My Lords, over the past month the bravery of the Ukrainian people has inspired the world. In contrast, Putin’s savage and unprovoked attack on a sovereign nation has shocked us all in equal measure. This country stands with Ukraine. That is why we continue to support that brave nation with defensive weapons and humanitarian aid, and it is why we are introducing the largest and most severe economic sanctions that Russia has ever faced. These sanctions will help to cripple Putin’s war machine and degrade the Russian economy for years to come. However, as my right honourable friend the Chancellor said in the other place last week,
“behind Putin’s invasion is a dangerous calculation that democracies are divided, politically weak … and incapable of making tough long-term decisions to strengthen our economies”.—[Official Report, Commons, 23/3/22; col. 337.]
This Government are determined to show that this cynical view of the world is wrong.
That is why, on the international stage, we will continue to support Ukraine, while domestically the Government are focused on strengthening our public finances. The measures contained in this Spring Statement will help to build a resilient, robust and fast-growing economy that will allow this country to respond to crises and help our friends in their times of need.
The economy is recovering well following the coronavirus pandemic. The Government’s successful vaccine rollout and Plan for Jobs have helped support a quicker than expected recovery and a buoyant labour market. Tax receipts have been stronger than expected, which has contributed to borrowing falling this year and over the forecast period. However, the steps that the Government are taking to sanction Russia are not cost-free for the UK and pose a risk to our recovery. Higher than expected global energy and goods prices have already led to an unavoidable increase in the cost of living in the UK. Statistics published last week show that in February inflation stood at 6.2%. This was still lower than in the US and broadly in line with the euro area. Disruption to global supply chains and energy markets, combined with the economic response to Putin’s aggression, means that the Office for Budget Responsibility expects the cost of living to rise further, averaging 7.4% this year.
As noble Lords will recall, the Government have already taken significant steps to help with the cost of living. These measures include a cut to the universal credit taper rate and increases to work allowances to make sure that work pays, a £9 billion package to help households with energy bills announced this year, and a freeze to fuel and alcohol duties to help keep costs down.
In this Spring Statement the Government are taking further action. At the heart of the Statement is a three-part plan to support families with the cost of living, support growth in the economy, and ensure that the proceeds of that growth are shared fairly. Let me stress that the Government’s approach to developing this plan and our ultimate goal of a lower-tax economy will be responsible and sustainable. However, as the Chancellor has said, cutting taxes sustainably is hard. It requires prioritisation and a commitment to fiscal discipline. We will take a principled approach, maintaining space against our fiscal rules, as we have this year, continuing to take a disciplined approach to spending, and carefully considering the broader macroeconomic outlook. Such a prudent approach is more important now than ever. Next year we are forecast to spend £83 billion on debt interest. This is the highest amount on record and almost four times higher than last year. These figures underline why the Government must not shy away from tough decisions. That is why the health and social care levy that the Government announced last year will remain in place, safeguarding a dedicated source of funding for the NHS and those who require care.
My Lords, this change to national insurance contributions is the largest single personal tax cut in a decade, reducing the tax burden by £6 billion for 30 million people across the UK. To mirror the increase in the primary threshold for employees, the national insurance lower profits limit will also rise from July to £11,908 and will increase to £12,570 from April next year.
The Government also recognise the impact of the rising cost of living on self-employed workers on low incomes. As a result, we are also reducing class 2 NIC liabilities to nil on profits between the small profits threshold and the lower profits limit. This will mean that, from April, those with profits between £6,725 and £11,908 will not pay class 2 NICs, with the upper limit rising to £12,570 from April next year. However, I assure noble Lords that these workers will still be able to build national insurance credits and will therefore remain eligible for the state pension and other contributory benefits.
