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If you’re feeling a bit disorientated by the chancellor’s autumn statement, you’re not alone.
In just eight weeks, the government has shifted from wanting to roll out the biggest tax cuts in 50 years to taking the country’s tax burden to its highest level since the Second World War.
Liz Truss and her chancellor Kwasi Kwarteng wanted to slash taxes – announcing £45bn of unfunded tax cuts in September – only for their replacements Rishi Sunak and Jeremy Hunt to swing the pendulum the other way, with an autumn statement targeting £55bn of fiscal consolidation, plus tax rises of £25bn and spending cuts at £30bn.
We’ve lurched from the zeal of Ms Truss’s low tax, small state, trickle-down economics to the pragmatism of Mr Sunak, who claims he’s instinctively a fiscal Conservative but on Thursday oversaw an autumn statement that borrowed much from the opposition front bench.
There were windfall taxes on energy companies (raising £5.6bn by 2027/8), a freeze on National Insurance thresholds for extra money for employers (£5.8bn), a cut to the 45p rate of tax threshold to £125,000 (£855m), changes to capital gains and dividends tax (£1.4bn), and a reversal of Kwarteng’s stamp duty cuts (£1.6bn).
Tax rises paid for by business and the wealthy had all the hallmarks of a Labour budget.
On spending, too, the Tories are prioritising extra money for the NHS (£6.6bn) and for schools (£4.6bn) over the next two years, paid for in part from the overseas aid budget.
And while public services will feel the squeeze in the coming year as inflation gallops ahead of allocated spending, most of the £30bn of spending cuts will be kicked into the next parliament, when the Tories might not even be in power, with day-to-day departmental spending £21.5bn less in 2027/8 than under previous plans.
“They’ve shot Labour’s fox,” is how one senior economist put it to me, as Mr Hunt borrowed some of Sir Keir Starmer’s tax plans, put more money into public services and saved the…
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