Jeremy Hunt inhabits a world where the UK economy is firing on all cylinders. His problem is that nobody else lives there. “The economy has grown,” he told MPs, after a strange joke about his wife’s birthday fell flat. “Real incomes have risen!” he added. “We reduce debt, and cut taxes!” is how he summarised his budget, if only to try and persuade the army of Tory backbenchers who have spent the year since Liz Truss’s removal lamenting his refusal to make unfunded reductions in the headline rates.
But Hunt, this time, did give them, and the British public, some red meat: the “fiscal headroom” the Chancellor now enjoys because of record tax receipts and frozen thresholds at a time of high inflation means he can reduce employee National Insurance contributions from 12 per cent to 10 per cent – equating to an extra £450 a year for someone on an average £35,400 salary. The issue remains, however, that the extra £450 will do little to compensate for 15 years of real-wage stagnation.
According to the Office for National Statistics, average weekly wages adjusted for inflation, despite a recent uptick, are around the same level as in 2008. That was when Gordon Brown was prime minister, David Cameron was merely leader of the opposition, not Foreign Secretary, and we were all playing Snake II on phones whose batteries lasted for a week.
Quite a bit has happened since then, and people don’t feel any richer. Public services are demonstrably worse after a decade in which the public realm has been starved of investment. And with housing costs ballooning, people who hadn’t yet made it on to the property ladder before the lost post-2008 decade have been feeling pinched. The Tories will head into the election next year asking for voter support in spite of the largest reduction in living standards between two elections since records began in the 1950s.
The Autumn Statement raised benefits in line with inflation, which generous souls will say had nothing to do with the threat of a “Red Wall revolt” against press-trailed real-terms cuts, coupled with stealthy tax rises on workers and cuts to inheritance tax. The latter never materialised, despite plenty of fraught debate over whether a levy affecting just 4 per cent of (very wealthy) estates should be reduced. Hunt boasted to the Commons that he’d halved inflation – something voters have correctly concluded had little to do with his policies. But with price rises still hovering around 5 per cent, and tax thresholds static, the government is content to welcome a tax-cash windfall. The burden remains the highest it’s been in seven decades.
At that level of taxation, we might expect ambulances to turn up within an hour of emergency calls, or for public transport to run on time, or for police to respond to a burglary. But voters know that the government is not fulfilling those everyday indicators of how well public services are being run. In fact, Hunt’s statement gears us up for yet more of the fiscal tightening that has already severely depleted the public realm. The Resolution Foundation concludes that with spending plans set in cash terms, rather than increasing in line with inflation, “spending for unprotected departments is on track to take a 16 per cent hit in real terms over the next five years”. That means “austerity-level cuts being implemented at a similar pace to those overseen by George Osborne in the early 2010s”.
Hunt’s “full expensing” or capital allowances giveaway for businesses – encouraging them to invest in new machinery and plants – aims to increase private investment in capital assets just as the state prepares for another fiscal retreat. While it’s welcomed by a whole host of business lobbying organisations and is expected to incentivise new rounds of spending in the private sector, the policy will do little to compensate for the real-terms cuts to public departmental budgets that are already stretched, with services teetering on the edge of functionality.
Prior to the statement, the pollsters Redfield & Wilton compiled a word cloud based on how 2,000 survey participants rated the UK economy: “worried”, “bad”, “terrible” were the top three responses; “rubbish”, “depressed”, “crap” were not far behind. There was little Jeremy Hunt said today that will change their mind.