Beyond the national insurance system, this Spring Statement uses the tax system to ease cost of living pressures in other ways. Fuel duty will be cut for only the second time in two decades by 5p per litre for the main rates, saving motorists around £2.4 billion over the next year. In addition, the Government are reforming VAT reliefs for households that want to install energy-saving materials in their homes, such as solar panels, heat pumps and insulation. Consumers in Britain will pay a 0% VAT rate for the installation of these items and the scope of who can access such VAT reliefs has been expanded.
Our tax plan also contains measures to help businesses cope with inflation. The employment allowance will rise from April, allowing eligible businesses to cut their employer NIC bills by up to £5,000 a year. This tax cut is worth up to £1,000 per employer and will mean that businesses will be able to employ four full-time employees on the national living wage without paying any employer NICs.
My Lords, I thank the Minister for that exposition on the Budget, although I did not entirely recognise aspects of it. It is a Statement rather than a Budget; I need to watch my terminology.
One of my problems is that, normally, I would have been much further down the speaking order and would have therefore focused on a single point. Given that I am in a privileged position, I still want to make this point right up front: in the whole Statement, why is there no mention of the Government’s path to net zero? I ask that for a wider reason. Just before the Statement came out, there were rumours in the Conservative-supporting press that there was a serious change in tone on the Government’s approach to climate change. Despite the dramatic and impressive road to net zero Statement in the context of Glasgow, there was a pretty concerted view in the press that there had been a downplaying of commitments to net zero in government circles. I would like to know the truth of that.
I am fortified in that view by my experience the other night when the noble Lord, Lord Callanan, rejected a seemingly innocuous cross-party amendment that required the Subsidy Control Bill to take some notice of climate change policy. There was no reason for rejecting it, yet that seems to have been repeated in other parts of government through statements in the House of Commons and here. Has there been a change in the degree of emphasis on climate change? If not, why does the Government’s major Statement on economic strategy not make at least a brief reference to the need for economic and fiscal policy to take account of it? For example, there is no indication of any move towards a carbon tax. In some ways, we have short-term changes in the opposite direction. Whatever the benefit to motorists, even as a one-year wonder, the move to cut petrol and diesel tax—
My Lords, the move on fuel duty is not in the right direction as far as the climate change agenda is concerned. Even where the Chancellor generally moved in the right direction, he did so in a very limited way—for example, exempting in his post-Brexit freedom VAT on certain energy efficiency products, of which I thoroughly approve. However, he should have gone much further; the anomaly in the construction industry is that construction and demolition do not attract VAT whereas refurbishment and retrofit do. It is no use restricting the lifting of VAT to just some areas; it puts the whole balance for developers and planners in favour of demolition and rebuild and against refitting in a climate-resilient way. Demolition and rebuild have a considerable impact on emissions, both through the disposal of construction material and through rebuild using vast amounts of material such as glass and steel, which are highly fossil fuel-intensive.
I will say a few other words about the Statement which do not relate to the Government’s agenda. The Chancellor had rather more room for manoeuvre than he expected a few months earlier. He could have used that money to tackle effectively the immediate cost of living crisis, in which the lowest quantile is most likely to suffer the most. For example, he could have restored to universal credit the £30 he had just taken away or replaced it in some other way in the social security and taxation system. In view of escalating energy bills, he could have provided additional support to low-income groups to deal with them. He could have extended help to households to meet the costs of insulation and energy. He could have reduced the initial rate of taxation, which would primarily benefit the lowest paid, instead of fiddling with the national insurance threshold—I do not object to its equalisation principle, but the move benefits everybody, and actually those in the higher tax rates more than others.
The Chancellor could have provided direct support for public transport instead of cuts in fuel duty. In addition to their environmental effects, larger cars with larger mileages tend to be driven by the more affluent groups, and many in the lower quintile do not have cars at all. The Chancellor could have spent more money on the care service or the NHS. He could have spent the money on enhancing the NHS.
My Lords, I am pleased to follow the noble Lord, Lord Whitty, and I agree with all he says. I will make some remarks about health and the environment.
