Following the Chancellor’s Spring Statement last week, Will Tanner wrote for the Times Red Box, reflecting on whether the Chancellor has left enough time to make people feel their lives and places are improving before the next election.
This May in London and Halifax, in partnership with Create Streets, we will bring together the best thinkers and practitioners to celebrate community, discuss the challenges facing society, and share practical steps to revive left-behind places.
In two years as Chancellor, Rishi Sunak has had to steer the economy through a global pandemic, the deepest recession in 300 years and now the biggest squeeze to living standards in 70. Last week’s Spring Statement was meant to be the moment he moved from firefighting to the future. Instead, the fire rages on.
You only need to look at the sobering forecasts from the OBR to understand why. Real incomes are forecast to fall 2.2% this year and won’t recover to their pre-pandemic levels until 2023/4. Inflation is expected to peak at nearly 9 per cent this year. And energy prices are set to rise by around another 40 per cent in October. For those of us who did not experience the 1970s, next year is going to be a shock.
The question is not whether the Chancellor could have gone further – of course he could – but whether he did enough for now. The fuel duty cut, the National Insurance threshold increase and VAT cut for retrofit offer targeted support that will mitigate price rises for many. But the Chancellor has taken the judgement that, while the geopolitical outlook is so uncertain, it would be irresponsible to use all his firepower now.
We will not know the wisdom of that decision for some time. Many have said he should have acted more decisively to protect low-income households. But the crucial point is that he has left some space to go further if the future outlook demands it.
The real gap in the statement was political, not economic. While the promise of basic income tax cuts from 2024 is an indication of the Chancellor’s preferred dividing line for the next election, it will do little to improve left-behind towns. The Conservatives’ promised voters at the last election that things would get better. But most of the structural reforms that might level up the economy – capital investment incentives, R&D tax breaks, apprenticeship funding – are all delayed until Autumn. This risks leaving these reforms no time to bear fruit before polling day.
The implication is surely that, even if he was right to be cautious, the Chancellor may need to be bolder at the Budget. The next election is just around the corner – there is little time to waste.
A version of this note appeared on The Times Red Box on 24/03/22.
Will Tanner, Director of Onward
Yesterday the Government published the first Schools White Paper in six years, Opportunity for All. It includes new announcements on a minimum school week, stronger accountability measures and steps to bring all schools into strong Multi-Academy Trusts by 2030. Link.
In last week’s Spring Statement, the Chancellor announced a number of policies to help houses respond to future energy costs. This included zero VAT on energy efficient materials like solar panels, heat pumps and insulation, as called for by Onward, and a 5p per litre reduction on fuel duty. Link
A new £4 million fund has been set up to put communities in control of building over 1,200 new affordable homes. The new houses will be under the control of local organisations such as land trusts or housing co-operatives. Link