When the chancellor Rishi Sunak delivered his spring statement last week, he promised to tackle the rising cost of living. But the headlines the next day were unanimous: his announcements failed to hit the mark.
But just how wide of the mark was he? How many promises were broken by the chancellor last week? And, with the energy price cap pushing bills up from 1 April, does the spring statement deliver what is needed to avoid a cost of living crisis for households across the UK?
Promise: “I am going to deliver a lower tax economy”
Reality? Taxes are higher now than they have been at any point since the 1940s
Rishi Sunak claims to have given the British public the biggest tax cuts in a generation – but this is only possible because he has implemented even larger tax rises. His meagre tax cuts are only possible because he has raised taxes so much over the past few years.
Rishi Sunak’s so-called tax cuts announced in last week’s spring statement only offset his own tax rises by a sixth. The government Office for Budget Responsibility said “Net tax cuts announced in this Spring Statement offset around a sixth of the net tax rises introduced by this chancellor since he took over the role in February 2020, and just over a quarter of the personal tax rises he announced last year”.
This means that the chancellor’s tax cut announcements don’t actually mean the tax burden goes down. In fact the amount of tax we pay actually increases to 36.3% of GDP in 2026-27 compared with 33% of GDP when Rishi Sunak became chancellor in 2020.
According to the Institute for Fiscal Studies, in just two years Boris Johnson and Rishi Sunak have announced tax rises worth 2% of GDP – the same as Tony Blair and Gordon Brown did in ten. The Government’s tax take is set to reach its highest since the late 1940s.
Promise: “We will help families with the cost of living”
Reality? Families are struggling to make ends meet now more than ever
UK families face the steepest drop in living standards and the deepest cost-of-living crisis since the 1970s. Household incomes are predicted to fall by 4% in real terms – or an average of £1,000, according to the Resolution Foundation.
On 1 April 2022 energy bills will increase by up to 54% as the energy price cap rises. National insurance contributions will increase 1.25 percentage points. Essentials like broadband are set to increase, with BT announcing a 9% bills hike and supermarkets like Tesco predicting food costs will increase by 5%.
Childcare costs in the UK are the second highest in the world and fuel costs are at an all time high. Meanwhile wages have stagnated. In the public sector, workers have been subject to a decade of wage restraint and below-inflation increases.
Instead of announcing measures that would help tackle this crisis – such as a real terms public sector wage increase, a reinstatement of the Universal Credit uplift, a windfall tax on big energy profits to fund lower bills, and properly funding childcare provision – the chancellor has chosen headline grabbing options.
Many of his announcements are temporary, such as the £200 energy bill rebate. In reality, this is a compulsory loan which will repaid through higher energy bills in the future.
Promise: “We will share the proceeds of growth fairly”
Reality? A tax hike for working people and a tax cut on wealth
National Insurance is a tax on workers and their employers. Income tax is a tax on everyone whether they get their income from working or from unearned wealth. That means an increase in National Insurance contributions is a tax targeted at working people.
This increase comes at the same time as Rishi Sunak has announced a future income tax cut. This means those who make their money in other ways – for example landlords, people with private wealth and property, or those who earn money from their investments – will get a tax cut.
Analysis by the Resolution Foundation shows that many of the richest taxpayers have benefitted from the Government’s decision not to levy any significant taxes on wealth at a time when savings and investments, including property, had made unprecedented gains.
The losers are low earners, who gain the lease from the increase in tax thresholds as any tax cut is cancelled out by significantly lower benefits. The Resolution Foundation shows that the increase in the National Insurance threshold is a tax cut mostly for middle and top earners – only £1 in £3 of this benefit goes to the bottom half of earners.
Promise: The 5p fuel duty cut is “a tax cut this year for hardworking families”
Reality: 5p does help at the pump but prices are still spiralling out of control
Because of the record increases in fuel prices thanks to inflation and the impact of the Russian invasion of Ukraine, the RAC were clear that the reduction will only “bring prices back to where they were a week ago” and called the cut a “drop in the ocean”. The cut is also only a short-term measure, which will last for only 12 months.
Not only is the cut in fuel duty a temporary salve for rising prices, it is also an unequal one. Because lower income households spend a lot less on petrol or diesel than wealthier ones – perhaps because of the need to budget or because they are less likely to own more than one vehicle – they receive less of the benefit. According to the New Economics Foundation, only 7% of the benefit will go to the poorest 20% of the population, while 30% will go to the richest 20% of the population. This means the 5p cut is worth only £1.80 per month for the poorest households.
These figures also assume the full 5p cut is passed onto motorists at the pump – in reality, the AA has found that petrol prices have fallen just 2.71p as petrol stations fail to pass on the savings.
Meanwhile, despite the issue being raised with the Treasury and Secretary of State for Health, the Government has failed to update mileage rates. HMRC’s rates for employees claiming back miles driven just to do their jobs have not been updated for a decade, which means many workers are out of pocket simply by doing their jobs.
