Mr Sunak’s Spring Statement has been widely criticised for failing to meet the sweeping cost of living crisis facing millions of families across the UK. Brexiteer economist Julian Jessop told Express.co.uk that while there were some good points to the announcement, many of the new policies either missed the mark or failed entirely to meet the enormity of the crisis. He suggested that the Chancellor’s strategy is not focused on helping beleaguered families – but rather on political gains.
Regarding the decision to raise National Insurance at a time when households were already facing major increases in their household bills, Mr Jessop said: “I think he’s just wrong.
“I mean, there’s never a good time to raise taxes, but now, customers are in crisis.”
The economist said: “It’s more about politics than economics. There’s a strong case economically for delaying the increase for a year. But he’s reluctant to do so partly because he might not win the fight in a year’s time.
“He wants to send the signal to departments that you can spend whatever you like.
“Politics rather than economics was also certainly the case with the decision to pre-announce income tax cuts in two years’ time.”
Families across the UK have seen a £1,600 hit to their income after the government’s decision to increase the energy price cap sees it jump from £1,277 to £1,971, an increase of £693. Official forecasts predict this will increase by a further £788 in October.
This comes as inflation hits a 30 year high, all while millions are met with a rise in their contributions to National Insurance.
Mr Sunak’s plan to help families includes raising the level of earnings at which people pay National Insurance to £12,750 in July, a 12-month long cut of 5p per litre for fuel duty, and a decrease in two years’ time of 1 percent of the basic rate of income tax.
The statement was widely criticised with Labour leader Sir Keir Starmer telling Sky News: “People don’t want a revolution. They do want to know ”how am I going to pay my energy bill which has just gone up today by hundreds of pounds?’
With the income tax cuts set to come into effect in April 2024, they will be starting just before the next UK general election in May of the same year.
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The cut in fuel duty also appeared to be ineffectual for poorer households, who are the most affected by the crisis, because they do not use fuel nearly as much as richer households.
Mr Jessop said: “The cut in fuel duty is only a small move, but the benefit will go more to people who use a lot of fuel – and those are not necessarily poor people.”
According to the New Economics Foundation, 40 percent of the poorest families in the UK do not own a car, and so would not benefit from the change.
However, the economics expert did state that the cut in fuel duty may have a trickle-down effect on the prices of everyday goods, as fuel is widely used in commercial production and a fall in cost may be able to be passed on to the consumer.
For instance, farmers across the UK are facing major damage to the prices of their products, with Kite Consulting, the UK’s leading adviser to dairy farmers, warning that milk prices could rise as much as 50 percent, and butter by 30 percent.
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British Egg Industry Council added that there could be egg shortages “within a matter of weeks” due to increasing production costs.
Mr Jessop added that the higher threshold for National Insurance contributions was part of the Spring Statement that would actually help poorer families, arguing it “takes a lot of the sting out of the increase in insurance rates for the poor tax cuts for low-income earners.”
However, the same could not be said for Mr Sunak’s strategy for benefits payouts, with he stated was out of touch with the rate of inflation in the UK.
Benefits will be increasing by 3.1 percent, which was the figure for inflation last September – a while before the cost of living crisis has hit.
Mr Jessop argued that the Chancellor could have based it on the rate of inflation from December last year, or bring forward the increase predicted for September of six or seven percent.
He also accused the chancellor of being reluctant to spend money in order to prepare for future shocks to the economy, adding: “You might say they’re saving for a rainy day. Well, if you look outside the window right now, it’s absolutely pouring down.”