Kuenssberg: The budget cannot hide major changes in our economy

In normal times (remember those?) there would be frenzy this weekend about what comes up in next week’s budget.

If it feels a bit muted so far, it’s not just because of a bit of media frenzy over something else (what could it be?) but because Jeremy Hunt was brought in as a “calm” chancellor – brought in as a calming manager with many years of experience in a sensible bank to fix things after some crazy young guns spent all the loot.

Given how he got his job and his political nature, he’s not going to wake up Wednesday morning and spring a red box full of massive shocks on an unsuspecting public.

A senior Conservative MP is hoping for a few “pleasant surprises” but notes that Downing Street neighbors’ priority is to “hold on to their reputation for caution and prudence”.

Expect headlines that the country is less in the red than expected, a possible giveaway on retirement savings and some goodies to help working families with skyrocketing childcare costs – you can read Faisal’s primer here.

But when we sit down to our program this Sunday with Jeremy Hunt and Labour’s Rachel Reeves – who is hoping to fill her job – there is so much more to talk about than what comes on Wednesday.

No budget can hide some big shifts in how the economy works – or may not work for many voters. Long-term changes in wealth and wages help influence how we all vote.

Statistics in the last few days suggest that the economy is not in as bad trouble as predicted a few months ago, but what has happened over the last few years and possibly coming next is not pretty.

To put it bluntly, the economy has not managed to grow convincingly for a long time, and there will be no strong increase anytime soon. In fact, the Bank of England expects growth to be paltry in the coming years as well, only returning to pre-Covid levels in 2026.

Politicians are not short of explanations for what has gone wrong – some self-inflicted, some beyond their control.

There has been the Ukraine war, the pandemic and the disruption of Brexit. We’ve also seen years of political strife, the markets’ disastrous response to Liz Truss’s decisions, the effects of a spending squeeze in the 2010s and even the lingering hangover from the financial crisis of 2008. Remember pundits swinging “L-shaped” graphs during that time – and warned that it would take years for the economy to climb back to something strong?

These political and economic dramas have had real-life consequences, presenting enormous challenges to what politicians years ago presented to voters as normal, achievable aspirations – the hope and expectation that each generation would do better than the last . Maybe it’s jarring now.

Take, for example, this statistic from the Institute for Fiscal Studies: In 1997, more than 60% of middle-income earners between the ages of 25 and 35 owned their own home. Twenty years later, that figure had dropped to just over 20%.

Think about that for a moment – it’s a profound change. There is, of course, a blizzard of statistics, and every year, every budget, there are movements up and down. Think how influential Kwasi Kwarteng’s short time in the red box at No 11 Downing Street was.

But let’s look at the big changes that have been underway over a longer period.

For years wages have been sluggish and growing more slowly than wealth. Paul Johnson, economist and director of the IFS, says a “significant fraction” of people in their 20s and 30s earn less than their parents at the same point in life.

It is more difficult to buy a house. It’s more expensive to rent one if you can’t afford to buy. For decades, what your parents passed down became less important to your chances of prosperity. It appears to have gone the other way and could have huge consequences for our political choices.

It has given Labor leader Sir Keir Starmer ammunition to suggest that that covenant – the “social contract” with the public that you get back what you put in – under the Conservatives has frayed.

“Hard-working families”—the nebulous group so beloved of successive generations of politicians whose votes could swing if only the right solutions could be dangled in front of them—are likely to work harder and also feel that life is harder.

Add to this the pressure of an aging population: fewer people in the workforce pay taxes, live happily longer, but require more money for health and care.

The two main political parties share a desire to make the economy grow strongly. It is not abstract – if the economy is not growing and the government needs more money for e.g. health or defence, ministers must either borrow, raise taxes or cut spending. These are not ideas parties like to put on the front of leaflets, pulpits or Facebook ads.

The problem for the Conservatives is that they themselves disagree within the party about how it should be done. Former Prime Minister Liz Truss’ judgment was to cut taxes and borrow to do it, which ended in disaster.

Although Jeremy Hunt and Rishi Sunak promised radical tax cuts when they were vying to become Tory leader, neither says now is the right time. There will probably be hints on Wednesday and promises of tax cuts, but it is unlikely that they will be pushed back to cut now.

We’ll hear more from Rachel Reeves on Sunday’s program about how Labor would spend billions trying to create thousands of jobs and get growth going by supporting green industries. But there may also be tension for Labor promising massive government intervention in the industry while promising to watch every penny.

Rishi Sunak has calmed jittery Tory brows in the past few weeks with a frenzy of activity, fewer cabinet leaks and hints that the economy may not be in as bad trouble as previously thought. His calm chancellor, Jeremy Hunt, calmed the manic financial markets when he took over. But Labor has been solidly ahead in the polls for months and shadow chancellor Rachel Reeves has carefully built her reputation for credibility and struck a chord with business.

What happens with our wallets makes a huge difference to what happens at the ballot box. There is enormous pressure on both major parties to address the major shifts in how we live our lives as individuals and as a country.

It’s not just about what happens this Wednesday, but who wins far bigger arguments that affect us all in the months and years to come.

We will ask Mr Hunt and Mrs Reeves the big questions of the morning and maybe also talk a bit about what’s going on at the BBC.