Chancellor Rishi Sunak presented his Spring Statement to Parliament in the middle of an unprecedented cost of living crisis. Inflation, running at 6.2 per cent, is the highest it has been in thirty years, wiping out far smaller increases in average pay. National Insurance and council tax increases mean millions of people are facing an effective pay cut.
Petrol prices have surpassed £1.50 per litre for the first time. And from April 1st, the current price cap on gas and electricity will rise by £693, putting the average household’s annual energy bill at £1,971 with further substantial increases set for October. Plans for a £200 loan ‘rebate’, to be paid back by customers in installments in future years, hardly make a dent in such sharp price rises.
With less disposable income left at the end of each month, many people face a real and substantial drop in living standards. The poorest, of course, are hit hardest of all. Food bank users are said to be declining potatoes because they can’t afford to cook them.
Sunak’s ‘mini budget’ could have been a chance to ease the financial pressure on struggling families and communities and reinvigorate the national economy. But it was a wasted opportunity.
Bold thinking and big ideas are desperately needed. But what we got was tinkering at the edges. And to make things worse, much like the energy rebate, this tinkering often just back-tracks on previous tinkering.
So, rather than scrapping the proposed rise in National Insurance altogether, Sunak intends to raise the starting point at which people begin to pay the tax. Most people won’t actually be any better off - just those who earn under £35,000 will now be no worse off once the NI increase is imposed.
Likewise, a 5 pence cut in fuel duty sounds generous but duty accounts for 57.95 pence on every litre of fuel, and then 20 per cent VAT is added to the overall bill. With prices so high, motorists will barely register Sunak’s price cut and the treasury will continue to benefit from the tax return. He could have made far bigger cuts.
Most depressing of all is Sunak’s plan to help meet the rising cost of gas and electricity bills. His big, bold idea is to remove VAT off heat pumps, solar panels and wind turbines. This means those looking to retro-fit their home with the latest in environmentally-friendly technology can save themselves a few hundred pounds in the process. Of course, you need to have several thousand pounds to spare, and own a large house to boot, before you can even consider taking advantage of this discount.
Neither individual lifestyle changes, nor giving pennies with one hand after having taken them with the other, will transform the UK’s ailing economy and raise living standards. Sunak could have announced major investments in fracking, nuclear power, transport infrastructure and house building. These measures would provide a boost to industry and enhance productivity. They would provide a more long term basis for raising living standards than the promise of a 1p tax cut from 2024.
Rishi Sunak’s low expectations mean we don’t even have the promise of jam tomorrow.