“Well, you might almost think that there is an election on the way! Or maybe that the Chancellor is seeking to position himself more favourably with Tory MPs in case there is a leadership election any time soon.
“This is the Chancellor, after all, who until recently had been jacking taxes up through the roof – higher NICs, frozen personal allowances, higher corporation tax. Today, he moved to cut petrol duties by 5p per litre, increase the amount people can earn before paying national insurance and – the big rabbit out of the hat – announced a 1p cut in the basic rate of income, for 2024.
“This package will cheer up Tory backbenchers, many voters and the Conservative supporting media. But it’s not obvious that the Chancellor has tackled the broad range of problems confronting the economy.
“Inflation is set to average 7.4% this year, which will squeeze living standards, not least for those too poor to benefit from the higher national insurance threshold. The package delivered very little for those on the lowest incomes – poverty is likely to increase notably. Perhaps the Chancellor has decided that those in poverty are not his target audience?
“Growth forecasts have been slashed almost in half for the current year, which will boost borrowing. Debt interest payments are surging higher because of rocketing inflation. The Chancellor is gambling on growth being strong enough to keep the deficit falling, but there are significant risks here.
“Meanwhile, many people will wonder what sense there is in increasing national insurance by 1.25% now, and then cutting income tax by 1% in two years time. This means lower taxes for pensioners and high taxes on workers – not perhaps much economic sense or fairness.
“Beneath these headline announcements are some interesting suggestions of policy changes to boost training and reform R and D tax credits. As ever with these statements, we now need to look closely at the small print.”