Chancellor’s Spring Statement

Several weeks ago, Chancellor of the Exchequer Rishi Sunak delivered his Spring Statement, often referred to as a ‘mini-budget’ halfway to the keynote Treasury event of the year. As those who followed the Budget in October will, no doubt, realise, this constituted a significant deviation from the government’s planned fiscal policy, though was not a total ‘U-turn’ – that favourite phrase of British media – as some might have hoped. Many traditional ‘small c’ financial conservatives have reeled from this sudden shift into the Conservative party becoming one of high taxation. This feeling is compounded by the recent ballooning of state power over the lives of individuals through the pandemic. Covid-19 and responses to it have created a very large national debt, normalised ‘big state’ – in contrast to the small state, minimal interference, focus on the individual that is typical of British conservatism – and huge domestic costs. These have been caused by recently exposed gaps in public services and given people new priorities: clearing the enormous backlog on NHS waiting lists, ‘fixing’ social care and ‘levelling up’ (whatever that means…). This program of public spending, as well as considerations about the transition to a net-zero economy and new emplacement of sanctions upon and investment away from Russia and its interests comes into conflict with the cost-of-living crisis created by the pandemic and other factors as the UK transitions away from financial support through domestic restrictions. A planned rise in National Insurance Contributions (NICs) rise of 1.25 percentage points will come into effect in April 2022, and changes to thresholds for paying tax will result in millions more paying tax by 2024 than would have been the case. This planned change in NICs was not amended by Sunak in his statement and nor was the decision to remove the £20-a-week uplift to Universal Credit (benefits) payments that had been in place during the pandemic to alleviate some financial burdens. The real changes to come out of budget were to VAT: cut to 0% for various energy-efficient home technologies including solar panels, insulation, and heat pumps. This ties in with green initiatives becoming an increasing priority, as well as that these products also have money-saving potential in the long term. For Times journalist Alex Massie, there are ‘two kinds of chancellor of the exchequer: those who start badly and never recover, and those that end badly.’ He places Sunak in the second category, having benefited from popular policies during the pandemic. Only time will tell the Chancellor’s fate in the history books.