It’s the day of the Spring Statement (23 March) – one of two days in the year when everyone in Westminster becomes a finance minister for 12 hours. There is an intensity to these days: the Commons will fill for a rare set-piece speech; the Office for Budget Responsibility will release a report hundreds of pages long, full of pivotal fiscal estimates and semi-decipherable graphs; and journalists will try and tease out the underlying political decisions expressed in a sea of numbers. Within 48 hours the details will likely be forgotten, but a verdict will have been issued on the Chancellor’s political success in delivering the statement. (The UK’s economic fate tends to feature somewhat less prominently.)
What should we expect? The Treasury’s press release unfortunately offers little insight. Rishi Sunak, it informs us, will “set out [a] plan for [a] ‘stronger, more secure’ economy”, as if any chancellor could be setting out a plan for a weaker and less secure one. “Further plans” are promised “to support people with the rising cost of living”, along with a “pledge to continue to ‘stand by’ hard-working families during the challenging times ahead”. Tantalisingly, we are told that the “government plans to create a new culture of enterprise”: an ambition that no previous government has apparently ever had. After today’s proposals, the private sector will, we are assured, be “training more, investing more and innovating more”.
Prepare for a liberal peppering of such platitudes at lunchtime today, when Sunak will follow PMQs and speak for 40 minutes or so. The Mail is holding out hope that Sunak will cut, delay or alter the imminent National Insurance levy to pay for social care – a long-held hope of many back-bench Tory MPs – while the Mirror splashes on a mother and her four children struggling with the cost of living (“We need your help, Rishi”). Interestingly, many other papers scarcely mention Sunak’s statement, with the Sun and Metro leading instead on Vladimir Putin and Roman Abramovich, respectively, and the broadsheets focused on the front in Ukraine – although the Times notes that the cost of a roast chicken may soon spike by 30 per cent.
Here are a few key facts on tax to remember ahead of today’s more granular reports. Three taxes – income tax, VAT and National Insurance – bring in nearly two thirds of government revenues. Chancellors tend to cut income tax, which everyone notices, and pay for it by hiking National Insurance, a less well-understood tax on earnings. VAT is a regressive tax levied on consumption that is paid equally by the rich and poor.
Corporation tax (which Sunak has already increased), council tax and business rates are the next three key earners. Taxes on capital bring in relatively little, and the Treasury is defeatist about the possibility of soaking the wealthy for more. Meanwhile, fuel duty, which Sunak is under pressure to cut, has already been frozen for more than a decade, costing the Treasury billions throughout the 2010s. There is scant room to cut taxes – the UK has barely begun to pay for Covid, and for two years Sunak has been trying to raise revenue not reduce it – yet that is what Sunak now seems obliged to do. We’ll soon see how.
This piece first appeared in the Morning Call newsletter; subscribe here.
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