Director and former Head of Operations for Boris Johnson
Chancellor Rishi Sunak entered this set piece in the political calendar on the back of sustained, carefully thought-through briefings into the Westminster commentariat from his team. Treasury advisors spent yesterday evening briefing about the “ballooning” interest payments of nearly £50bn on the national debt. This was designed to dampen the excitement in some quarters, and the more encouraging numbers on tax receipts and public borrowing would indicate headroom that might allow some fiscal loosening.
The view taken by those around the Chancellor is that – as people continue to watch the horrific scenes in Ukraine and with a country barely back to a “new-normal” post-pandemic – a sense of security and protection was the prescription required from this Spring Statement.
Given the last Budget was only in November, when arguably some of the toughest decisions were made, the Chancellor would originally have been looking at today’s Spring Statement as being a mere tickbox exercise, albeit with the “pain” of his previous tax hikes starting to kick in over the coming weeks. However, with a sizeable gulf opening up between wage growth and the rate of inflation – coupled with the unprecedented increases in energy prices and everyday living – a strong response to a very uncertain political and economic environment was required. So it was that Sunak announced – to significant cheers in the chamber – measures to reduce the impact of rising fuel prices on consumers and to slash VAT on energy efficiency measures. The decision to equalise NI and Income Tax thresholds – effective from the summer – was welcomed by the backbenches and will enjoy significant support from conservative commentators and policy influencers. So too, will the further measures to reduce the tax burden on small, struggling businesses.
The Chancellor was also keen to highlight the various signs of optimism in the economy – as he rightly should. Indeed, the employment figures are hugely impressive with numbers now back to pre-pandemic levels. And he was keen to focus minds on the future and on his overarching commitment to reducing the tax burden over the life of this Parliament – announcing a ‘tax plan’ to reassure backbenchers that he really means it. Setting out his priorities in this area – people, ideas, capital – helps him to frame the conversation around where taxes should most urgently fall.
The background to today was one of mounting stories of families going without food and heating. Last November, it was about cancelling the annual holiday, this spring it about whether you can keep your kids warm and fed. Political reality dictated that help would need to be put in place to help families to bridge the gap. The measures announced today are a temporary effort towards doing that with the tax plan providing the longer-term roadmap towards a lower-tax economy.
Account Director and former Head of Private Office and Forward Planning to Keir Starmer
In the weeks leading up to the Spring Statement Labour would have been planning to attack the Government on the cost of living crisis with a series of targeted criticisms designed to build up the narrative that the Conservatives in general – and Sunak in particular – are to blame for spiralling prices and rising taxes.
However the invasion of Ukraine has forced Labour into a position of constructive opposition similar to the one implemented by the Party during the first months of the pandemic. In her response to the statement today, Reeves reopened these core economic dividing lines to hammer home her message that the Government cannot solve the cost of living crisis, as they are the cause of it.
Labour believe they are on to something with their central economic message that Sunak is a high tax, low growth Chancellor. They feel this critique works on two levels. Firstly, any rise in National Insurance is the wrong decision for the Government to make at a time when the country is dealing with a cost of living crisis and that this is not mitigated by the raised threshold. Secondly, this low growth is a result of over a decade of Conservative mismanagement and that the planned tax rises are being used to prop this up. Reeves also reiterated her characterisation of Sunak as wasteful in overseeing £12 billion lost to fraud and unusable PPE. Instead, she argued, Labour would scrap the National Insurance rise, cut VAT on gas and electricity bills and pay for it with a one-off windfall tax on oil and gas producers.
Reeves’ response is – as always with Statement or Budget responses – part economics, part politics. By pinning the blame on the cost of living crisis as being a result of poor decisions made by the Conservatives, she is able to paint Sunak as a high tax, low growth Chancellor and position Labour as the Party who can now be trusted with taxpayers’ money. She also signals a marked shift from the previous Labour leadership’s focus on higher taxation and instead her emphasis on high-growth and ending waste creates space for Labour to set out their future spending priorities without, she hopes, needing to raise taxes to fund it.