We have not really even come out of this pandemic but we have indeed seen a spike in childhood obesity. We have had new data lately about the soaring amount of diabetes there is in this country and the cost to the NHS. People mention this all the time, yet when you look at the Spring Statement there is really very little in there to help people with their actual diets. There is such a big difference between eating healthy and unhealthy food. When families are unable to afford to eat well, it has a devastating impact on their health. Physically they are weakened because they rely on less nutritious food, and mentally they are stressed because they cannot provide for their families.
Reducing health inequalities is more important than ever. Childhood obesity rates have spiked and the gap between the richest and the poorest has widened. People on low incomes already had less healthy diets before this cost of living crisis, consuming on average much less fruit and veg, less oily fish and less fibre, and this current situation will widen.
Families choosing less healthy foods when times are tough do so because, when food prices rose during and after the 2008 financial crisis, people chose food that was cheaper per calorie but lower in nutritional quality, trading down the quality of their food choice in response to pressure on household spending. This was the only sensible economic choice for families facing budget pressures. Healthier foods are right now three times as expensive, calorie for calorie, as less healthy foods and the UK is once again facing significant food price rises and high levels of food insecurity.
CPI data shows that UK overall food and drinks prices have risen 5.1% in the 12 months to February 2022. In that period, sugar, jam and confectionary prices have risen by 3.5%, while vegetables have risen by 4.2% and fruit by 6.2%. Although food prices are rising at a slower rate than overall inflation, increases in other areas of household spending, such as energy bills, which we all know about, put pressure on food budgets. People cut down on food. You see this right through the chain, whether it is a school, a hospital or a prison: people squeeze the food budget, because they cannot negotiate about the other bills that they have to pay. A recent ONS survey reported that 81% of adults have seen their cost of living rise, and food was the most reported single rise.
My Lords, it is a great pleasure to follow the noble Baroness, who made some powerful points, if I may say so. I welcome this opportunity to speak on the Spring Statement and thank my noble friend the Minister for setting out aspects of it.
At the outset, it is worth stating that the Chancellor deserves enormous credit for his action through the pandemic, particularly on the furlough programme. We maintained a healthy position on employment, which many doubted—to accentuate the positives, it is worth stating that. However, the challenges now are very different. They include the cost of living, inflation and the cost of energy, which has been particularly exacerbated by the situation in Ukraine, to which my noble friend referred.
I differ slightly from the noble Lord, Lord Whitty, on the point about room for manoeuvre in the Budget. I agreed with much of what he said, particularly on net zero, which I will come on to. However, in relation to the position in the Budget for extra spending, it is worth stating that debt interest is set to hit £83 billion next year. That is nearly four times what it was last year and any rise in the cost of borrowing will send it up even higher; it is worth taking note of that. It is also worth stating that £83 billion exceeds the budgets on schools, the Home Office and the Ministry of Justice combined—and that is just the debt interest.
That is not to say that I do not think that more should have been done in this Budget—indeed, I think that more should have been done—but it is worth bearing in mind that this must be paid for. All those who say that we should not be going for the NI increase, of which there are many, must say where the money to pay for these extra spending elements will come from. That said, we should be spending more.
As the Minister outlined, there are things in the Spring Statement that are worthy of praise. The increase in the employment allowance will help employment. The extension of the annual investment allowance will help investment. For eligible small and medium-sized enterprises, the help with the Help to Grow digital scheme is certainly worth while.
My Lords, it is a pleasure to follow the noble Lord, Lord Bourne, who was a respected Minister in this House. When he stepped down, I and many others on a cross-party basis were very disappointed. He is also respected in Wales for his service there. I agree with the point he made on Northern Ireland and, having been the Secretary of State for Northern Ireland, which is in a very unstable state at the present time—politically and in other ways—I hope the Minister will respond to that.
I take issue with one of the points the noble Lord made about debt and point out that debt following the Covid crisis was just half what it was after the Second World War, expressed in the usual way as a percentage of GDP. That being the case, what did we do after the Second World War with that huge debt which came from fighting Hitler? We built the National Health Service, we invested in a welfare state, built millions of houses and we had growth on a scale which compares much more favourably to that which we have had over the last 10 or 12 years. I would be grateful if he would bear that in mind.
