Chancellor Rishi Sunak
(Picture: AP)Who was Rishi Sunak trying to please with yesterday’s Spring statement?
Despite loud declarations of helping hard-up families, his speech contained thin gruel for almost everyone.
A few giveaways are not enough to prevent what will be the largest fall in living standards since records began in 1956, according to the Office for Budget Responsibility.
That is terrible news for businesses. Some £6 in every £10 spent in the UK comes from “household consumption”: average joes buying shoes, investing in property, going to the cinema — you get the picture. A squeeze on the spare cash in our pockets will quickly hit the wider economy.
The historic looming crunch is of course a result of surging oil and gas prices. It could yet get worse if energy prices return to the highs that we have seen in recent weeks.
But the Chancellor is contributing too. He has fought tooth and nail to stick to the looming rise in National Insurance, which will see workers pay billions more into Government coffers from next week.
Businesses too face a growing burden from VAT returning to 20% from April and business rates, which are badly in need of reform.
Sunak’s motivation to stick with tax hikes is the government’s rapidly rising debt costs, as the OBR set out. Rising interest rates mean that the cost of servicing Government debt is expected to hit a record £83 billion next year. But everything is relative and debt payments in relation to revenue will still be nowhere near historic highs even when we hit the £83 billion mark.
Given the context of the oil shock, Sunak’s determination to stick to tax rises looks dogmatic.
And the Chancellor’s decision to use just half of the spare cash delivered to Treasury coffers by a faster-than-expected economic bounce-back to help people pay their heating bills is nakedly political.
Sunak can say he’s a low-tax Chancellor but actions speak louder than words.