Promise: “Public sector workers will see fair and affordable pay rises”
Reality: Any pay rises planned in October’s budget have been wiped out by inflation
The chancellor didn’t mention public sector pay once in his spring statement. Despite promising an end to the pay freeze in autumn, record levels of inflation have wiped out any prospect of a pay rise in line with inflation. Instead, inflation at a 30-year high means public sector workers risk yet another real-terms pay cut.
To make good on his promise to end the freeze for public sector workers, the Institute for Fiscal Studies estimated that the chancellor needed to commit £10bn to ensure pay kept pace with inflation. The fact that this funding was not forthcoming, and public sector workers didn’t even get a mention, means this is another broken promise from Rishi Sunak.
It’s a scandal and disgrace. 37 years I’ve worked for the NHS and its no better paid since I started in March 1985. The tories always look after themselves. Pay us Nurses a decent wage for once instead of us having to do bank shifts to make up the short fall.
Absolutely !where has all the gratitude for the epedemic gome
It is corruption on the part of The Energy companies The Energy regulator ofgem and of course The Government. They will have blood on their hands later on this year because their will be a risk of people taling their lives as a result of depression. We need a mass resistence as from today.
I have been awarded £1.50 a week pay rise for the next 12 months on my old age pension. Now what shall I spend it on. A block of chocolate would be nice. It won’t melt because we won’t be able to use the central heating. . He cancelled the triple lock. We voted for tories as they pledged to keep this going.
I to totally agree with Maria Jarvis. I started work with the NHS in 1986 July. As far as I am concerned the Nurse’s pay has always been Crap. And it will never change. That is why I am leaving has soon has my Pension is sorted out.
The rich always look after themselves first and foremost. As usual, its the poorest in the communities who bear the burden and are made to suffer the hardest for an ineffectual government. Oil prices per barrel haven’t gone up but are kept artificially high. No need for it!! The government could at least give us a break in the tax on that!! As for wages, please can we not only think about public sector wages but about private sector wages too!! A lot of businesses haven’t given a wage rise in many years and we are way behind inflation. Its not just the public sector who are suffering but only them that are heard about!!! Lets be a bit fairer about who is hurting here.
Shameful.
I am aS.R.N who started training when the N.H.S. Came into being-the Tories opposed it’s then, and it is still the same now.
I worked for over a period of 40yrs in hospitals, and we were never given a fair crack of the whip when Tories were in power, poorly paid and working long hours.
Then Margaret Thatcher was elected Prime Minister and she tried her utmost to close the N.H.S. down. When that did not succeed she got rid of the Matrons and put Managers, with no N.H.S.
Experience in their place. Things were ever the same after this,
I believe the present Government are following in her footsteps, and their aim is to have Private Medical Care reinstated.
I am now in my ninety second year, and must say that I have recently received excellent care
from Surgeons and Nursing staff whilst I was in their care.
Just how many times have the Conservative Party deceived the mass of the British people? There is absolutely nothing new in their sleight of hand. All working people are betrayed by a Conservative government. Please remember this when the local elections come along in May. Make your vote the start of the fight back!
I have worked in local government for 42 years and have never had to penny-pinch like this before. The latest pay rise has been swallowed up in rising taxes, fuel bills, petrol price hikes and general cost of living rise. I accept that covid has thrown a spanner in the works but feel cheated by governments lack of empathy and support for working people. Government must do better!
I’m just really worried that we won’t have an economy, as if people are spending all their money on their bills, how will we be able to hold up our economy, I don’t know enough about economics but wouldn’t it fold in on itself?
I work in education and am aware that deprivation causes development issues for children, research has shown that investing in children is cheaper in the long run as these supported children grow up to be healthier and less of a burden on the system, something Labour was trying to initiate till the Tories abandoned all the good work.
Its the same old story, workers will foot the shortfall regardless. But its the workers and those who have worked are paying the price.
If you look at those you don’t work and get the benefits (and help) they in most cases get more money than some of those of us who work, but they do not pay any taxes on their money, they get free Council Tax and free rent (which the taxes payers have to pay through the Council Tax increases etc). It would be interesting if we could pick what we pay for and have a breakdown what we would see displayed. If everyone payed the basic tax then, eg Council Tax bills would come down and eventually tax rates would also come down.
The increases are to cover the shortfall. Why do any of the parties think it okay to keep being the ‘do gooders’ for other countries, inviting people in when those people need looking after and we, the workers of this country are having to pay for it all. Start thinking about the workers. P Patel was quick enough to say 3 years for the Ukraines, but not the boat people or the others. Everyone should be made to pay taxes on there money, especially when its handouts from the taxpayers who paid the taxes in the first place. What would happen if you didn’t have taxpayers to foot the shortfall. I remember when they first increased the NIC, they said it would be a one off – guess not. Another suggestion would be that those who don’t pay taxes should not have a vote on what happens in this country. But I suppose that would be really hitting out, as its the people on benefits etc that keep certain parties in seats. Sorry but I remember once that the Governments turned around and said that they would get people into work and off the benefit system as it was only there as a short gap help. I know people who have lost their jobs and the only help they get is forcing them back into work. Shame it doesn’t apply to those who don’t work and just take, take, take.