Paul Johnson of the Institute for Fiscal Studies has summarised the British economy’s pre-pandemic performance under Conservative Governments since 2010 as
“a long period of feeble growth”.
Sadly, the Spring Statement heralds a return to that debilitating trend. The Office for Budget Responsibility expects growth this year to be half what it was last year, to halve again next year, and to flatline thereafter. The OBR also foresees the biggest fall in British living standards for 60 years. These are awful prospects.
The key to real recovery and to managing Britain’s public finances is to help the economy grow. Yet the Chancellor’s response to possible recession, coupled with a cost of living crisis, already announced tax rises and the war in Ukraine, is not to invest but to cut public spending, and to do so at the very moment that the Bank of England is raising interest rates.
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I turn to the specifics of our tax plan. Under the first part of the plan, which focuses on relieving the pressures facing families and individuals as a result of the rise in the cost of living, the Government are making a range of sweeping changes to the national insurance system. As noble Lords may recall, reforming and simplifying the tax system has been a long-time goal of this Government. Since 2010, millions of people have been lifted out of income tax through successive increases to the personal allowance, raising it over that time from £6,500 to its new level of £12,570. However, the equivalent thresholds in national insurance, which define how much people can earn NIC-free, are still about £3,000 less. The Prime Minister pledged in the 2019 election that the Government would increase those thresholds. We have already taken some steps forward on that front and last week fulfilled that promise.
From July, the national insurance primary threshold will rise from £9,880 to £12,570, bringing it in line with the income tax personal allowance. This means that people will be able to earn £12,570 a year without paying a single penny of income tax or national insurance. In fact around 70% of all workers will have their NICs cut by more than the amount they will pay through the new health and social care levy. This change will save the typical employee £330 while the typical self-employed worker will receive a benefit worth over £250. This measure represents the largest increase in the starting threshold ever.
This brings me to the second part of our tax plan, which includes measures that seek to boost growth and productivity. The Government want to create a new culture of enterprise and help the private sector to invest, train and innovate more. The Government’s focus here will be on three key areas: capital, people and ideas. The plan sets out tax-cutting options on business investment and innovation, with the final decisions to be announced in the Autumn Budget.
First, on people, we are behind our international peers on adult technical skills so we will examine whether the current tax system, including the operation of the apprenticeship levy, is sufficient to incentivise businesses to invest in the right kinds of training.
Secondly, on ideas, this country is built on innovation. In recent decades, UK-born inventions such as the world wide web, carbon fibre and the ATM have changed the world. In fact, over the past 50 years, innovation has driven around half the UK’s productivity growth. However, since the financial crisis, the rate of increase in these new ideas has slowed more than it has in other countries. As the Chancellor set out last week, this country spends more on R&D tax reliefs than almost any other country yet, right now, the amount that businesses spend on R&D as a percentage of GDP is less than half the OECD average. So, the Government will reform R&D tax credits so that they are as effective as possible and provide better value for money while expanding their generosity to include data, cloud computing and pure maths. The Government will also consider what more can be done to tackle abuse—particularly in the SME scheme, where rising costs indicate that the relief is not being used as intended—and, in the autumn, will consider whether to make the R&D expenditure credit for large companies more generous.
Thirdly, on capital, we know that capital investment by our businesses is considerably lower than the OECD average. This is another cause of the UK’s productivity gap with its international peers. Once the super deduction ends next year, this country’s overall tax treatment for capital investment will be far less generous than in other advanced economies. That is why the Government have said that, at the Autumn Budget, they will cut and reform taxes on capital investment. The Government will engage with businesses on this matter in the months ahead.
