Reaction to the Spring Statement. The reaction to Chancellor Rishi Sunak’s Spring Statement last week has seen an unusual breadth of criticism. Normally Conservative-supporting newspapers, poverty-focused NGOs, most of the right of centre think tanks and a number of Conservative MPs attacked the Chancellor for doing too little for lower income households in the face of the cost of living crisis.
Inflation and living standards. Published alongside the Spring Statement, the Office for Budget Responsibility’s Economic and Fiscal Outlook 2022 forecasts that inflation will rise to 8.7% by the end of the year. It has downgraded its GDP growth forecast for 2022-23 from 6% to 3.8%. (The Outlook’s Executive Summary is here, and brief Overview here.)
The uprating of benefits and pensions. Much of the analysis of the Spring Statement focused on an announcement the Chancellor did not mention. By uprating benefits and pensions from April by only 3.1%, the rate of inflation last September, rather than the 7-9% rate which inflation will actually be over the next year, Sunak has made around 19 million people in the lowest income households - those dependent on benefits and the state pension - on average around £450 poorer. Coupled with the removal of the £20 a week uplift to Universal Credit in November, this is a hit of nearly £1500 a year, or more than 10% of total income, to many of the poorest households. By early 2023, benefits will in real terms be 9% lower than they were before the pandemic.
Tax changes. The Chancellor’s decision to raise National Insurance contributions (the ‘health and social care levy’) by 1.25% while promising a 1p cut income tax in 2024 was heavily criticised. While Sunak’s political intent was widely noted, the Resolution Foundation’s Adam Corlett pointed out that the combined effect of the income tax and NI changes represented ‘a transfer from poor to rich, leaving most people worse off.’
Borrowing and debt. The OBR’s Economic and Fiscal Outlook calculates that public borrowing is set to fall by 60% from last year, when it was £322bn (15% of GDP), to £128bn (5.4% of GDP) this year. The OBR forecasts that public borrowing will continue to fall over the next few years, reaching a little over 1% of GDP (£31.6 billion) in 2026-27. This would be the smallest budget deficit for 25 years. Public sector net debt (including the Bank of England) is forecast to fall from this year to 83.1% of GDP by 2026-27, as required by the Chancellor’s fiscal rules.
EU energy market reform. On Friday, EU leaders agreed to hand over energy market reform to the European Commission after hours of ‘gruelling’ discussion on the EU’s response to the energy crisis. Euractiv’s Kira Taylor has the details.
Free school meals. Free school meals are to be extended to children from families with ‘no recourse to public funds’ (NRPF), having been temporarily introduced in 2020. People who have NRPF (such as Universal Credit or housing assistance) include those without immigration status and those on short-term visas.
Insecurity Index. A new report by the Centre for Labour and Social Studies (CLASS) and Autonomy explores the expansion of insecure work over the past 17 years and the rise of ‘zero-hours, tiny-hours and temporary contracts’ in the workplace. An accompanying tool has also been launched, where people can find their ‘insecurity score’ by answering some short questions.
Stagnating (or falling) wages. The IPPR’s George Dibb explains how the cost of living crisis is not just about prices ‘but is also a crisis of wages’. He explains how, with wages not expected to keep up with inflation, real earnings are set to fall, and how this dynamic works in a supposedly tight labour market.
Biden to tax billionaires? The US President is set to announce a 20% minimum tax rate on households worth more than $100 million, dubbed the ‘billionaire minimum income tax’. This echoes proposals from economists Arun Advani and Andy Summers for ‘a minimum 35% tax on earnings above £100,000’, which they estimate could raise £11 billion a year.
McTax. In a new report, War on Want accuses McDonald’s of not paying ‘its share of UK tax’. It highlights how at the same time, the McDonald’s received £872 million from the UK government during the pandemic via the furlough and Eat Out to Help Out schemes. (More in this video and thread).
Emissions inequalities. We should stop thinking of emission disparities by country, argues the World Inequality Lab’s latest report. Instead, we should look to disparities within nations and the extent to which emissions vary from the richest to the poorest. Among the more shocking facts in the report is that Jeff Bezos’ 11-minute flight to space was ‘responsible for more carbon per passenger than the lifetime emissions of any one of the world’s poorest billion people’.
Greenwashing. Influence Map has found that the world’s 30 largest financial institutions are all members of ‘financial industry associations which are opposing emerging sustainable finance policy’, despite 29 of the 30 having signed up to Net Zero goals. It also found that cumulatively, the 30 institutions ‘enabled at least $740 billion in primary financing to the fossil fuel production value chain in 2020 and 2021, equivalent to 7% of their total primary financing in this period’. Billionaire Sir Chris Hohn, a hedge fund manager and founder of the Children’s Investment Fund Foundation, urges shareholders to vote against bank directors involved in greenwashing.