Labour MP Asks Rishi if He Thinks the Public “Are Stupid”

Not for the first time, it’s Labour MP Siobhain McDonagh who’s provided the standout fireworks from Rishi’s treasury select committee appearance. With Sunak once again flaunting his supposed low-tax credentials, McDonagh repeatedly blasted the Chancellor for whacking up the tax burden to unprecedented levels – at one point even asking Sunak if he thinks the public “are stupid”Which seems excessive, although given her line of attack, McDonagh needs to remind everyone she’s a member of the opposition – and not, say, the Tory backbenches – somehow…

Rishi: “…I think you’re talking about through to the end of the Parliament, we’ve already had that conversation.”

Siobhan: “With respect, you don’t decide what questions we ask, or how often we ask them. Let’s do the maths though. When you add up all the proposed tax increases, and subtract your fuel duty, income tax, and national insurance pledges, the net result is a 3.3% rise in the tax to GDP ratio between 2019-20, and 26-27.”

Rishi: “No it’s a reflection of the fact that public spending is also, over that period, going to rise by over 2 percentage points of GDP… Government has to pay for the things it’s spending money on… rather than cut public spending, we’re raising the taxes to pay for it.”

McDonagh then went on to question the timings of Rishi’s proposed 1% cut to income tax, suggesting it was a cynical election ploy. Maybe it is, although it’s still pretty good politics. Labour are probably going to have to vote against a tax cut now after all…

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Front Pages: Spring Statement Edition mdi-timer 24 March 2022 @ 08:28 24 Mar 2022 @ 08:28 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
Guido Talks: Spring Statement 2022 Special

The wonks and commentariat have given their verdict, now hear what the Guido team have to say about Rishi’s Spring Statement. Was it really a tax cutting budget?

Subscribe to Guido Talks on YouTube, or if you prefer to listen rather than watch, subscribe to the show on Apple PodcastsGoogle PodcastsSpotifyTuneInaCastSounder.FM, or from wherever you get your podcasts.

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Spring Statement 2022: Think Tanks Respond

Westminster’s wonks have once again whirred into action, poring over every dot and comma of Rishi’s spring statement. Guido brings you the lowdown on what Westminster’s think tanks have to say about today’s announcements:

Unsurprisingly the Centre for Policy Studies are the happiest of the bunch, given they’ve been campaigning for Rishi’s NIC-Income Tax threshold parity for four years now – a report first launched by Theresa May herself. Tweeting an immediate reaction that no doubt Rishi’s advisors will be delighted with, director Robert Colville said the Chancellor had “decided to go full Lawson.”, with the wonks’ full reaction saying:

“We are delighted that the Chancellor has adopted our proposal to increase the National Insurance payment threshold to match the Income Tax threshold and create a Universal Working Income. It is great to see CPS ideas continue to make their way into Government and help reduce the tax burden for millions of people.”

The Adam Smith Institute isn’t so impressed, claiming the statement “leaves a lot to be desired” despite a welcome rise to the NIC threshold. ASI Director of Operations Morgan Schondelmeier writes:

“At a time when gas prices are only getting higher, we don’t need to be gaslit by a Chancellor who continuously claims to be a low tax fiscal conservative… In an ideal world, the Chancellor would have scrapped the planned National Insurance Contribution rise, although it is encouraging to see that he plans to raise the NIC threshold in line with income tax thresholds… All in all, the Spring Statement leaves a lot to be desired. There are promising mentions of a review of full expensing policy and increasing private sector investment, but more immediate relief for the rising cost of living and our oppressive tax burden are needed.

The Taxpayers’ Alliance calls it a mixed bag, praising the NI threshold hike while claiming the planned income tax cut is “taking with one hand to give away with the other”. Chief Executive John O’Connell says:

Taxpayers suffering through a cost of living crisis will welcome wins on fuel duty and income taxes. Soaring inflation has given the chancellor extra wiggle room, but this tax plan needs to come alongside an efficiency drive to eradicate waste and tackle the colossal cost of covid. Rishi must get a grip on spending if he wants to restore balance to the public finances while boosting growth and letting taxpayers keep more of their own money. Though a cut in income tax is welcome, in reality the Treasury is taking with one hand to give away with the other.”

The Centre for Social Justice also welcomes the NI threshold rise, though inevitably added they wanted to see uplifts to Universal Credit. A spokesperson says:

“We welcome the measures the Chancellor announced today to shield those on lower incomes from the impact of the National Insurance rise. But the reality is this cost of living crisis is just getting started – and today we needed to see a strategy for those struggling the most.

Resolution Foundation Chief Torsten Bell doesn’t mince his words, calling the statement “badly designed” and nonsensical. He writes:

“It’s crazy to raise National Insurance so you can cut Income Tax. Really not clear to me that what 21st Century Britain needs is to make things harder for workers and easier for pensioners/landlords… It’s even crazier to only have £0.5bn of support for lower income households in the face of the biggest cost of living hit for generations – contrast with the £10bn real terms benefit hit they face in the year ahead. This is a bigger package than many are saying, but it’s a really badly designed one.”

