Wannabe Thatcherite Rishi Sunak believes that the path to the premiership he craves runs through a low tax agenda that revs the engines of the tory backbenchers and grassroots party members that decide leadership elections.
But he also knows that the prospects of a fifth Conservative general election victory are dead in the water if the UK economy is flat on its back. Pandemic or no pandemic, the British electorate is simply not going to elect another Tory Government if it is responsible for a failing economy. A growing economy is necessary (but insufficient) for the long-term prospects of the Tories remaining in power.
Sunak has also had to oversee record borrowing to pay for the consequences of the pandemic. With sluggish economic growth not up to the task and the dire political consequences of upsetting the new Conservative electoral coalition in the ‘Blue Wall’, Sunak has reluctantly chosen tax rises over the course of his Chancellorship.
Added to this, our Chancellor must find solutions to the cost-of-living crisis and runaway inflation that is officially running at 6.2% but predicted by the OBR to reach 7.4% later this year. World’s smallest violins at the ready but there is some truth in the Chancellor’s previous claims that he has limited options to deal with these (interest rates are controlled by the Bank of England and much of the inflation we’re seeing reflects global prices rises that were of huge concern even before the Russian invasion of Ukraine).
Regardless of whether you believe there are other policy levers available for Sunak, the British electorate is utterly unconcerned with the nuances of where fiscal responsibility lies and entirely concerned with putting food on the table, something that is a lot more difficult to do when the price of the weekly shop has rocketed. They are looking for practical help from their government.
Today’s fuel duty cut and rise in the National Insurance threshold will help with the cost-of-living crisis, but they fall short of what is required – something that could have dire electoral consequences for the Tories in the future.
In many ways, all Chancellors face the challenge of cutting taxes, balancing the books, growing the economy, controlling inflation, avoiding cutting public services and helping people day-to-day. And like all Chancellors, Sunak is struggling to strike the right balance hence him continuing with the overall NI rise but also announcing a 1p cut in income tax in 2024. At best, this will largely be cost-neutral for most working households and at worst a bung for the better off, including electorally significant pensioners.
In the end, this has been a small spring statement – as Sunak himself signposted earlier in the week – but it has also been hyper political. Shoring up pensioners, especially after scrapping the triple lock, looks like a classic Tory tactic to secure its base ahead of the next general election. Combined with the reduction in income tax from 2024 (no prizes for guessing the date of the next election) are all classic moves from a politically ambitious Chancellor that is framing both this statement and himself as about cutting taxes.
But what is the Tory base now? Is it still pensioners in the home counties or is it dual-income families in the north-east? The former are getting more out of this Spring Statement than the latter which perhaps suggests that Sunak is more concerned with the next Tory leadership election that the next general election. We’ll find out in 2024.
All the documents relating to the Spring Statement can be found here.
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