And there was also bad news for people who are currently on benefits, with Sunak allowing inflation to erode their real-terms value by almost five per cent in 2022-23 as the cost of the basics of life, food and energy, continues to soar.
Some commentators went as far as to say the Chancellor once lauded for the furlough scheme that helped millions of people through the Covid crisis was ushering in a new age of austerity.
Responding to yesterday’s mini-budget, Labour shadow Chancellor Rachel Reeves said Sunak did not seem to understand the size of the problems facing the country and claimed that his decisions were “making the cost-of-living crisis worse, not better”, while Unite general-secretary Sharon Graham accused him of doing little but “tinkering around the edges”.
The scale of the crisis was laid bare by the Office for Budget Responsibility, which warned real disposable incomes are set to decline by 2.2 per cent in 2022-23, “the largest fall in a single financial year” since the Office for National Statistics began keeping records in 1956.
One reason is that taxation, while slightly reduced as a result of yesterday’s changes, is still at levels almost unprecedented in modern history, a situation expected to persist for years. The OBR said by 2027 some 36.3 per cent of the nation’s income would go to the government, the largest tax burden since the late 1940s.
How can it have come to this? The main explanation for such historically bad news is the vast debt run up by the UK Government during the pandemic. In 2022-23 alone, the UK is forecast to spend a staggering £83 billion just on paying off the interest – the highest figure on record.
But, while the current Conservative government would never admit it, the consequences of Brexit are making our economic situation worse.
At a time of record-high job vacancies and relatively low unemployment, the number of people in work is currently 450,000 lower than before the pandemic hit in March 2020, shortly after the UK left the EU. The OBR estimated there would still be about 400,000 fewer people in the labour force in 2027, with 190,000 attributed to a “smaller population, largely the result of lower net-inward migration”. These are lost taxpayers who could have helped to pay off the UK’s debts.
Our economy is straining at its leash but the decision to leave the EU and end freedom of movement is hamstringing its attempts to move forward, just when we need this most. If jobs are not filled, companies will not grow, and those vacancies may start to disappear.
The UK needs to work out what kind of country it wants to be and whether Brexit ideology, with its inherent, irrational hostility to migration, really is worth the price. A return to the European Union may be unlikely, but making it easier for migrants from Europe and beyond to come to this country seems like a good idea.
Meanwhile, the ranks of the working poor in the UK, one of the world’s richest countries, are set to grow as their leaders hope they can handle it. And for supporters pointing to a new £500 million fund for councils to help the poorest cope, that should be compared to the inflation-driven, real-terms cut in benefits, which equates to £12 billion.
Sunak’s choices were limited by the sheer scale of the country’s problems, but the way out of this increasingly scary nightmare is through economic growth, driven by private sector companies, coupled with an acceleration of the switch from expensive fossil fuels to low-carbon electricity.
The UK should abandon Brexiteer myths about migrants, realise the benefits of soft, not hard, borders, and embrace forward-looking policies fit for the new industrial age that is already upon us.