Furloughing extended to September, more grants and loans for businesses and a package to help hospitality and retail survive the ongoing lockdown. All well and good but the bills for the Covid-19 crisis continue to rise to plus £400bn – and all this under a Conservative Government.
And then comes the hangover: the tax hikes to pay for it all. By freezing the level of tax free income and the higher rate threshold from next year the Chancellor will see more than two million people paying more tax bringing in billions more to the exchequer by 2026. Add to that the hike in Corporation Tax and Rishi Sunak will have begun the serious task of paying for the ill thought out spend, spend, spend policy to tackle the pandemic. No help for more than a million freelancers, hike the tax bill on the low paid, only a temporary increase on universal credit, no increase in minimum wage or help for care workers and no long term strategy to pay for the NHS and an aging population.
When the leader of the opposition Kier Starmer replied to the budget he had a point that it was papering over the cracks. Essentially a sticking plaster on the economy – hoping that things pick up this summer and all is back to normal in 18 month’s time. What then?
There had been talk of a wind fall tax on the big tech firms of Google, Facebook and Amazon and the like. A tax on home deliveries to encourage us all to return to the high street shops. A wholesale reform of business rates and a permanent cut in VAT for retailing and hospitality – but no. This was an opportunity to look to the future to help small and medium sized businesses once again fire up the economy. A chance also to recalibrate Britain socially so that the low paid have more in their wages which in turn go into spending and investing – it’s basic economics. So much talk of levelling up has been just that.
To use an old phrase Rishi Sunak has had a good war – or in this case a good pandemic. He’s emerged as the bright new hope of the Conservative Party. Slick, positive and clean cut. Unlike the politically bruised images of Boris Johnson, Michael Gove and Matt Hancock. If as expected Labour make substantial gains in the 2024 election but fail to win then Johnson’s days are numbered and Sunak looks a shoe in for a move to Number 10.
There is much to applaud in his budget – and I’ve clearly outlined the downside – namely a failure to address the long term. But help for retail and hospitality is appreciated, help for locals to save their pubs, help for business in the way of loans, extending furloughing, help with stamp duty and a freeze on the usual victim of the budget: booze. And the freeze on fuel duty is a big help for the entire economy – although the idea that petrol and diesel cars will be phased out starting in 2030 is questionable. Collectively motorists through fuel duty pay the Chancellor £27bn a year and that cash can’t automatically be replaced by a tax on hydrogen powered engines or even less likely electric vehicles. If as I predict Sunak moves next door in 2024 or soon after, this and other long term issues will fall in someone else’s in-tray. For now he’s just about got away with it and remains the Teflon Chancellor – which in politics is everything.
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