Let me now turn to the final part of the Government’s tax plan, which focuses on ensuring that the proceeds of growth are shared fairly. This Government recognise that it is only right that hard-working people keep more of what they earn. As a result, the Spring Statement announced a cut to the basic rate of income tax from 20p to 19p. This will be worth an average of £175 for more than 30 million workers, pensioners and savers, and will be implemented in 2024 when it is forecast that inflation will be back under control, debt will be falling sustainably and the economy will be growing. Income tax rates have been reduced only twice in the past two decades; this is the first income tax basic rate cut in 16 years. I should point out that this cut will apply in England, Wales and Northern Ireland. The Scottish Government will receive additional funding each year through the agreed income tax block grant adjustment, which they can use to reduce taxes or increase spending.
Beyond the tax plan, the Spring Statement sets out a range of other actions that will help families with the rising cost of living, including doubling the existing household support fund through an additional £500 million to support the most vulnerable households with essentials. This money is distributed through local authorities in England, which are best suited to know how to use it in their local areas. These measures build on the support that we have already put in place to help families to deal with inflation—a package worth £22 billion in 2022-23.
This is far from an exhaustive list of all that is included in the Spring Statement. However, these measures underline our commitment to building this country’s economic strength and resilience through supporting people with the cost of living, helping businesses to expand and grow, and creating a country where everyone who works hard will see the rewards of their labour. I commend the Statement to the Committee and beg to move.
We expect Chancellors to use the last few minutes of their speech for the thing they think is most important. Despite the cost of living being so high, it was very odd that this Chancellor used it to announce a future cut in income tax, which will come into play just before the next general election. He may have thought that was clever, but even his most rabid supporters in the press have not seen it that way. They have seen this as a political move which discredits him and takes some of the gloss off him. The ploy has not worked. Neither the public nor the press has thought this was a brilliant move, and reserving most of his headroom for that announcement has taken away from what he ought to be doing both in the immediate cost of living crisis and the longer-term climate challenge.
Alongside price rises, the NFU has warned of possible vegetable shortages due to gas shortages. Farmers are already choosing to plant fewer crops this year due to unaffordable fertiliser prices; in the UK, fertiliser prices have already risen 200% in the past year, according to the NFU. The latest Food Foundation data shows that food insecurity levels are now higher than at any previous point in the pandemic; 10.8% of households—that is 5.7 million adults—experienced food insecurity in the six months to January 2022. This situation is going to deteriorate as the impacts of inflation, price rises and national insurance increases begin to be felt.
The Living Wage Foundation has found that one in five workers have had to take out a payday loan to cover the cost of essentials in the past year. That is a terrible fact. The situation is worse for those on benefits, with 40% going into debt in order to be able to eat or pay bills, according to the Trussell Trust. At Feeding Britain, which I chair, our food banks, food clubs and social supermarkets are now seeing people for the very first time who have previously lived a relatively comfortable existence. They can claw themselves out of debt on utilities and council tax only by obtaining food aid. In the 1980s, food banks became completely entrenched in the American way of life. I asked the Minister a Question in the House of Lords the other day as to how the Government saw food banks, in terms of their budgets. Do they now form part of the support structure of this country? Are the Government now committed to saying that it is okay—people will not actually starve because they can go to the food bank? I would be grateful for an answer.
There are some things that the Government could do. They could protect incomes for those from the lowest socioeconomic groups by increasing benefits levels and protecting wages. They could provide nutritional safety nets and invest in the expansion of free school meals. If they cannot do it universally, at least lower the threshold of application for it. Not everyone who claims universal credit can also get a free school meal for their kid—and, please, when can we do automatic registration for Healthy Start? The warm homes discount does this, and Healthy Start is now online; it is very easy, but a very low percentage is taking it up.
I have just heard while I have been sitting here that the Government are considering reneging on the new regulation to abolish BOGOFs—for anyone who does not know, that means “buy one, get one free”. In supermarkets, BOGOFs are always on crisps, sweets, hot dogs, buns or whatever. It is absolutely known by every marketeer that, if you buy two packets of biscuits thinking that the second will last till next week, that is rubbish—they both get eaten that week. I would be keen to hear a ministerial response as to whether that bit of news, which is flooding my email right now, is true or a rumour.
