“Alice in Sunakland” was the analogy used by the Shadow Chancellor, Rachel Reeves, to criticise Rishi Sunak’s alleged disillusion with the realities and consequences of his policies, as he gave his Spring Statement to Parliament yesterday.
Top of the agenda was the crisis in Ukraine. To this point, Sunak outlined a two-fold update. Firstly, he detailed how the UK was supporting the Ukraine humanitarian effort and, secondly, how the government plans to face rising cost of living and inflation (set to average at 7.4% in 2022), which have been exacerbated since the crisis began.
For the Autumn Budget we analysed how Sunak’s promises lined up with his actions, in line with Porter Novelli’s ‘Say-Do’ proposition, and today we will take the same approach to the Spring Statement:
Say: “Confront challenge to our values by sending resources to Ukraine and strengthening our economy at home”
- Providing £400m of economic and humanitarian support
- Setting up the Homes for Ukraine scheme to allow refugees safety in the UK
- Freezing assets of major Russian Banks and Russian HNIs, as well restricting access to SWIFT, sterling clearing, insurance and UK capital markets
Though the UK’s collective actions with other nations have allowed the Russian rouble to reach record lows, and Russian central bank interest rates to double to 20%, there was criticism from the opposition, who questioned the decision to cut British army troops, at a time when security concerns were at a high.
“Nowhere near enough” were the words of the opposition bench, as Sunak outlined the sanctions imposed on Russian assets in the UK. The media has been equally vocal in criticising the government’s approach to the Ukrainian refugee crisis, praising the ‘fast-track’ schemes of other countries, such as Ireland, and condemning the bureaucracy of the UK’s visa process.
Though Sunak emphasised the UK’s actions for Ukraine were “not cost free at home”, some argue the government could go much further, in closing its “Say-Do gap”.
Say: “Help families with the cost of living”
- £9bn plan to help 28 million households pay around half the April increase in the energy price gap
- Fuel duty cut by 5p per litre
- Universal Credit payments and the state pension to rise by 3.1% in April, in line with last September’s CPI inflation figure
- Household Support Fund to double to £1bn “to help the most vulnerable households”
- Scrapping the rise in National Insurance Contributions (NICs)
Sunak highlighted the significance of his new policies, noting “the biggest cut to fuel duty rates, ever”.
There has since been an array of scrutiny. Rachel Reeves noted the Conservative Government’s reluctance to implement calls for a windfall tax on oil and gas producers, after BP noted that the current crisis was a “cash machine” for them. She added that the windfall tax would have been able to raise over £3bn, to help families through the energy crisis.
One analyst argued that by only increasing benefits to 3.1% – half the rate of inflation – Sunak has effectively cut benefits twice now in six months, risking an additional 400,000 people being pulled into poverty.
The Resolution Foundation said uprating benefits by a further five percentage points, by 8.1% rather than the 3.1% currently planned, to keep up with inflation would deliver “four times more support to the bottom half of the income distribution per pound spent, than scrapping the rise in national insurance contributions (NICs).”
Others argue Sunak’s changes were sufficient, given the current economic state, and should provide some relief for working families dealing with soaring energy and fuel costs.
Say: “Grow our economy”
- Consider where the apprenticeship levy is failing and seek improved incentivisation
- Reform of R&D tax credits, expanding to data, cloud computing and pure maths
- Cutting tax rates of business investments, to be finalised in the Autumn Budget
- Small business support:
- Business rates discount for Retail, Hospitality and Leisure businesses (on business rates up to £110k)
- Help to Grow Management Scheme (90% government-funded mini-MBA)
- Help to Grow Digital (to support SMBs buying new software)
Despite increased investment in upskilling and innovation outlined by Sunak, there was little additional information on the extent of aid for businesses dealing with pressures from the Ukraine crisis. Many UK businesses have ceased distribution in both Russia and Ukraine, and others are suffering from increased supply chain disruption. Sunak vowed to support UK businesses in his Autumn Budget, but this action was few and far between in yesterday’s statement.
Reflection from the Spring Statement
So, what was missing? Onlookers noted a “climate shaped hole” at the heart of the Spring statement, arguing that measures to tackle climate & cost of living crisis should be one in the same. The only notable move towards supporting sustainable efforts in the statement was the new 0% VAT on items such as solar panels and heat pumps.
Further criticism has arisen regarding the government’s bailout for Bulb Energy, which will cost taxpayers more than £2bn. Ed Miliband, the Shadow Secretary of State for Climate and Net Zero, claims this is a direct result of the government’s failure to regulate the energy market properly.
NHS workers also took a clear message to Rishi Sunak before his Spring Statement – “where’s our £350 million a week?” an open top bus, that rode around London, read. Mention of the NHS was kept to a minimum in the statement.
With much of Sunak’s new policies “to be finalised” over the summer, particularly those regarding UK businesses, only time will tell if Sunak closes his Say-Do gap in the next Budget.