LONDON – Rishi Sunak’s latest tax and spending plan will ease the pressure on at least one key constituent: the UK’s chief finance minister himself.
The chancellor, who has long sought to highlight his free-market credentials, set about buffing his personal brand at Wednesday’s spring declaration while continuing to whisper that he was the obvious choice to succeed a politically-struggled Boris Johnson.
But the question is whether Sunak sold himself short and should have gone further amid an intense cost of living crisis in Britain that could cause his Conservative Party major problems in the next election.
Sunak took office just as the COVID-19 pandemic was rocking the economy and has consistently posed as a low-tax conservative.
His fellow MPs have not been entirely convinced so far, with Sunak presiding over a raft of new taxes and costly, interventionist measures to stabilize the economy.
His biggest immediate pledges on Wednesday – softening the impact of a controversial payroll tax hike and fuel tax cut – appeared designed to reassure Tory colleagues he’s still one of them.
And by pledging to deliver a rare, direct income tax cut by 2024 – the likely date for the next election – he has likely not hurt his chances with the Tories he wants on his side.
A former minister said Sunak was hit by criticism that he was not a low-tax chancellor and the statement showed he was trying to prove he really was. “You can poke holes in it, but ultimately what more could he have done in a responsible way?” They argued.
Stick to his guns
Speculation in Westminster of an imminent challenge to Johnson’s leadership has died down in recent weeks after a scandal surrounding ebullient governing parties amid pandemic restrictions pushed the war in Ukraine to a backdrop.
But Sunak’s maneuvers could still help him retain the keys to the powerful Treasury Department in the next government reshuffle and improve his standing with a future leader candidate.
Some of Sunak’s decisions on Wednesday show a Chancellor sticking to his guns as a fiscal conservative despite grim warnings about the cost of living. Inflation was logged at 6.2 percent just before his speech and the watchdog, the Office for Budget Responsibility, predicted living standards would fall to the lowest since records began 66 years ago.
Ever since Sunak rolled back a temporary increase in welfare payments last year, he has maintained the principle that any new aid to the poorest must come in the form of lump-sum or time-limited payments. Several MPs and Tory strategists suggested this is because the Chancellor is adamantly opposed to allowing spending on additional benefits which may then be difficult to recover.
While reports circulated that Sunak might adjust Universal Credit – the UK’s main social security scheme – he instead offered a much more modest increase in local authority handouts for the most vulnerable.
Sonia Khan, a former special adviser to the Treasury Department who is now an associate director at communications firm Cicero/amo, said Sunak had been “adamant,” citing his lack of Universal Credit measures. “He has proven that he is indeed a very conservative finance chancellor and he has stayed true to his Thatcher roots by choosing not to invest in large amounts of public spending,” she added.
A Conservative MP for a disadvantaged seat warned the package would not be enough for his constituents: “We risk looking like we’re burying our heads in the sand.”
Meanwhile, some of Sunak’s colleagues are skeptical that the trailing tax cuts will matter in the long run. “People will still remember that we tax too much,” said a second ex-minister. “We didn’t need these tax increases and we’re squeezing people’s incomes when we don’t need them and lowering growth rates.”
However, a Conservative Party strategist suggested that the full force of rising inflation and energy prices has not yet taken hold and that Sunak may hold back more dramatic action if intervention becomes inevitable.
The chancellor’s decision to announce his income tax cut so far in advance also puzzled many Westminster observers. By presenting his 2024 cut proposal, he appeared to be robbing himself of a chance to make a splash just ahead of the next election. A former No. 10 aide said Sunak “must” offer something headline-grabbing now and insisted he had an opportunity to go further before the elections are held.
In terms of other measures, some believe he is on safer ground as the Tories seek to hold on to the diverse electoral coalition that gave them the 2019 election victory. Will Tanner, director of think tank Onward, pointed out that the fuel tax is having a disproportionate impact on voters outside of London and the South East. “Some of these tax cuts are specifically designed to mitigate costs in parts of the country where Conservatives can make a strong case in the next election.”
By aligning his springtime statement so closely with his personal brand — his boss was barely mentioned — Sunak must also face all sorts of consequences if things get worse.
Keiran Pedley, policy chief at pollster IPSOS, pointed out that while the Conservatives still have a steady advantage over Labor when it comes to becoming familiar with the economy, the Chancellor’s actions will now determine whether he acts as a drag or the assets of his party are regarded as enrichment.
“If you see him not rising to the moment and not responding to public concerns, that’s how conservatives’ reputation in business is changing,” he said. “And that would be important.”
https://www.politico.eu/article/uk-chancellor-rishi-sunak-in-a-tight-spot-uk-own-brand/?utm_source=RSS_Feed&utm_medium=RSS&utm_campaign=RSS_Syndication In a difficult situation, the Briton Rishi Sunak strengthens his brand - POLITICO