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The Spring Statement Was a Scam

Today, Rishi Sunak had a chance to tackle the cost of living crisis. Instead, he has left the average family around £1,000 worse off than last year – the biggest fall in living standards since records began.

Today's Spring Statement included no new money for education, health, or other public services. (UK Parliament / Jessica Taylor)

Let’s be clear. This Spring Statement did not even come close to addressing the scale of the cost of living crisis. The distance between the feeble measures announced and the grim reality of skyrocketing costs of essentials like gas, electricity, food, transport, and rents was so wide as to inspire outright derision.

It will not be sustainable: as prices continue to rise, most likely much faster than forecast, the ensuing political crisis will most likely drag Chancellor Rishi Sunak (or his deputies) back to Parliament to make further announcements in short order. Sunak’s preening, arrogant claim that ‘this day is an achievement which we can all celebrate’ will come back to haunt him.

His response to the outbreak of Covid-19 was the same: Budget announcements in March 2020 were heralded by a supine press as extraordinary, unparalleled interventions—before turning out to be totally inadequate just weeks later. No doubt the headlines tomorrow will be dominated by the fuel duty cut and the increase in the National Insurance Contribution threshold.

But cutting 5p from fuel duty means putting the price of a tank of petrol back down to the level it was at about a week ago. It will cost the government £5 billion, largely benefit drivers of bigger cars—who themselves tend to be better-off—and still allow the profiteers of the oil industry to fleece ordinary motorists. The boss of BP called his company a ‘cash machine’. Sunak’s fuel duty cut amounts to subsidising the £900-a-second profits of his company.

And raising the salary at which National Insurance Contributions have to be paid to match the minimum level for income tax (both now rising to £12,500 a year) will hand a bit more money to all those earning more than this. But of course it does nothing for those earning less than the current threshold. More than half of the extra money, according to Resolution Foundation, will go to the top half of the income distribution.

The fuel duty cut is worth about £150 a year for the average household. The NICs threshold is worth about £300. That still leaves the average family up to £1,000 worse off this year. This marks the biggest fall in living standards since records began in the 1950s, according to the OBR—but it could in reality stretch back to the 1920s or even the Industrial Revolution.

There was no new money for benefits. After the disastrous £20 Universal Credit cut, pushed through by Sunak in autumn last year, those dependent on benefits, meaning some of the poorest people in the country, are set to be the hardest hit by price rises. The State Pension will rise by only 3.1%, well below the current rate of inflation.

There was no new money for education, health, or other public services. The extra £500 million for local authorities barely makes a dent in the £15 billion real-terms cut in spending they have suffered over the last decade. Spread over every local council in the country, it’s derisory. With no new money for public services, public sector workers will be forced into heavy real-terms pay cuts, in line with leaked Treasury plans last October.

Public sector pay cuts, in turn, will undermine the ability of workers in the private sector to win bigger pay increases, just as the Governor of the Bank of England recommended a month ago. It’s obvious who the government expects to carry the cost of this crisis—ordinary workers.

The Labour Party hasn’t risen to the crisis, either. Rachel Reeves, as Shadow Chancellor, brings the confidence of a former Bank of England economist to the job and has scored some political hits, rattling the Tories. But what’s needed now from the Opposition in this cost of living crisis aren’t the technocratic appeals of a former Bank of England economist to ‘growth’—growth is very strong right now, and wages are still falling. Labour should be in the Tories’ faces, dragging them back, again and again, to the profiteering of the oil companies and the landlords, and the poverty pay of millions.

Labour’s windfall tax is fine, but the £3 billion Labour want to raise from it isn’t even 10% of the £40 billion profits Shell and BP alone made last year. Labour needs to remember it is the party of the workers against the profiteers at the top. As it is, the Party will also find itself running to catch up with a crisis that is only set to worsen from this point onwards.

Sunak could have halted his National Insurance Contribution. He could have halted the 56% energy price rise. He could have raised the National Living Wage well above inflation. The cost of living crisis isn’t simply due to some natural, unstoppable force: NICs, the energy price cap, and the National Living Wage are all directly under the government’s control. Sunak could have instantly lessened the burden for millions.

Yet Sunak chose to do nothing. I don’t believe, faced with the social devastation that is now coming, with a government barely troubling itself to address the disaster, people will remain silent. They certainly should not.