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29 March 2022

Why Rishi Sunak can’t escape the cost-of-living crisis

By refusing to support the poorest, the Chancellor has stored up problems for the government.

By Freddie Hayward

Rishi Sunak defended his Spring Statement in a tetchy two-hour performance in front of the Treasury Select Committee yesterday, while the Metropolitan police has announced that it will issue the first 20 fines to people involved in partygate.

Select committee appearances are often more revealing than ministers’ performances at the dispatch box, where questioning can be brief, performative and easily dismissed. After days of criticism for not doing enough to combat the cost-of-living crisis, the Chancellor gave the clearest account of his decision-making process yet. Coming out of the pandemic, he said, he did not want to borrow more due to concerns that it could worsen. This left him a choice between cuts to public spending or increases to taxes. He opted for the latter, raising the tax burden to the highest level since the late 1940s. Within these self-imposed constraints, he used his Spring Statement to target support at those in work by increasing the national insurance threshold, rather than channelling money to the poorest through the benefits system. That was the story the Chancellor told and, in response to the Labour MP Angela Eagle, he said he was “comfortable with the choices” he’d made.

His comments on Brexit were much less direct but equally revealing. When asked whether a drop in trade since 2019 compared with other economies might relate to Brexit the Chancellor, who voted leave, conceded that it “might well be” and confirmed that it was “inevitable if you change the exact nature of your trading relationship with the EU, that was always going to have an impact on trade flows”. It was a rare admission from a politician who claimed in 2016 that Brexit would bolster trade.

In any case, the political narrative is set to move swiftly on from the Spring Statement, with the first fixed-penalty notices for partygate. The Met has not said which individuals have been fined or which events they attended, but there are potentially more to come. This will dominate the headlines and could prove fatal for the Prime Minister. But the mounting cost of living, and the Chancellor’s refusal to target support to the poorest, means that he is shoring up problems for the government in the future. Partygate will soon return, but with the rise in the energy price cap due on Friday, the cost-of-living crisis will remain a political problem for the government far beyond the Spring Statement.

This piece first appeared in the Morning Call newsletter; subscribe here.

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