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Rishi Sunak is under increasing pressure to provide more money for the NHS and struggling households amid criticism from tax and spending experts that his budget plans to repair Covid-19 damage to public finances they were not realistic.
The Institute for Fiscal Studies and the Resolution Foundation, with the head of the Treasury’s own independent forecasting body, questioned whether it would be possible to achieve the spending cuts that are fundamental to the chancellor’s strategy.
Sunak, on a visit to Teesside to defend the free ports, was forced to go on the defensive after the IFS said it had made “U-turns” in the fiscal policy of the previous Conservative party, and attacked the abrupt manner in the one that £ 20 a week The increase in universal credit would end in September.
In the first concerted criticism he faced in his year at the Treasury, Sunak also came under fire from free-market think tanks for his six-point increase in corporate tax to 25%. The Center for Policy Studies said the move would leave the UK with one of the least competitive commercial tax regimes in the developed world.
The chancellor said he was being “honest” with the public about the need to curb the peacetime record deficit of more than £ 350bn this year, but the IFS director said he was not convinced that Sunak would actually convert. from “Santa at Scrooge”. , with £ 65bn of immediate support for the pandemic-ravaged economy, followed by nearly £ 50bn of tax increases and spending cuts.
IFS director Paul Johnson said “spending plans in particular don’t seem deliverable, at least not without considerable pain” and predicted that the government would have to spend more.
“Are we really going to spend £ 16bn less on public services than we were planning before the pandemic? Will the NHS really revert to its pre-Covid spending plans after April 2022?
“Actually, there will be pressure from all kinds of directions. The NHS is perhaps the most obvious. The Chancellor’s medium-term spending plans just look incredibly low. “
Shadow Chancellor Anneliese Dodds said IFS analysis showed that Sunak’s budget was “unraveling rapidly.”
“After a year in which our key worker heroes kept the country going, it is incredible that the chancellor could not find a penny more for our schools and hospitals,” he said. “We need to learn the lessons of this pandemic, not go back to the insecurity of the past. But this chancellor has the wrong priorities and is totally disconnected from the needs of this country.
Richard Hughes, director of the OBR, the body responsible for economic and debt forecasting, said the budget does not provide an explicit commitment beyond the end of the 2021-22 financial year to the legacy of the pandemic for public services. That was despite the need for an annual revaccination program, ongoing testing and traceability, and catching up on operations that the NHS had been unable to do over the past year.
“At the moment, the government has not set aside any additional resources for that activity and, in fact, what it has done is cut approximately 15 billion pounds sterling in non-Covid expenses beyond next year.”
The OBR predicts that 2022 will see the fastest annual growth (7.3%) for the UK since World War II, as the government’s vaccination program and budget measures together spur a rapid economic recovery.
But Torsten Bell, Director of the Resolution Foundation, said: “Improving GDP prospects next year will not translate into a rise in living standards, with unemployment forecast to rise and household incomes to decline.
“The long-term economic scars also mean that this will be the worst parliament for growth in living standards on record, except for the short period of 2015-17. Austerity will also continue in practice for many public services as more cuts are put in place. “
Bell said the details of Sunak’s plans left “serious questions unanswered about whether enough has been done to support households in the recovery to come, how credible it is that further reductions in planned spending can be achieved, and whether the UK public finances have been achieved. ” it really has been put on a long-term sustainable foundation. “
Ahead of budget, the Resolution Foundation had been pushing for the £ 20-a-week increase to universal credit to be made permanent, but Sunak said it would provide only a six-month extension through September.
Johnson said he would increase pressure to maintain the 20-pound-per-week gain, even though it would cost the Treasury 6 billion pounds a year.
“It is, by the way, remarkable that while the Chancellor felt the need for a phasing out of the license, support for commercial rates, stamp duty reductions, and VAT reductions, he is still in a reduction to edge of the cliff at UC such that the incomes of some of the poorest families will drop by more than £ 80 between one month and the next. Whatever the case for reducing generosity in the long term, if you are going to do it, the case of doing it gradually rather than doing it all at once seems unanswerable, ”said the IFS director.
Sunak said the government was being generous by continuing to pay UC’s highest rate through September and that it was important to take into account all the other measures, such as the higher living wage, that were helping low-income people.
“Our lifetime skills guarantee is here to stay, it is permanent, the kickstart scheme will help a quarter of a million young people; many of those people will have universal credit and will be able to benefit from all these initiatives and helping people do good quality work is absolutely our focus. “
The chancellor said the UK’s corporate tax rate will remain one of the lowest in the G7 group of major industrialized nations, but the CPS said Britain will plummet to 28th out of 36 countries in the competitiveness ranking. Fiscal of the Organization for Economic Cooperation and Development. in 2023.
Some Tory MPs have raised concerns about the corporate tax shift in particular, and former Brexit secretary David Davis warned it could deter inward investment.
Labor has signaled that they will not oppose the government’s plans to increase corporate tax later in parliament.
Dodds has not said whether his party would refuse to back the changes to income tax thresholds announced by the chancellor, but questioned why they occurred before the corporate coup.
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Sign up for the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk “Why is this government scheduling a personal allowance freeze ahead of corporate tax increases?” she asked.
The left-wing campaign group Momentum is urging Labor to completely oppose the tax-free allocation freeze.
“This pandemic has made billionaires profit while workers suffer. The failures of our rigged economy are more evident than ever, and that is why Labor has to fight for a redistribution of wealth and power away from the elite and towards the common people, “said a spokesman. “Key workers need a pay raise, not a tax increase.”
