending, and the tramlines for the financial debate at the next election. It is why the chancellor told me last month that he didn’t expect to have the “headroom” for a major new initiative on energy support.

Happily for many bill payers, support is expected to be maintained at current levels for three more months at the Budget, meaning a typical household would continue to pay £2,500 per year rather than this rising to £3,000 (although this level of support would not count as “major”). After that point it is unlikely further help will be needed as gas prices fall.

Longer term, the government is looking to boost UK nuclear power to increase energy security, and has said it will invest £20bn in carbon capture and storage over 20 years as part of net zero targets.

I would also expect a few billions of pounds in top-ups to public sector pay settlements, though this may not be a formal part of the Budget process. The government looks to be in settlement mode. As the former Tory union tsar Richard Balfe told me last week, that looks likely to involve pay deals for the current financial year, as well as for the new one starting in April.

The other big theme of the Budget will be to try to push policies aimed at getting Britain back to work. Mr Hunt wants more over-50s who have retired early to return to the workforce to help plug gaps. But he’s likely to use some carrot and stick. We could see more favourable tax breaks for pension pots, for example, but also an extension to the official retirement age being brought forward

Also expect to see some effort made around working benefits, and more of a push on childcare which will be a central theme of the Budget.

While we will get some warm words on tax cuts, the chancellor’s strategy indicates a preference for dealing with this at his Autumn Statement later this year. His priority right now appears to be to help with the issue of business investment, but only after the borrowing and economic situation is more certain.

And then there is the grand plan for the future of the economy. Mr Sunak would love the UK to be a science superpower deploying post-Brexit freedoms to return to high growth after a bumpy decade. The Northern Ireland Brexit deal has also cleared a pathway to smoother economic relations with the EU.

Chief Scientist Sir Patrick Vallance has been looking at pro-growth regulatory change in key sectors such as artificial intelligence, pharmaceuticals and green tech. Whether it will be enough to help the UK compete with major plans pushed by the US and EU remains to be seen.

Certainly the prospects of strategy will be welcomed by many in business. It is notable that Labour leader Sir Keir Starmer has been increasingly public about conversations with top foreign investors, who he says have been put off by political instability.

Getting to actually deliver an official Budget should not really qualify as an achievement for a chancellor. But that shows why next Wednesday will still be principally about economic, financial, fiscal and household stability.