“On a day when 700,000 workers were on strike because of the driving down of their wages, the Tory Chancellor found billions of pounds for corporations.”Andrew Fisher
Andrew Fisher assesses Jeremy Hunt’s first full budget.
“A British economy proving the doubters wrong” announced Chancellor Jeremy Hunt at the start of his Budget speech.
The UK economy is the only economy in the G7 that is smaller now than pre-pandemic, we still have the lowest growth forecast for 2023 of any G7 nation for 2023, and the UK is the only country in the G7 where pay is lower today than in 2008.
If that’s the evidence Hunt is putting forward to prove his steady guardianship, after the disaster of Trussonomics, then he really is clutching at straws.
The Office for Budget Responsibility (OBR) forecasted that “real living standards are still 0.4 per cent lower than their pre-pandemic levels in 2027-28” – which means that we will be worse off in 2028 than we were in 2008. An unprecedented two decades of stagnation.
On the upside, Hunt can point to predictions that the UK will avoid recession this year, but it won’t feel like it for households who are experiencing what the OBR describes as “the largest two-year fall” in living standards since records began. Just yesterday, pay figures published by the Office for National Statistics showed wages fell by 3.2% in real terms in the last year.
Hunt had wanted to present this week’s announcements as a “back to work Budget,” focusing on changes to childcare, pensions and social security.
His flagship announcement was the extension of 30 hours of free childcare for all pre-school children from 9 months. But this will not even begin to be rolled out until April 2024, when parents of 2 year olds will gain entitlement to 15 hours of free childcare. Hunt has increased payments to childcare providers and incentivised people into childminding. If his timetable for implementation slips, any electoral gain from what could be a welcome policy may evaporate.
The rest of the announcements in this section of the Budget veered from cruel to obscene. The Budget announced the Government would be “strengthening the way the sanctions regime is applied” – and extending the sanctions regime to new cohorts of in-work Universal Credit claimants. After 15 years of punitive sanctions in the British social security system, there is no evidence that they do anything other than deepen poverty.
Jeremy Hunt had urged early retirees to get off the golf course and back into the workplace – while for several years consultant doctors have lobbied successive chancellors to remove disincentives to work because of punitive taxation of pensions above the previous £1.07 million lifetime allowance.
With 9,000 doctor vacancies in the NHS, and waiting lists of over 7 million people, Hunt is under pressure. But he chose a costly and unjustifiable tax cut for all wealthy pensioners. Hunt increased the annual allowance of what can be saved tax-free for a pension (from £40,000 to £60,000) and removed entirely the lifetime allowance.
This is a move costing £835 million a year that will benefit a few thousand people with the most generous pensions – including fat-cat company directors. As Torsten Bell of the Resolution Foundation assessed, “Rich people now have no overall limit on how much can be put into their pension pots tax free which, because of another big policy mistake, can be passed onto their heirs with absolutely zero inheritance tax.”
As Labour leader, Keir Starmer asked rhetorically: “The only permanent tax cut in the budget is one for the very wealthiest. How can that be the priority?” How indeed? While the rich get a tax cut, the lowest earners face benefit sanctions.
Elsewhere in the Budget, Hunt reminded his rebellious backbenchers that even with the scheduled corporation tax increase to 25 per cent going ahead that it remained the lowest rate of G7 nations.
But to soothe them Hunt conjured up £9 billion of tax breaks for big business. On a day when 700,000 workers were on strike because of the driving down of their wages, the Tory Chancellor found billions of pounds for corporations. Don’t ever let them tell you the money isn’t there.
Another big giveaway in the budget was an extension of the freeze in fuel duty and cut in petrol prices, which comes with a £5 billion price tag next year.
This is disproportionately a subsidy to better off households as just over one-third of the poorest households has a car, whereas around 95% of the richest households own a car. It also sits ill with the Government’s claimed green credentials.
These giveaways to the wealthiest pensioners, big business and motorists were not replicated for public services.
Despite the biggest recruitment crisis in Britain – with 165,000 care worker vacancies – there was no extra funding and not even a mention of social care in the Chancellor’s hour-long speech. There was likewise no extra money for the NHS which desperately needs extra capacity to help reduce the 7 million-long waiting list for treatment.
Rather than do more to address the sky-high energy cost crisis, Hunt maintained the household energy cap at £2,500 and will not be repeating last year’s £400 universal payment – meaning a de facto 19% increase in energy costs.
So move beyond the rhetoric and spin and here are the key facts from this Budget:
- The economy is shrinking this year
- People are facing the sharpest fall in living standards on record; and
- Hunt found billions for big business and the wealthiest, but not one extra penny for public sector workers, the NHS or social care
If this was meant to be a budget to boost the Tories in the polls, it should fail.