With a backdrop of the worst cost-of-living crisis in living memory, the Chancellor, delivered his Spring Statement last week.
Storm clouds have been gathering for a while. Inflation is rising and forecast to hit 8.7% later this year. Some of that is common to most industrialised economies but let’s be perfectly frank: other elements of it are entirely self-inflicted because of policy choices made in Whitehall.
Historically, the UK is facing the sharpest fall in real earnings since the 1970s, with the biggest hit to real household disposable income since records began in the 1950s being forecast. For all the rhetoric of this being a ‘tax cutting’ UK Government, the tax burden that it levies has risen to the highest level since Clement Attlee’s post-war Government.
However, there were still potential cracks in the gloom. The Chancellor had around £30billion-worth of headroom through a combination of increased taxation revenues which had not been forecast; and borrowing that had been anticipated which hadn’t so far taken place. This meant that despite everything, he was still in a position to do something fairly substantial for people who are feeling the pinch the hardest.
On a positive note, I was pleased the edge was taken off the National Insurance hike for the lowest earners by increasing the threshold. I always thought that increasing National Insurance was an extremely blunt instrument for raising money to help meet health and social care needs in England. It was also a burden which fell hardest on the youngest members of society. It remains a tax rise overall no matter how much it is dressed up as something different, but I still welcome that U-turn insofar as it goes.
However, I think most observers’ reaction would have been to scratch their heads and ask ‘is this it?’ The Chancellor did absolutely nothing to mitigate the cost of domestic fuel when some people are facing a choice between heating and eating. Making some energy efficiency home improvements zero-rated for VAT is great but if you’re already wondering how you are going to pay your electricity or gas bill, it is highly unlikely you are going to rush out and buy a heat pump or fit solar panels to take that same bill down.
People simply don’t have that room for manoeuvre. Bluntly, if you woke up on the morning of the Chancellor’s Spring Statement worrying about how you are going to pay your bills, you’ll have gone to bed remaining troubled by exactly the same thoughts.
So what else did we get? In the face of a 30p-a-litre rise in costs at the pumps, there was a 5p cut in fuel duty, which barely takes the cost at the forecourts back to where the prices were the week before last. That offers no respite to the motorist or consumer, given that we are all affected by the price of goods that are transported on lorries or vans to the shops.
This was a golden opportunity to tackle the cost-of-living crisis head-on by delivering much needed immediate respite to homes and businesses, while also taking steps to guarantee our food and energy security long-term. Unfortunately, this was an opportunity missed.
One thing is certain – the cost-of-living crisis looms as large this week as it did last. It’s only a matter of time before the Chancellor is back trying to clear up the pile of unfinished business left behind last week.