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All the Bad News Rishi Sunak Buried in his Spring Statement

Finer details in the Chancellor’s budget statement reveal that taxes will rise, incomes will fall, and the young and poor will pay the price

Chancellor Rishi Sunak. Photo: Imageplotter/Alamy

All the Bad News Rishi Sunak Buried in his Spring Statement

Finer details in the Chancellor’s budget statement reveal that taxes will rise, incomes will fall, and the young and poor will pay the price

The Chancellor today claimed to be cutting taxes while protecting the living standards of working people.

“This statement puts billions back into the pockets of people across the UK and delivers the biggest net cut to personal taxes in over a quarter of a century,” Rishi Sunak told the House of Commons.

The reality, as figures from the Government’s own Office for Budget Responsibility show, is quite different.

Taxes Will Go Up, Not Down

Sunak has gathered a series of headlines over the past week for his claimed “mission” to cut taxes. The reality is quite different.

Even before today’s statement, he had presided over the largest rise in taxes of any chancellor in almost three decades. 

And while he did announce some tax cuts today – on the basic rate of income tax and the threshold for National Insurance – the overall picture is that he plans to raise taxes even more than he has already.

According to the Government’s own Office for Budget Responsibility (OBR), the Chancellor will raise the overall tax burden in the UK to its highest level since the 1940s.

Office for Budget Responsibility March 2022 economic and fiscal outlook

Even on Sunak’s headline income tax cut, he declined to mention that his decision last year to freeze income tax thresholds means that the Government will actually increase the overall amount it collects in income tax due to so-called fiscal drag pulling more people into higher income tax bands.

Living Standards Will Fall

Office for Budget Responsibility March 2022 economic and fiscal outlook

Sunak also claimed today to be “rewarding work” while protecting household incomes.

The reality, as the OBR points out, is that overall living standards are set to fall by 2.2% in real terms over the next year – the largest fall on record – and are not set to recover to pre-pandemic levels until two years later.

Sunak Will Fail to Help the Poorest

Prime Minister Boris Johnson congratulates Chancellor Rishi Sunak after his Spring Statement in the House of Commons on 23 March 2022

The Chancellor today boasted of giving “security for working families as we help with the cost of living”.

However, in reality, there is little to help those who are at the sharpest end of the growing cost of living crisis. By definition, his cut to basic income tax will not help the poorest families for the simple reason that they do not pay tax on their income in the first place.

Sunak also announced almost no new help for people struggling on benefits, as he continues to refuse to reverse the Government’s cuts to Universal Credit. Instead, he has decided to prioritise cuts to income tax and fuel duty – most of which will help middle and higher earners, and only to do so right before the next general election.

As Professor Arnab Bhattacharjee, of the National Institute of Economic and Social Research, said following Sunak’s statement: “The announcements in the Spring Statement fail to help the poorest in society who bear the brunt of the cost of living crisis.

“To support low-income households and stop many thousands more from sliding into destitution, the Government should have at least reinstated the Universal Credit uplift to £20 per week, together with targeted financial support for food banks and free school meals.”

Students and Graduates Will Pay the Price

Buried in the small print of the Chancellor’s announcement is the fact that the tax cuts he announced today will mostly be paid by changes the Government has made on student loan repayments.

The Government announced last month that the salary cap at which people start paying back their student loans will be reduced from £27,000 to £25,000. The Government will also extend the loan repayment term from 30 years to 40.

These announcements combined mean that millions of students will have to pay thousands of pounds more towards their student loans.

Treasury Spring Statement March 2022

The small print of the the chancellor’s announcement reveals that these changes alone will pay for almost all the increased spending and tax cuts announced today.

Treasury Spring Statement March 2022

Prioritising Electoral Politics

So while Rishi Sunak today boasted of doing everything he can to protect living standards and household incomes, the reality is that those most in need of protection from the cost of living crisis will get little help from today’s announcements.

Instead, the Chancellor has made a political decision to prioritise a series of headline-grabbing tax cuts to be made right before the next general election, while at the same time raising overall taxes to the highest level for three quarters of a century.

Meanwhile, those struggling with rapidly rising food and energy bills on Universal Credit will have to wait even longer for the help they need from the Chancellor.

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