Budgets and financial statements are the set pieces that define a Government.
Last week’s spring statement and the policies announced over the past couple of years have defined this Chancellor– though not in the way he would wish.
The most potent powerful political weapons for the Conservative Party for the last 70 years have been broken – forfeited not just for the next election but for years to come.
No longer the party of low taxation but the party with the highest tax burden since the 1940s.
Alone among the G7 countries in imposing tax increases in the middle of a cost of living crisis.
No longer the party of fiscal conservatism but a party playing desperate games with the public finances.
No longer a party able to claim the mantle of aspiration and prosperity but a party whose decade of low growth underpins the current collapse in living standards.
This spring statement was meant to be the Conservative launch pad for an election campaign in 2 years time. Instead, it has exposed in stark relief why Britain cannot afford a fifth term Tory Government.
As the Institute for Fiscal Studies pointed out this week, anyone earning over £25k will pay more tax this coming year - even after the increase in NICs thresholds announced in the spring statement. Seven out of eight taxpayers will be paying more in tax after all the measures are taken into account.
The Chancellor’s argument that the National Insurance rise is to support our NHS or help fix our broken social care system was also blown out of the water.
First, he proposed that half the money raised from the NICs rise would not be raised at all because he would increase the starting threshold at which NICs would be paid.
Did that mean there would be a £6bn cut in NHS funding? No it didn’t, because the money had never been hypothecated for the NHS and social care in the first place.
That was always a myth and the Chancellor’s actions have proven the case. This was confirmed by the second tax announcement he made – that there would be a cut of 1p in the income tax rate in two years’ time. This would give back the second half of what he had originally proposed to raise through the NICs rise.
By the time voters had followed all these twists and turns there was only one question left – if you are giving half of the NICs rise back before you’ve even introduced it, and you are proposing giving the other half back in two years, what was the point of doing this at all? It’s certainly not to fund the NHS. The answer of course is to raise money now to fund an income tax cut as part of the Tory election campaign.
What must have seemed like a series of clever moves inside the Treasury now looks like nothing other than political game playing. The pledge on income tax looked less like a surprise rabbit and more like an act of desperation.
And as if all that was not enough his final move was to reject the one tax policy commanding widespread public support at this time – a one-off windfall tax on the excess profits of the oil and gas producers making a fortune from the current sky high prices. Along with scrapping the unfair National Insurance rise, that’s what Labour would have done in the spring statement, and it would have cut up to £600 off the energy bills of those who need it most. But the Chancellor won’t do it. These financial statements do indeed define Governments.
Pat McFadden is the shadow chief secretary to the Treasury and the Labour MP for Wolverhampton South East
