A Budget With No Answers

From the environment to the soaring cost of living, we live in a time of crisis – and today's Budget shows that Rishi Sunak has none of the answers we need.

Chancellor of the Exchequer Rishi Sunak holds the budget box as he departs to deliver the Autumn Budget And Spending Review. Credit: Dan Kitwood / Getty Images

With budgets, it always takes a few days for the truth behind the Chancellor’s showboating to come to light. But as soon as Rishi Sunak sat down it was clear that this was a smoke and mirrors budget that fails to deal with the deep crisis that millions of people face.

While much more will become clear in the coming days, here are five quick takes from Wednesday’s budget.

1. It Doesn’t Address the Deepening Cost of Living Crisis for Millions

The pre-briefing from Rishi Sunak of an ‘age of optimism’ shows just how out-of-touch the mega-wealthy Chancellor is. All the talk of Britain being the fastest-growing major economy will ring hollow for the millions of people facing a cost-of-living crisis with unjust tax hikes, cruel benefits cuts, energy and other price hikes, and unemployment as furlough ends. (And, of course, Britain is only having one of the fastest economic bounce-backs because our economy fell the furthest after the government’s disastrous handling of Covid.)

The IFS now estimates that over the next five years real household disposable income is expected to grow by a minuscule 0.8% per year. This is not only well below its historic average, but it comes after a decade of wage freezes, benefits cuts, and austerity ripped apart our public services. Average incomes are now expected to be £9,000 per person below the pre-2008 trend.

This certainly isn’t a budget that will leave people feeling more optimistic about their future.

2. Over a Decade of Stagnant Wages Will Continue for Many

As part of this squeeze on living standards, workers have faced the biggest stagnation of wages since the age of Napoleon. Wages are only just now back to their 2008 pre-crash peak meaning the Tories have overseen a decade of lost pay.

For all the rhetoric, it is unlikely that the budget will address this. As the TUC pointed out in its immediate budget response on Twitter, ‘So much for the high pay economy. Real pay set to fall by -0.1% in 2022, and average only 0.3% a year from 2022-2025.’

The Chancellor did confirm that he is ending the pay freeze for public sector workers—but that’s no good without specific new money set aside for departments to fund any increases and there was none guaranteed. Without such a boost to pay then services simply won’t improve.

Take the NHS: the £5.9 billion investment to build new diagnostic centres will fail to meet the goal of cutting waiting lists if staffing shortages aren’t fixed. The Health Foundation estimates it will take 4,000 more doctors and 17,000 more nurses to clear the backlog, but where are they to come from without a massive boost to NHS staff pay?

Much of the trumpeted increase in the National Minimum Wage to £9.50 will be eroded by the cuts to Universal Credit, tax hikes, and higher bills. In fact, experts estimate that the minimum wage boost will only be worth about £300 per year to a full-time worker on Universal Credit—way below the £1,000 benefit cut they recently suffered.

And the increase is anyway simply inadequate. According to the TUC, there are 3.7 million key workers—more than half in the private sector—getting paid below £10 per hour. After everything they have been through in this crisis, this budget should have been the moment for a really significant boost in the minimum wage with the government setting out plans to deliver the £15 per minimum wage that polling shows 65% of the public want to see.

3. Levelling Up? It’s Not Even Levelling Back to 2010

The Tory claims of levelling up were brutally exposed in the budget. The reality is that this Tory government isn’t even trying to level back services to where they were over a decade ago and funding for most will remain desperately short of that.

Take Youth Centres: the Chancellor announced money for 300 more but the Tories have closed 750 Youth Centres since 2010. Likewise, the government has announced some limited funding for so-called Family Hubs in 75 areas, but the Tories have axed up to 1,000 Sure Start centres in the past decade.

Sunak bragged that spending on schools will return to 2010 per-pupil spending levels by 2025. What that really means is that the Tories don’t think that it’s worth spending a single penny more on our children’s education over a 15-year period. And the extra £4.7 billion allocated today still leaves funding levels far off the £15 billion boost that the government’s education recovery commissioner had called for before resigning over inadequate catch-up funding.

Even the health spending announcement falls well short of what has been delivered in the past. Since 2010, the Tories have provided less than half of the historic rate of the 3.6%  NHS spending growth per year since its creation and way below the 6% per year average that the last Labour government delivered. That’s why even before the pandemic our NHS was struggling to cope and this budget has offered nowhere near enough to resolve the mounting NHS crisis.

4. Letting the Super Rich Off the Hook

While working people face unfair tax hikes, the wealthy continue to be let off the hook. In fact, the Chancellor slashed the taxes that bankers have to pay on their profits saving them billions over the next few years. Surely this would have been better spent tackling homelessness or child hunger?

Once again, we see the richest getting ever richer. Britain’s billionaires have increased their wealth by £106 billion during the pandemic—that’s £290 million per day. This budget should have been the moment to introduce a Wealth Tax to address the grotesque levels of inequality in our society.

There are many ways that wealth could be taxed. Increasing capital gains tax, paid on profits when selling assets like second homes or shares, to the same level as income tax, and getting rid of exemptions, could raise £18 billion per year.

This could go alongside the proposal I recently put to Parliament for an annual Wealth Tax of 1.5% on the wealthiest 1% of people, those with assets of over £5 million. That would raise £14 billion per year according to the UK Wealth Tax Commission—more than the government‘s regressive hikes to National Insurance would. A one-off 10% tax on the wealth of those with over £100 million would raise £69 billion, while a Windfall Tax on excessive profits made during the pandemic could also raise important funds to rebuild our social services.

5. A Missed Opportunity to Build a Better Future for People and Planet

Like many I nearly fell off my chair when I heard the Chancellor was cutting taxes on UK internal flights, just a week before the historic global COP26 climate talks and when the UN is warning the world is far from doing what’s needed to prevent climate catastrophe.

This should have been the moment to really boost public spending with a huge social investment programme to tackle the climate crisis and to eradicate the deep inequalities so exposed by Covid.

Earlier this week, nine of the UK’s leading think tanks and over 70 economists called on Rishi Sunak to do just that by investing in a ‘Green and Care-Led Recovery’. The group calls for an additional £70-90 billion annual spending to rebuild our public services, meet climate goals, and address regional equality while also helping spur economic growth, tackle unemployment, and generate higher tax receipts to cut debt levels. Likewise, the IPPR has called for £47 billion extra investment this year to help boost the recovery, take the economy to full employment and help meet net-zero commitments.

The whole Left should now take advantage of ‘building back better’ and ‘levelling up’ by pushing for these demands to make the Tory rhetoric a reality.