I agree with the noble Lord, Lord Whitty, that there is a worrying and scary downplaying of the seriousness of climate change, which we see through the Spring Statement and through so many Answers that we are getting to Questions in the House. We very much need the Government to lead from the front on energy efficiency. Part of this should be a public information campaign on the transition to net zero.
I will give a quick example of why this is important. Polling figures from the ECIU published this week show that only a quarter of people know that their gas boilers create nitrous oxide, one of the most potent greenhouse gases. However, once they know, nearly half of them say that this makes them much more likely to make the switch to a heat pump. So, for a relatively small amount of money, there could be a big impact. Scotland has a government-funded body, Home Energy Scotland, which provides this sort of impartial advice. Can we have something similar for England?
Nearly two years ago, the Government announced the green homes grant. It was a great idea but, by the Government’s own admission, it was poorly executed. We have heard that lessons have been learned from it, but another spending Statement has passed with no mention of its replacement. Is it now the Government’s view that they do not need to offer household assistance with insulation and energy efficient measures? Although the VAT reduction is welcome, without the other measures a large proportion of households just will not be in a position to proceed with the work.
Finally, this issue is far more pertinent now than it was when the green homes grant was initially announced. In the context of our high energy prices and the uncertainty in fossil fuel markets, the obvious answer is energy efficiency and renewables. It is in the national interest to pursue this duo, as both measures will make us much more energy secure and less vulnerable to the global market. Although it is clear that the Business Secretary and other colleagues at BEIS know this, it looks like the Chancellor and the Treasury do not. The fact that the energy security strategy has been delayed suggests that it is not a priority. If it is not a priority now, when it will have the most impact, when will it be?
However, I agree with the noble Lord, Lord Whitty, in relation to the dog that did not bark: the absence of any real emphasis on climate change and the fight for net zero. You cannot partially believe in the need to tackle climate change. You either believe in it or you do not. It is worth underlining that. To those who are unconvinced by the need to act, I say this: speak to people from Tuvalu, whose country will shortly disappear without effective action on climate change. We undoubtedly need to do more.
So I approve of the VAT relief on energy saving materials. It should go further, because we need to do more in the general area of climate change. I would still like to see—it may be coming down the line, so perhaps my noble friend will indicate whether an announcement will be made on it later—some help in relation to retrofitting and installing insulation in Victorian and other homes. This will not only help to increase employment but ease the pressure on the purchase of oil and gas, which is necessary in the current circumstances and indeed generally. It will also help in the fight against climate change. There is much to welcome from something that is relatively straightforward.
I will just backtrack on the measure for energy saving materials and climate change. It is good but I regret that, because of the protocol, Northern Ireland is receiving a Barnett share and is not subject to this and many other measures in the Spring Statement. Northern Ireland is in a dreadful limbo, which really needs sorting. I do not expect my noble friend to wave a magic wand and make that problem go away, but I would like her to say something about that in summing up.
Universal credit needs to rise by more than is currently planned in the Spring Statement, as outlined by my noble friend. That view is shared by the Child Poverty Action Group, Citizens Advice, the Trussell Trust and, perhaps less predictably, the Centre for Policy Studies, which, as my noble friend knows, tends to be on the right rather than the left of the political argument.
Backtracking again to the position on climate change, more needs to be done on the warm home discount scheme. Some of the poorest people benefit from this, so it needs extending. It helps those with pre-pay or pay-as-you-go meters, so this is something that could be looked at.
I have no particular criticism of the content of the Spring Statement. It just does not go far enough and we need to do far more on energy measures and for the poorest in our society, who will be up against the wall and suffering if we do nothing. Just look at the position on energy and cost of living; I do not blame the Government for this as these things are largely beyond their control and made worse by the position in Ukraine, but we need to recognise this and do something about it.
