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Hello. Taxes go up (next April and for some time after that). There will be reductions in real terms in most line ministries thanks to short-term inflation and even greater after the next election.
Lots more on that to come, but a few thoughts on the overall policy in today’s note.
Today’s Inside Politics is edited by Abby Wallace. Follow Stéphane on Twitter @stephenkb and please send gossip, thoughts and comments to [email protected].
God, let me cut the expenses (but not yet)
When he first ran for the Conservative leadership, Rishi Sunak’s speech was that he would cut taxes, honestly, but only once he cut spending. Jeremy Hunt’s fall statement is similar: he will cut spending, honestly, but only after the next election. Taxes will start rising straight away, but state pension and in-work benefits will rise to shield households from some of the economic shock. And there will be deep cuts in infrastructure spending.
Much of the rhetoric and political style was indebted to George Osborne, who has returned to Downing Street in an unofficial capacity to advise Sunak and Hunt. One aspect of this was the return of an old David Cameron favourite: Hunt announced that Patricia Hewitt, a former health secretary under New Labour, and Michael Barber, who advised Tony Blair on education from 1997 to 2001, will participate in the exams. on improving NHS efficiency and skills policy respectively.
These journals have something to commend in pure political terms, in that they provide institutional memory and (in theory, at least) broaden the political constituency that supports whatever emerges. But they’re also a great way to confuse your opponent and make you look reasonable.
That said, the actual content of the budget was more Alistair Darling in 2009 than George Osborne at any time from 2010 to 2016. Like Darling, Hunt uses the automatic stabilizers of social policy to shield households from some of the economic consequences of the crisis. . Like Darling, he uses capital spending cuts to signal his willingness to present austere budgets while promising that the worst is yet to come after the election.
Like Darling, Hunt hopes for something to happen, which means he doesn’t have to do all those things. And like Darling, when the time comes, that’s probably going to be the other political party’s problem anyway.
Of course, January 2025
Here is the most important graphic in British politics:
Real household disposable income per person is expected to fall by 4.3% in 2022-3, the biggest fall since ONS records began in 1956-7. This is then followed by the second largest decline in 2023-4. It will be only the third time since 1956-57 that disposable incomes have fallen for two consecutive years: the last time this happened was in the aftermath of the global financial crisis.
It is, in a word, awful. Horrible for households, horrible for businesses, horrible for society as a whole, and horrible, electorally, for the government.
You have to assume two things: the first, as is always the case when a party in power fears that its next meeting with the electorate will end badly, is that it must be assumed that this legislature will last the longest time possible. As I have already noted in this email, the latest date on which the next election can take place is January 28, 2025. This date would of course be very disruptive during the Christmas period and is therefore unlikely: but not impossible. In any case, the probable landing zone is November 2024 to January 2025, I think.
The second thing is that it is very likely that the Conservatives will not be re-elected, and if they do, it will be with a greatly reduced parliamentary majority. There is virtually no prospect that a Conservative government with a majority smaller than this will be able to make the clean cuts that Jeremy Hunt’s budget promises, and no prospect that a Labor government, whatever let it be, please. Whatever Labor says between now and the next election, the reality is that they will end up having to raise taxes sharply. If the Conservatives do eventually return to power, they will almost certainly end up choosing tax hikes over spending cuts.
Now try this
Recent events have led me to re-read Emily St John Mandel The glass hotel, one of my favorite novels. It tells the story, among other things, of a Madoff scam.
Whatever you do, have a wonderful weekend.
Top stories today
Small businesses react to fall statement | Soaring inflation, rising interest rates and a looming recession are weighing on the small businesses that form the bedrock of the UK economy. Read their verdicts on the fall statement.
Stamp duty change threatens weak housing market | Also in his autumn statement, the chancellor said the stamp duty reductions in England and Northern Ireland announced by his predecessor Kwasi Kwarteng would be phased out from March 2025. Critics of the move said it risked aggravating a housing downturn.
Gloomy outlook for the UK economy | Even more eye-catching than Hunt’s measures themselves were the dire prospects that necessitated them. Living standards set for biggest fall in six decades; the economy will not return to its pre-pandemic level until the end of 2024. Even if its finances are stabilized, Britain’s growth problems remain chronic, writes the editorial staff of the FT.
Newcastle-under-Lyme residents have lost patience with the government | The West Midlands town of Newcastle-under-Lyme switched from Labor to Conservative in the last election, but there was little evidence on Thursday of continued support for the government. As they digest the news that the next two years will bring the biggest drop in living standards since the 1950s, locals said just getting through this winter would be tough enough.
Discounts and road taxes | Hunt raised windfall taxes on oil and gas companies from 25% to 35% and extended them through 2028. Also in the fall statement: motor vehicle excise tax exemption , known as the vehicle tax, is scheduled to end in April 2025.
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. budget Jeremy Hunt est Alistair Darling George Osborne