The Chancellor will stand up to deliver the next Budget on Wednesday, March 3, with a mind-boggling array of problems before him.
After 10 years campaigning for financial discipline in the wake of the financial crisis, the Conservatives have suddenly found themselves presiding over the biggest borrowing binge since the Second World War.
So far, Rishi Sunak’s rhetoric has remained cautious, indicating that the long battle against the deficit of the credit crunch has left its mark on the occupant of 11 Downing Street.
In his spending review in November – before the latest wave of Covid-19 really took off – the Chancellor warned this year’s bumper borrowing was only possible “because we came into this crisis with strong public finances”.
“We have a responsibility, once the economy recovers, to return to a sustainable fiscal position,” he said.
Back in October, he called balancing the books a “sacred duty”.
Potential tax hikes have been mooted on fuel duty, corporation tax and even extra charges on the self-employed.
Mr Sunak has made clear the Budget will focus on “the next stage” of the response to Covid-19, which has worsened since November, though the vaccines offer hope of reopening in the foreseeable future.
So will he open the spending taps even further, or tighten the purse strings?
The Chancellor is expected to announce plans to raise the rate of corporation tax from 19 per cent, though the timings and end target for such a move remain unclear.
There has been widespread speculation the rate could rise to 23 per cent or even as high as 25 per cent, which would likely still be the lowest rate in the G7.
Treasury sources have been quoted pointing to the fact Joe Biden’s treasury secretary has indicated she wants America’s corporation tax to rise from 21 to 28 per cent.
The increase could start later in the year or early next year if the Chancellor pushes to delay changes with the economy still in a freeze from the Covid-19 lockdown.