Rishi Sunak’s Spring Statement has failed to impress experts, commentators, many in his own party and, crucially, the millions of people facing what the OBR forecasts to be the biggest fall in living standards since records began in 1956. Snap YouGov polling found that 69 per cent of people don’t think the Chancellor did enough yesterday to address the looming cost of living crisis, and 66 per cent say the Chancellor’s announcements today will not benefit people like them much.
As I wrote yesterday, this was a Statement designed to reassure Conservative backbenchers that Sunak is a low-tax Tory like them – his popularity has wobbled in the past year over his choice to hike taxes like National Insurance. But unfortunately, saying “tax cut” over and over again in yesterday’s statement has not been enough to undo the reality that – despite the increase in the National Insurance threshold, a 5p cut to fuel duty, a cut to income tax by 2024, and scrapping VAT on heat pumps and home insulation – the tax burden is still going to rise to the highest it has been in 70 years. Paul Johnson, the head of the Institute for Fiscal Studies, has this morning branded the Chancellor a “fiscal illusionist”.
It doesn’t mean, however, that the entirety of the Conservative party has turned on Sunak. Despite the public drubbing in today’s papers, most Tory MPs are crediting the announcements Sunak did make and don’t envy the invidious position he finds himself in, simultaneously trying to balance the books post-pandemic, provide support for a fresh crisis (against his own political instincts to be less interventionist) and lower taxes when the book-balancing imperative, his priority, gives him little scope to do that. Despite the political messiness of raising the National Insurance threshold while going ahead with the unpopular increase in the rate, many Tory MPs previously worried by it are expressing relief, describing the “huge difference” it will make to their constituents. The fuel duty cut has also been welcomed, even it will make a couple of pounds’ difference to the cost of filling up.
The problem with Rishi Sunak’s Spring Statement is less about the measures he announced (although there were some criticisms of those), and more that they simply don’t go far enough. I wrote last month about Labour’s approach to Sunak, once the most popular politician in the country, and reported that they don’t have much faith in Sunak’s abilities as a political operator any more (or that he’s “crap at politics”, as one figure close to Keir Starmer put it). The damning response to the Spring Statement shows why.
Labour sees fiscal events like these as important staging posts ahead of the next election. The party has a rare opportunity to increase its economic credibility, which it sees as the fundamental way it can beat the Conservatives (Labour has never won without polling well in this area). It sees Rishi Sunak’s statement as out of touch, failing utterly to tackle the serious concerns of households up and down the country – and it is taking a lot of pleasure in exposing the difference between Sunak’s low-tax rhetoric and his high-tax reality. That position on taxation could well come back to bite Labour. But for now, the party is vindicated in its assessment of Sunak, and more confident both in its ability to oppose him and that it is the party with the economic offer to meet the needs of the country. As someone close to Rachel Reeves put it: “He set the bar really high with his first budget, and he’s never really recovered.” Sunak is struggling to live up to his own hype, and yesterday failed to reassure people that he is rising to the challenge of a fresh economic crisis.