If you’re feeling a little disoriented after the chancellor’s Autumn Statement, you’re not alone. 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 £45bn 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 fiscal consolidation. with tax rises coming in at £25bn and spending cuts at £30bn. From the low-tax, small-state, stagnant-economy zeal of Liz Truss, we’ve gone to the pragmatism of Rishi Sunak. The prime minister claims to be instinctively a fiscal Tory, but on Thursday he oversaw an autumn statement that borrowed heavily from the opposition front: windfall taxes on energy companies (a £5.6bn increase by 2027/8), a freeze on national insurance caps on extra money for employers (£5.8bn), reducing the 45p tax rate threshold to £125,000 (£855m), changes to capital gains and dividend tax (£1.4bn), reversing cuts in Mr. Kwarteng’s stamps (1.6 billion). The tax increases paid for through 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 is partly paid for from the aid budget in abroad. And while public services will feel the squeeze next year as inflation races ahead of allocated budgets, most of the £30bn of spending cuts have been blasted into the next parliament, when the Tories may not even be in power. – Daily departmental spending £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 saved the pain of spending cuts until after the general election . 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. 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 damage voters and no doubt their strained relationship with a Conservative Party that already has 20 units back in the polls. YouGov poll in The Times it says 45% 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. Mr Sunak was nominated in the summer by his then leadership rival Ms Truss as a Tory chancellor who raised 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 said tax hikes risk stifling growth, Sir Bill Cash complained about the cost of HS2, Therese Villiers called on the chancellor to cut taxes quickly if current forecasts for the economic recovery and inflation proved true overly 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 didn’t roil markets, but the economic outlook is anything but bleak for the public and the government, and the coming months could be very bumpy indeed.
