In just eight weeks, the government has gone from wanting to deliver the biggest tax cuts in 50 years to raising the country’s tax burden to its highest level since the Second World War. Liz Truss and her chancellor Kwasi Kwarteng wanted to cut taxes – announcing £45 billion of unfunded tax cuts in September – only for their replacements Rishi Sunak and Jeremy Hunt to swing the pendulum back, with an Autumn Statement targeting 55 billion of fiscal consolidation. plus £25bn tax rises and £30bn spending cuts. From the low-tax, small-state, economy zeal of Ms. Truss we have moved to the pragmatism of Mr. Sunak, who claims to be instinctively a fiscal Conservative but on Thursday oversaw an autumn statement that borrowed heavily from the opposition front. There were windfall taxes on energy companies (£5.6bn rise by 2027/8), freeze on National Insurance limits for extra money for employers (£5.8bn), 45p tax cut to 125,000 £ (£855m ), changes to capital gains and dividend tax (£1.4bn) and reversal of Kwarteng stamp duty cuts (£1.6bn). The tax increases paid by business and the wealthy had all the hallmarks of a Labor budget. On spending, too, the Tories are prioritizing extra money for the NHS (£6.6bn) and schools (£4.6bn) over the next two years, which are partly paid for from the budget aid abroad. And while public services will feel the squeeze next year as inflation races ahead of devolved spending, most of the £30bn of spending cuts will be unleashed in the next parliament, when the Tories may not even be in power, with per day – Daily spending by departments £21.5bn less in 2027/8 than previous plans. “They shot Labour’s fox,” one senior economist told me, as Mr Hunt borrowed some of Sir Keir Starmer’s tax plans, put more money into public services and avoided the pain of spending cuts until after the general election. Mr Hunt also threw down the gauntlet to Labor on how they would pay for improved public services. But the political skill of Thursday’s statement cannot diminish the harsh reality of what people are about to face as the UK slips into recession and energy bills and inflation remain high. Use Chrome browser for more accessible video player 2:50 Promise to increase NHS budget UK households are expected to experience a 7.1% fall in living standards over the next two years. It’s the biggest drop in six decades and will push household disposable incomes back to levels not seen since 2013. A decade of growth is gone. This, combined with lower inflationary pay rises for public sector workers and tight budgets as inflation outstrips the funding of many of our public services, will hurt voters and will no doubt test their relationship with a Conservative Party that has already 20 units back. polls. Read more: Key announcements at a glance Millions to pay more tax A YouGov poll in The Times says 45 per cent of voters blame higher levels of borrowing on the Conservative government, despite Mr Hunt’s best efforts to blame it on global factors. And then there is the Tory party itself. Use Chrome browser for more accessible video player 0:49 The energy price cap will rise again in 2023 Mr Sunak was ousted in the summer by his then-leadership rival Ms Truss as Tory chancellor, who pushed the country’s tax burden to a 70-year high. On Thursday, it went further, pushing it to a nearly 80-year high. Signs of discontent rippled across the back benches on Thursday. Richard Drax has pointed out, shared by many of his colleagues, that raising taxes risks stifling growth. Bill Cash complained about the cost of HS2 and Therese Villiers called on the chancellor to cut taxes quickly if current forecasts for economic recovery and inflation proved too pessimistic. This is an autumnal statement from the chancellor and prime minister who insists it is time to “weather the storm”. On Thursday, both will be relieved that the announcement did not roil markets, but the economic outlook is anything but bleak for the public and the government. The next few months can be very bumpy indeed.
