No one will have envied Chancellor Rishi Sunak when he presented the Government’s Spring Statement last week. It has not escaped anyone that the economic prospects of large swathes of British society are looking bleak. Annual inflation is at a 30-year high at more than 6%, energy prices are reaching record levels and according to the Office for Budget Responsibility, 2022 will see the biggest fall in living standards since 1956. Depressingly, many negative trends are being exacerbated by the violent war in Ukraine that’s now lasted for a full month.
In this context, the country is looking to the Government, and Chancellor Sunak specifically, to take bold action aimed at minimising the amount of people falling into poverty and businesses folding over the coming months. Given Sunak’s highly popular and unexpectedly interventionist approach to the initial economic impact of lockdown through the furlough scheme, many will have expected or hoped for something equally ambitious to be announced this week.
It is safe to say that Sunak’s Spring Statement did not contain anything remotely close in scope to a furlough scheme. Instead, a longer number of targeted policies were announced touching on the wide range of economic pinch points facing the country.
Here is a summary of the Chancellor’s key pledges:
- A 12-month 5p cut to fuel duty with immediate effect
- Increase of the National Insurance threshold by £3,000 to £12,750 from July, aligning it with income tax cut-off
- An extra £500m for councils to help support the poorest households with energy costs
- VAT will be slashed from the cost of installing home solar panels and insulation
- A 1p decrease in income tax to be introduced in 2024, 16 years after the last cut of the basic rate
- Employment allowance will be increased to £5,000 for small businesses from April
- Retail, hospitality and leisure businesses will get a 50% discount on their business rate payments up to £110,000
- A 50% discount on buying new software worth up to £5,000 for businesses
- An increase of the Annual Investment Allowance to £1m
- Additional funding for the HMRC and DWP to collect tax, prevent and detect fraud and error, and collect debt
As soon as the relatively brief speech by Sunak was over, it became clear that his proposed package would fail to instil confidence within the electorate. Interestingly, a majority of voters have expressed support for each individual policy pledge – with the raised National Insurance threshold being the most popular according to a snap poll by Opinium. However, 65% of those asked said the Government should be doing more, and only 26% say that they support the government’s economic handling overall, according to the same poll.
The papers have also not minced their words. Even the Daily Telegraph, typically friendly toward Conservative governments, published a column with the headline “Is that really it, Chancellor?”, highlighting the sense that Rishi Sunak seems more concerned about balancing the budget than solving the cost-of-living crisis.
It seems like the Chancellor is trying to reaffirm the image of the Conservative Party as the party of tax cuts and prudent spending, as this has brought with it great electoral success in the past and lies at the core of many of its MPs ideological identities. However, times have changed and there does not seem to be much support for tax cuts and bringing down national debt in what the electorate, or business, is demanding in the short term.
The time between now and the next budget announcement is likely to be dominated by stories of economic hardship. People will be looking at their own financial situation to evaluate how Rishi Sunak’s policies impact them, with little patience for staged photo-ops or carefully crafted talking points. Sooner rather than later this might force him to go against his political intuition and open up the public purse once again, hoping that the cautious and badly received 2022 Spring Statement is soon forgot.
Gabriel Hedengren is an account manager at The PR Office.