In 1947, as he was about to present his Budget, Labour’s Hugh Dalton, the then chancellor of the exchequer, let slip to an old friend: “No more on tobacco; a penny on beer; something on dogs and pools but not on horses; increase in purchase tax, but only on articles now taxable; profits tax doubled.”
That leak was enough to force him to resign the same day.
Jeremy Hunt trailed his Autumn Statement so extensively that before the event it seemed there could be little left for him to surprise us with. It was heavily hinted that we’d all be paying more tax; there would be fairly savage cuts to public spending including cutting grants to local authorities; there would be a windfall tax on energy giants; and the triple lock on pensions would stay.
I write prior to the chancellor’s actual speech, but expect austerity more severe than George Osborne’s in the early days of David Cameron’s government. The basic message endorsed by the prime minister is that it’s time we stopped relying on ultra-cheap money and burgeoning public debt. All of that came to a head of course in the car crash that was the Liz Truss/Kwasi Kwarteng “Budget that wasn’t”, but the signs were already there that things simply had to change.
At last, after three chaotic years under Johnson, the grown-ups are back in charge
Rishi Sunak keeping Hunt as his chancellor has reinforced the sense that at last, after three chaotic years under Boris Johnson the grown-ups are back in charge. Personally I’m more interested in the fact that Sunak is the first British prime minister to have made millions out of Goldman Sachs than I am that he happens to be a practising Hindu.
But after 12 years of notionally Conservative government this administration, now on its fifth leader since David Cameron, has to recognise that it is time to remember some fundamental economic realities such as Margaret Thatcher advocated. One of these principles is to spend within the limits of the taxes you impose because the consequence of prolific borrowing is a debt burden that becomes one of the largest costs to governments as much as it does to families.
We are not alone in our predicament. Two extraordinary events have transpired to make this a nightmare time for almost every government in the world.
Pandemic mistakes
The pandemic cost us £400bn. Was it all value for money? Almost certainly not, but we now know there was hardly any country that was adequately prepared. Just as Dame Kate Bingham delivered the most effective vaccine strategy where other EU nations failed to, so we spent billions on our furlough scheme a slice of which was simply stolen by fraudsters.
But what we don’t need is a blame game. This is for you, Matt Hancock because he, Johnson, the medics and the forecasters had no hard evidence to go on, no essential supplies in store and all, right or wrong, did their level best. Labour leader Sir Keir Starmer went along with the vast majority of the steps the government took.
And then just months after Covid-19 had receded a real shooting war between Russia and Ukraine erupted which has led to a massive rise in energy prices that cost us £150bn simply to ensure people had some relief from massively increased energy bills, as well as calls for more money for defence.
We have already seen a return to union militancy and we can expect more to urge their members to strike because no government will be able to protect everyone from the consequences of austerity. To match inflation with wage increases simply guarantees the continuation of high inflation, which otherwise should fall dramatically in the next nine months.
The next couple of years will be a huge test of resilience for businesses and families alike. We will all face hard choices. This is hard-hat time for us all in the UK and only the best in our industry which is so integral to the health of the economy, will survive.
Steve Norris is chairman of Soho Estates and Future-Built
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