Speculation over which taxes the Chancellor will slash or, more likely, hike at tomorrow’s spring statement seems to have settled on two areas. First, a cut to fuel duty and, second, an increase in National Insurance thresholds, a way of tweaking the already announced tax hike to reduce the burden on the poorest.
On the first point, a cut in fuel duty could cost the Treasury around £2.5 billion a year (although the government is unlikely to get much political credit if Sunak does go down this route given how quickly energy costs are rising). On the second, it looks almost certain that the Chancellor will proceed with his planned 2.5 point rise in NI contributions, despite today’s data revealing borrowing is on track to undershoot by about £26 billion. The NI hike is expected to raise £12 billion per year – meaning the British public will be paying more tax when Sunak sits down at the despatch box than we were when he stood up.
Amid a cabinet rift over the rise back in January, the Chancellor insisted it would be irresponsible to ‘duck difficult decisions’ ahead of the planned increase. But the current trajectory isn’t ‘difficult’ any more than it is responsible. Borrowing for day-to-day spending is reckless. But a bolder government would rethink its strategy of narrowing the deficit through tax rises and commit to bringing down the country’s tax bill while reducing public spending, which has spiralled out of control during the pandemic. A serious Conservative government would, for instance, cut ‘sin taxes,’ scrap the green levies which make up around a quarter of our energy bills, and abandon the National Insurance tax increase.
When Sunak was confronted this weekend with a graph showing how much taxes had been raised during his tenure compared to his predecessors, he blamed the pandemic for his record.