Imagine yourself, if you can, in the shoes of Sir George Carew, Henry VIII’s Vice Admiral and captain of the great warship, the Mary Rose, as it lurches out of Portsmouth in July 1545 into a blowy Solent to take on the French Navy. You know the ship is unstable following a botched redesign. Your monarch has insisted a lot more heavy cannon be brought on board. And the crew are mutinous. You fear the worst.  

Rightly so. A few minutes later, after a broadside, the ship slowly topples over and disappears beneath the waves, along with you and most of the crew.  

I think Chancellor Rishi Sunak must have felt rather as Carew did when preparing his Spring Statement. The British ship of state is also in choppy waters. Already bloated and fragile after the Covid pandemic, it is nevertheless asked to take on new task after new task, from policing supermarket displays to new social care responsibilities. It sits lower and lower in the water, each redesign making things worse not better. The forward momentum slows and manoeuvring becomes more and more difficult.  

Given the unenviable task of steering this lumbering behemoth, the Chancellor last autumn took a stand. If new tasks and new spending were to be imposed on him, then there would have to be new taxes to pay for them. The social care levy, the frozen tax thresholds, the corporation tax increases – only this new fiscal armament would keep the British state seaworthy for the future.

Yet the economic gales from Ukraine have proved even stronger than he thought. His Spring Statement shows he realised that the extra fiscal measures, far from helping, endangered the whole ship. It was too risky to plough on as planned.

Speaking to the Commons, he was very clear about the storms we were facing, but couldn’t bring himself to take the obvious step of reversing last year’s tax and national insurance rises. But some lighter fiscal measures in the form of NI thresholds and fuel duty were thrown overboard to steady the ship. And more tax cuts were promised as soon as the current turbulence was over and smoother water reached. 

He also, rightly, resisted the pressure to protect everyone in the country against every unwelcome economic reality. Apart from the fuel duty cut, people would have to deal with the reality of energy costs. There would be no windfall taxes and no new spending programmes. 

All of this is enough to stop the ship listing too badly and to sustain some forward momentum. But the underlying problems remain. The British state is doing too much and a lot of it badly. The tax burden is at its highest since the Attlee government. Spending is at its highest on a sustained basis since the 1970s. That’s not an environment that supports economic growth. 

The Chancellor was cautious, but not as cautious as he could have been. Good. Arguably the main danger in this extraordinarily uncertain environment is not in taking a risk for growth but in paying too much regard to Treasury orthodoxy – from insisting on fiscal consolidation too early, from not believing in the power of economic growth to increase the size of the economic cake. 

The correct way forward is a different one: to get onto a new path, to hold the tax burden down, force the necessary difficult choices on spending, and boost growth. 

That means a fundamental redesign of the British state. Between now and the autumn Budget, I would like to see the Government develop a credible plan to reduce the size of the state to the levels of successful countries such as Switzerland or Australia over the long term: to simplify and cut taxes, to trim spending, and (as the Chancellor noted) to encourage investment, R&D, and skills. Then the Government needs to argue for it and defeat those who say that only an ever-enlarging state will do the job. 

This is how to deal with cost-of-living problems sustainably – boost growth, let people keep more of their own money, and build an effective state that can do the tasks placed upon it. That is how Rishi Sunak can make us best in class and admired by the world – and transform our ship of state from the Mary Rose into the Cutty Sark.