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Spring Statement: Country and Kitchen Sinks

Douglas Fraser
Business/Economics Editor, Scotland

4 days ago

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  • Principal’s Spring Statement
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  • How far should governments go to keep people and businesses safe in times of crisis? When the epidemic hit, she tried her best to deal with it. What about price inflation and economic wars through energy prices?

“I cannot protect everyone from the global challenges we face. So Chancellor Rishi Sunak echoes strong expectations that he should do more to mitigate the impact of high price inflation.

It was followed by a TV interview on the subject. “That’s the hardest part of the job, not being able to do all the things people want us to do. I can’t let all the problems go away. Where we can make a difference, we want to. »

Inevitably, however, there are ways for the Prime Minister to make a difference, but choose not to. Make choices in political careers. He could have done something by increasing social welfare in line with inflation, but he chose not to.

There will be income tax relief (not for Scottish taxpayers) after two years, reducing taxes on wealthier pensioners and the wealthy, while increasing the cost of National Insurance for staff. is also an option.

Principal carries spring statementImage Source, Getty Images

The Spring Statement also focuses on the politics and economics of managing expectations. It aims to answer a difficult question: what governments can and should do to support people when they are in financial crisis.

Behind the statement is a chancellor trying to build a reputation as a fiscal conservative, unlike his Downing Street neighbours, whose fiscal flexibility has left some Conservatives deeply puzzled.

A combination of all the measures the UK government has taken since October to help households cope with rising prices, the Office for Budget Responsibility says they offset about a third of the financial impact people are facing from rising prices.

Amortization effect

Compare that to the beginning of a pandemic. The answer is to throw the kitchen sink at the health and economic challenge.

When people started asking for 75 per cent wage support, Mr Sunak went further and took 80 per cent leave. When they asked him to extend it, he first said no, then went further than expected. Businesses want loans. They got more than they asked for.

pubImage Source, Getty Images

At the start of the pandemic, Mr Sunak supported the company with 80% of wages

Like other countries, through Covid has become a collective national enterprise. This is a special kind of stress that requires a special response.

Now? Not only are prices rising rapidly, but energy prices in particular are being used as a weapon of economic warfare. This financial instability is spreading to everyone’s home, orchestrated by the Kremlin.

air ringImage Source, Getty Images

So the big question is: How much should the government do to buffer the impact on individuals and businesses?

Rishi Sunak’s answer: It should help, but not to the same extent as an epidemic.

stagnant income

Of course, this is partisan politics. The Conservative Party sees itself as a low-tax party. However, Rishi Sunak is one of the greatest chancellors of modern times.

His response to Covid goes well beyond the excessive borrowing that the Tories under Jeremy Corbyn are trying to pin on Labour.

Mr Sunak has raised the share of domestic output absorbed by UK tax revenue to the highest level since the 1940s, when the country was emerging from a wartime situation.

Nor can the Conservatives easily claim to be the Welfare Party. An analysis of the spring statement by the Institute for Fiscal Studies pointed to the impact of stagnant incomes since 2008.

With that year’s financial crisis, credit crunch, weak productivity growth, tight budgets hampering growth, the pandemic and the inflation crisis, median income barely budged.

They earn less than £30,000 a year. However, if incomes continue to grow until 2008, the IFS says the median worker will earn an extra £11,000 a year.

“Pull Back the Boundaries”

So a party claiming to be low tax or prosperous will be a fight against Labour, the SNP or the Liberal Democrats at the next Westminster election.

Where else could the fault line be? Thatcherists can recall their heroic call to “overturn the country’s borders​​”.

Personal freedom and responsibility play a bigger role in this conservative ideology. The role of the state as a provider of people’s economic life security has been strengthened and weakened again by the epidemic.

Maybe Rishi Sunak is trying to navigate the border between the state and the individual acceptable to his party and country.

His political opponents have a chance to respond in their own way.

Related Topics

  • Rishi Sunak
  • Principal’s Spring Statement
  • UK economy
  • coronavirus pandemic
  • income tax

article Condition and kitchen sink first appeared in Zimo News.

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