I am not sure if the noble Lord, Lord Whitty, agreed with raising the threshold for national insurance. It is not a massive measure, but it seems sensible for the threshold to be the same as it is for income tax. We have to be honest about the tax position: this has to be paid for. I agree with the national insurance increase, although it would have been better on income tax, but we need an increase in taxation to pay for the measures we are facing for the health service and social care. We also have to be realistic that it is necessary to extend universal credit and do some things on the environment, and both have to be paid for. Personally, I would look at a possible tax on online sales, or at least a one-off levy, and beyond that at oil and gas companies. I hope I have been realistic and am not just wishing for extra spending. This has to be paid for and that is how I would do it.
We need to recognise that we cannot simply say, “Let’s scrap all the tax increases, cut taxes and increase expenditure at the same time.” We have been down that road before and it does not work. The books have to be balanced, certainly in the medium to long term.
We are in today’s difficult position because Tory Chancellors spent a decade stopping the economy from growing. The Office for Budget Responsibility has acknowledged that between 2010 and 2019 Tory Chancellors delivered “fiscal tightening” equivalent to nearly 9% of GDP, meaning that they slashed total spending in the economy by a huge amount—£220 billion in today’s figures. They did so primarily by public spending cuts which formed 82% of the total Tory squeeze, with tax rises responsible for the remaining 18%.
In the 1990s, with Ken Clarke, now the noble and learned Lord, Lord Clarke, at the Treasury, the fiscal squeeze was shared about equally between public spending cuts and tax rises. Since 2010, Tory austerity has fallen overwhelmingly on cuts in public services, public investment, and public sector pay: a £180 billion public spending squeeze. This is the source of today’s unprecedented National Health Service staff shortages, unparalleled waiting lists, and a social care crisis; all were there before—this is important—and not just after the Covid pandemic. They could have been avoided by fully funding the NHS and by investing in adult social care. Instead, Tory Chancellors subjected Britain to a decade of austerity in pursuit of debt and deficit targets, none of which was ever met. This was not just socially callous; it was economically illiterate. History shows that an expanding economy can live comfortably with a significant level of public borrowing. It is when economies stop growing that budget deficits begin to balloon and debt burdens become difficult.
Yet what is Chancellor Rishi Sunak’s top priority? To make space for pre-election tax cuts by letting inflation erode the real value of October’s public spending plans. Public sector budgets no longer stretch as far as he promised back then, and public sector workers face even deeper real-term pay cuts. The real growth in public services in 2022 planned last October could have been protected by raising spending by £4 billion, but the Chancellor did nothing.
The Treasury is also stifling new policy initiatives by refusing financial backing. Just when renewable energy should be a top priority, Treasury traditionalists are trying to rein in the Government’s green ambitions lest they involve extra public spending. Meanwhile, the Government’s levelling-up pledges have turned into empty promises of jam tomorrow. Their White Paper was not accompanied by even a post-dated cheque, let alone a credible funding plan—more unfunded Tory promises.
It is difficult to take seriously the Chancellor’s talk about the Tories having a “sacred duty” to
“leave the public finances strong”
and his vow to “always balance the books”. He invokes the spirit of Margaret Thatcher but forgets that no Tory leader delivered more budget deficits than Mrs Thatcher: 10 in her 12 years in power. Only two of the previous nine Tory Chancellors ever ran a budget surplus: Tony Barber once in the 1970s and Nigel Lawson, as he then was, twice in the 1980s. That leaves 29 budget deficits in 32 years in office. So much for the Tories’ “sacred duty” to balance the budget.
It has taken a pandemic and war in Europe to prove what a vital role the state plays in protecting society from harm, promoting the common good and defending our freedoms. All that could have been helped by boosting economic growth and putting funding for public services first. In today’s worrying domestic economic climate and dangerous international situation, pre-election tax cuts should have had no place on any Chancellor’s priority list. Public investment, including in security and defence, should have.