The Institute of Economic Affairs praises the promised cuts to income tax and fuel duty, although warned of the dangers of inflation and labelled the statement a “mitigation mini-Budget“. Director General Mark Littlewood says:

“The reduction in fuel duty will make a small difference to households. The decision to raise the National Insurance threshold means workers on an average wage will see their contributions fall, despite the planned 2.5 percentage point rise going ahead. The pledge to reduce the basic rate of income tax is welcome. But the UK will spend £83 billion on debt interest this year – almost double our entire defence budget. The Chancellor will not achieve economic ‘security’ without a commitment to drastically bringing down our tax bill and reducing government spending, which has spiralled out of control. Only then will he boost our anaemic growth forecasts.”

Onward‘s director praises Sunak for protecting the lowest earners against inflation, and dismissed critics for insisting he should have scrapped the NI rise. Will Tanner said:

“Today’s statement was a firefighter’s statement. The Chancellor has warned about inflation since he entered the Treasury and today his warnings were realised. The 5p cut to fuel duty and the rising threshold for National Insurance contributions offer considerable protection against spiralling inflation, especially for those on the lowest incomes – and, from 2024, he ensured that voters will keep an extra penny from every pound they earn. Critics will say he should have scrapped the planned National Insurance rise. But doing so would have meant finding £12 billion elsewhere for the NHS and social care, or explaining to voters why they must wait months for operations in the run up to a general election. Ultimately this left him with no easy choices. 

James Kirkup, Director of the SMF, said:

“Public spending as a share of the economy is at its highest since the late 1970s. The tax burden is at its highest since the 1940s. Higher debt interest payments will cost almost £100 billion in the years to 2027.

Politically, the state is as big as it can get and any politician who wants cash to fund crowd-pleasing policies – be they tax cuts or more spending – will have to think creatively about how to fund them. That means reforming public services to make them more efficient – taxpayers deserve to get more bang for their bucks.”

Connor MacDonald, Head of Policy Exchange’s Economic Unit, said:

“This Spring Statement comes at a time of immense volatility. It is not surprising that the Chancellor stuck to the fiscal rules, given that it is likely that in the Autumn more fiscal firepower will be needed. This is probably the prudent approach, and it should be pointed out that the Chancellor did use more of the fiscal upside from increased revenues that previous Chancellors have done. It is right that the Chancellor simplified the tax code by aligning income tax and NIC thresholds, and it is vital that the consultation on tax that the Chancellor announced today delivers substantial pro-growth reforms. One area that may need to be reviewed is that benefits were not uprated relative to the new inflation projections. Given current volatility, six-month lags in uprating benefits to CPI are probably not helpful. Continuing to uprate at 3.1pc may be particularly problematic for disabled people, a group where there has been a widening employment participation gap since the pandemic, according to the IES. The Chancellor has very hard choices in extremely difficult circumstances, and the decisions made today highlight the extent to which there are choppy waters on the horizon.”

Guido will have his own response coming out soon…

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Read in Full: Spring Statement and Rishi Tax Plan

Spring statement:

Tax plan:

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+Spring Statement Announcement Live Blog+

Stay tuned…

Security

  • Moral responsibility to use economic strength to support Ukraine and impose severe costs on Putin’s regime
  • Putin sanctions not cost-free to UK and presents risk to our recovery

Outlook

  • OBR has said there is “unusually high uncertainty around our economic output.”
  • OBR now forecasts growth this year of 3.8%, then 1.8% next year, followed by 2.1%.
  • Lower growth outlook hasn’t affected jobs performance with unemployment forecast to be lower in every year of the forecast
  • OBR expect inflation to rise further, averaging 7.4% this year

Energy

  • Three immediate measures:
    • Fuel duty cut by 5p per litre, biggest cut to fuel duty rates ever
      • Cut will last until March next year
      • Worth over £5 billion, taking effect from tonight
    • VAT cut on homeowners installing energy-saving materials will now pay 0 VAT, something we can only do thanks to Brexit.
      • All energy red tape abolished
      • Solar panel installation will now be £1,000 cheaper
      • Won’t be able to sanction this in Northern Ireland thanks to the protocol, Barnett relief will be sent to Stormont instead
    • Doubling household support fund
      • Will receive this funding from April

Fiscal rules

  • Rishi still meeting his fiscal rules with the above announcements. Borrowing as percentage of GDP still falling.
  • Cost of borrowing continuing to rise
    • £83 billion of debt interest payments next year, 4 times that of last years
  • Treasury will continue to weigh carefully calls for more public spending

Cost of living/tax

  • Overarching ambition to reduce taxes by end of this parliament
  • Tax plan published today – “principled approach” 
  • Any extra resources to go on lower taxes not extra spending
  • NI Rise:
    • If the rise goes, so does the £12 billion NHS funding
    • Right that the Health & Care Levy stays
    • Not incompatible with reducing taxes
    • NI threshold currently £9,900 – current plan to increase by £300 but Rishi instead to increase it by the full £3,000, fully equalising the NI and Tax threshold
    • From this July £12,570 earners won’t pay a penny in NI
    • £6 billion tax cut
    • £330 a year tax cut for workers
  • Rishi will review whether current tax system is incentivising training
  • R&D is too low as a percentage of GDP, will expand relief
  • Employment allowance increased to £5,000, help for small businesses
  • Rishi refuses to let ambition of income tax cut “dither and drift”
    • Rishi confirms that before the end of this parliament, 2024, basic rate of income tax will be cut by 20p to 19p in the pound
    • A £5 billion tax cut for 30 million people

Rishi claims this tax plan represents the biggest cut to taxes for a quarter of a century and surprisingly commends it to the house…

mdi-timer 23 March 2022 @ 12:42 23 Mar 2022 @ 12:42 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
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