Director and former Industry Editor at The Daily Telegraph
It wasn’t a Budget for business (because it wasn’t a real Budget, but a Spring Statement). But then the Chancellor’s hands have been tied not only by events outside his control – Ukraine, the aftermath of Covid, global supply chain issues – but also by Conservative pledges of fiscal responsibility.
He had little room to manoeuvre but did his best, offering up headline-grabbing promises to please voters of cheaper fuel and lower tax for hard pressed households.
But apart from a rise in the Employment Allowance from £4,000 to £5,000, meaning smaller companies will get relief on NI, there was nothing to move the dial.
Markets were unimpressed, but then they weren’t expecting much, so the FTSE 100 edged lower.
Worries that energy companies would be hit with a windfall tax proved unfounded. Despite references to Ukraine and how the UK’s best defence is a strong economy protected by a capable military, there was no arms spending bonanza.
Companies with large fuel costs aren’t exactly celebrating either. The 5p per litre cut in fuel duty helps, but considering diesel was at 125p a year ago and is now 167p, it hardly makes a dent.
Where Rishi did provide a glimmer of hope for business was – as ever – in the future. He acknowledged the UK’s low productivity, attributing it to lower investment, faltering innovation and poorly trained staff. He looks forward to talking with industry about how this can be improved, potential making cheaper investment in upskilling, equipment and R&D. But don’t expect any concrete details until the Autumn, when the (real) Budget comes.
Head of Public Affairs and former Deputy Political Editor at The News of the World
The Chancellor woke up this morning to a slew of demands splashed across the papers.
The Daily Mail demanded Sunak “delve into his bag of tricks” and insisted he could spike the National Insurance hike.
The Sun called for cuts to tax, red tape, the civil service “blob” and bills.
The Mirror pleaded “We need your help, Rishi” pressing him to raise pensions and benefits, scrap the NI increase, and slap a windfall tax on oil and gas giants.
The i called for tax cuts to help businesses invest, while The Daily Express said it expected the Chancellor to help households suffering from the cost of living crisis at the same time as ensuring public services were on a sound financial footing.
For all the Treasury’s expectation management – with sources telling The Sun on Sunday “don’t expect him to pull a rabbit out of a hat. Maybe a few baby bunnies, no more” – the papers reflect what their readers are thinking. As the BBC’s Faisal Islam said, the public now expects more help from the Government than it used to.
But as Patience Wheatcroft wrote in the FT Weekend: “Imagine if the Chancellor decided to be frank about the impossibility of meeting so many demands”.
Sunak was never going to be able to satisfy all those demands. But despite the briefings that this would not be a mini-Budget, the scale of today’s measures mean it will be given the full Budget treatment in tomorrow’s papers.
Much of the focus will fall on the Chancellor’s tax plan. That plan will be set against Mr Sunak’s repeated insistence that he is a low-tax Chancellor. He did not give in to the pressure to scrap the NI hike, but he did take the sting out of it. That may be enough for some papers, but not all.
The FT’s Political Editor George Parker put the figures into perspective. The Chancellor is cutting NI by £6billion and income tax by £5billion. But that’s less than the £12billion he will raise by putting NI up next month.
The fuel duty cut will also be a key focus of tomorrow’s papers. A golden rule of Fleet Street is to only launch a campaign you know you can win. Papers want to demonstrate their influence and it will be splashed across the papers tomorrow as their triumph. The Sun is already reporting it as a “major victory” for its Keep it Down campaign.
As always there was enough in the statement for Tory-supporting papers to get behind while the
Labour papers will insist the Chancellor has not done enough.
There were some big announcements today, but there are some bigger challenges coming with a cost-of-living emergency. As the BBC’s Political Editor Laura Kuenssberg said many of Mr Sunak’s headline-grabbing pledged could soon feel like pretty small beer to struggling families.