“The Conservatives are set to punish already hard-pressed households struggling with the cost-of-living crisis and drive social conflict, by prioritising sticking to their own arbitrary fiscal rules.”
By Ben Folley
Jeremy Hunt will deliver his first ‘autumn statement’ this week, serving under former Chancellor Rishi Sunak, with widespread briefing of tax rises at all income levels and significant public spending cuts that will add to the past twelve years of austerity measures that have hit living standards for the majority.
The Conservatives are set to punish already hard-pressed households struggling with the cost-of-living crisis and drive social conflict, by prioritising sticking to their own arbitrary fiscal rules. On Thursday, John McDonnell will lead a discussion with Labour movement activists to analyse and respond to the budget.
Rishi Sunak has already been quoted en route to the G20 in Indonesia, making clear that major decisions in the statement will be made to demonstrate his government is ‘delivering on the expectations of international markets‘ and that the those markets are stabilising because they expect him to meet his fiscal rules through spending cuts.
Where these cuts will fall will only be revealed on Thursday but there is already speculation that social security payments could be pegged back to rise in line with earnings – so approximately 5% or so – and not at the September rate of CPI inflation, which would mean 10.1%.
There is debate too about the further suspension of the Triple Lock, which might mean the state pension rises at a lower rate than inflation is currently at.
And public sector pay, already being held at a rate of 5% this year for most pay review body sectors like teachers, nurses and firefighters, has been reported as being pegged back even further next year, at around 2%.
Even talk of increased windfall taxation on the oil and gas giants, and its extension to energy retail suppliers like British Gas and EDF will not be enough to make up the governments fiscal rules, therefore requiring further spending cuts and tax rises.
And rumours about a revised energy price guarantee scheme is likely to target support on a small pool of people, allowing bills to rise further for millions after the spring.
The government has made clear this weekend that tax rises will hit everyone, whilst the majority are already suffering real terms income cuts whilst a few at the top capitalise on under-taxed wealth.
Economists on the left are already condemning media rhetoric – driven by government briefing – of the existence of – or need to deal with – a fiscal black hole.
In a report for Progressive Economy Forum, Rob Calvert Jump and Jo Mitchell, said the fiscal hole was, ‘the product of forecasts produced by economic models and the government’s own fiscal rules’ of an arbitrary deadline to get national debt falling as a share of the economy in three years time.
In it, they argued, ‘It makes no sense to pre-empt any potential increases in borrowing costs with a return to austerity. We do not know what the cost of government borrowing will be. We do not know what nominal GDP will be. We do, however, know all too well what the cost of austerity would be.’
And as an alternative to cutting government spending, set out that, ‘Changing the accountancy rule used to measure the government debt back to what it was before Autumn Statement 2021 completely removes the “black hole”, putting government debt back on a sustainable footing with £64bn headroom to spare.‘
Similarly, BBC Newsnight’s Ben Chu set out why the Conservatives could choose from a range of options, and that the ‘fiscal hole’ was a creation of the Conservatives economic priorities which fail to act in the publics real-life interests.
The reality of the Conservatives agenda is it is driving social conflict. Millions are struggling to pay energy bills. Millions are still suffering the effects of the benefit cap and the loss of the £20 per week Universal Credit uplift provided during the covid pandemic. And millions of trades unionists are now balloting for strike action over pay which is being forced down in real terms.
In the past week around 300,000 nurses 100,000 civil servants and 70,000 higher education academics have voted for strike action. In addition, around 30,000 firefighters, a further 300,000 staff in the health service and around 700,000 staff in schools are being balloted to walk out over pay.
Labour left MPs have been backing trade unions taking strike action and in recent parliamentary debates have demanded increased taxation of wealth. This has included equalising capital gains with income taxation, applying national insurance to investment income, closing inheritance tax loopholes, or introducing a tax on the assets of the super-rich.
Thursday’s post-statement briefing will see left MPs John McDonnell and Jon Trickett give their thoughts on the announcement, joined by NHS Workers Say No campaigner Holly Turner and Ozlem Onaran, Professor of Economics at Greenwich University.
- “Hunt & Sunak’s Austerity Autumn Statement: how do we respond?” is taking place online on Thursday, 17th November at 6.30PM. Hear immediate response and analysis with John McDonnell, Jon Trickett, Holly Turner (NHS Workers Say No), and Professor Ozlem Onaran. Register your place here.