WHAT can we expect from Chancellor Rishi Sunak’s Spending Review on Wednesday? Actually, Mr Sunak has been conducting a Treasury fan dance over the last week or so, as he tries to deflect attention from the PM’s serial gaffes. So, we know there will be £3 billion extra for the English NHS and a likely public sector pay freeze. Not to mention a change to investment rules to shift more money into the English regions. But what is the Chancellor really up to politically?

Rishi Sunak is a former banker (Goldman Sachs) and made his personal millions as a hedge fund manager, aka financial speculator. It is rare for City types to end up running the Treasury – perhaps because they prefer to make money rather than prattle at Westminster. Not that the bankers aren’t around Parliament a lot. As a member of the Treasury Select Committee, I had to fend off armies of bankers and their PR poodles trying to get MPs to do them a favour.

Sunak is different. He wants power as well as loot. He is also clever. His splashing of cash has made him the darling of the Tory backbenches, just as Boris flounders. No-one ever accused the Prime Minister of mastering his brief or attending to detail. Boris lets others do the work. But the PM’s obvious inadequacies – witness his hapless undermining of devolution just as the Scottish Tories were about to hold their conference – suggest he will not be around all that long. Something our very ambitious Chancellor knows only too well.

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But Sunak’s career prospects aside, what does the Chancellor plan for the economy and the budget? The latest numbers published by the Office for National Statistics in advance of Wednesday’s formal statement show that the National Debt has rocketed to £2,060bn. That’s £31,000 each for every woman, man and child in the kingdom. Notional borrowing for last month alone was £22.3bn. Result: expect Sunak to take back with one hand what he is giving away with the other. Maybe not now but certainly after the pandemic crisis is over.

The Chancellor has already been laying down markers. He told a Sunday newspaper that “once we get through the crisis, we’ll have to figure out what the best way of returning to sustainable public finances is”. The phrase “sustainable public finances” is code for spending cuts, which Sunak says could start as early as the spring.

Superficially, this seems commonsensical. After all, how can you keep adding to the nation’s credit card at the rate of £22bn per month? Except that this so-called borrowing is not what it seems. Most of the cash the Chancellor has been splashing out since March has not been borrowed from the private sector. Instead it has been run up on the Treasury’s overdraft facility at the Bank of England. And, of course, the Government owns the Bank of England. Essentially, Chancellor Sunak is borrowing from his own bank. It’s the equivalent of you owning your credit card company.

At this point, I should note that you can only pull this trick if you have your own currency and your own obliging central bank. An independent Scotland using sterling would not be able to print its own money and really would have to borrow other people’s cash from the City of London. But I’ll leave you to ponder that one.

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Meanwhile back at the UK Treasury, the obvious question arises: if Mr Sunak is funding all this extra spending from his virtually limitless overdraft at the Bank of England (which simply prints the money electronically) then why is he now talking about cuts? There are possibly two answers.

First, the Bank of England can get away with printing vast billions of pounds for the Treasury because the real economy has cratered, as a result of the pandemic lockdown. This economic meltdown leaves huge surplus capacity in the economy. The Bank of England and the Treasury are creating demand artificially in order to fill the economic hole. If they tried increasing demand with printed cash in normal times, you would probably get inflation. The Chancellor is worried that inflation might come back, as the economy recovers next year.

These worries are vastly exaggerated. Even before the pandemic, the global economy was awash with surplus manufacturing capacity. I believe we are in an era of deflation, not inflation. The only folk worried about inflation are City types who lend money and are frightened they won’t get it back. As Sunak comes from this clan, he has a pathological aversion to anything that smacks of money losing its value. Future Treasury spending cuts are about reassuring the City that Sunak is their guy, and nowt to do with affordability.

The second reason Sunak is obsessed with cuts is that he knows the UK private sector economy is in deep trouble post-Brexit. All this Tory guff about trade deals masks an obvious reality. Remove trade barriers and British manufacturers will have to go head to head with foreign competitors. To have any hope of success in this rough and tumble, UK manufacturing will have to slash costs. That means cutting wages and increasing work time. Already we can see private sector companies using the excuse of Covid-19 to do just that in the aerospace industry.

HERE is Sunak’s problem: he is under political pressure to raise wages in the public sector, especially for carers and NHS workers. And he should, the pandemic has revealed (as if it needed doing so) that health and care workers are important. However raising wages in the public sector will only encourage workers in the private sector to resist cuts to their remuneration. Which means the Chancellor will freeze wages in the public sector pour encourager les autres and not because he can’t afford it. But then again, the Chancellor is a millionaire Tory.

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The impending wage freeze is only the half of it. Expect taxes to rise. In this endeavour, expect Dishy Rishi to have unexpected supporters. They include the normally leftish Institute for Fiscal Studies (IFS) which is recommending the Chancellor raise an extra £40bn in taxation. And where the IFS leads, expect the Labour frontbench to follow. If Labour leader Keir Starmer can withdraw the whip from his predecessor to show how tough he is, just wait till he tries to prove his fiscal conservatism.

All this should be grist to the mill for the cause of Scottish independence. We can exit Sunak’s needless cuts and pay freeze and build an economy based on social justice. Except, of course, that the SNP’s Growth Commission strategy precludes having our own currency. True, SNP conference voted to introduce a currency as soon as practicable. But as Andrew Wilson pointed out in his recent Spectator article, this still means complying with the Growth Commission’s “six tests”. The first of these tests is that the Scottish Government must meet tight fiscal targets (annual borrowing at 3% of GDP and National Debt at 40%).

In pandemic conditions that will take a long time, meaning we will have to go cap in hand to Mr Sunak’s friends in the City. Have a guess what they will say.