So, the Hunt proposes to reverse almost all of Kwarteng’s budget. Given how much of it benefited the wealthy (or even the really wealthy), it’s hard to be critical. But not impossible.
Some things to note.
- The planned cut in income tax to 19p is out, and indefinitely (though given there will have to be an election in the next year or two, is he just putting it in his hat to bring out later, Paul Daniels style?)
- The cut in dividend taxes is abolished – clearly that comes into the ‘wealthy’ category.
- The cuts to stamp duty will remain and with them my comments about the number of first-time buyers who are going to buy a place for £450k
- The freeze on alcohol duty will go – best buy in supplies soon?
But perhaps the most worrisome change is that the energy price guarantee will no longer last two years – only till April next year. It will be the subject of a Treasury review which will report before then.
As before I have little doubt that there are people receiving government help who don’t need it – or don’t need so much. My worry with anything that says “treasury review” is that they will start from how much they think they can afford – usually less than anyone else thinks is absolutely necessary – and then consider how best to action this.
So, for instance, would they offer subsidy ONLY to folk on Universal Credit? Somehow, I doubt it. Elderly Tory Party members (who won’t be happy their tax cuts have gone) feel the cold as well. Pensioners too then?
It’s very hard to say how this come out. For instance what will the price of energy be by April next year (six months away). Probably unlikely to have come down (more than a little) but vanishingly unlikely to have gone back to where they were this time last year. So the scale of the problem isn’t easy to predict.
But more than the scale, if, as the Hunt claims, support needs to be more targeted then they face two problems.
- Who are the targets? One of the problems they face is the poverty of UK government data and payment mechanisms.
- How much are they prepared to spend? Clearly we don’t know, but it seems a good starter for 10 that it will be less than we spend now.
One final thing, note the similarly between this and the content of my quote from Susana Cruz, at Liberum Capital, that, “Until the market sees a clear strategy to fund the energy cap freeze and other measures, we do not expect the pressure on UK gilts and sterling to ease, nor the pressure on equities, which is coming from persistent recession fears.”
There is another side to this, though – the cost of the price cap. The price cap has put any number of energy suppliers (as opposed to producers) out of business, as the gap between what they can charge and what they have to pay for supplies widens. One advantage some have had was to buy ahead at the ‘old prices’, but that is clearly going to peter out with time, meaning more and more are going to return losses, becoming unsustainable. Some of these are UK owned – for instance Octopus – but some are owned abroad, most notably and obviously EDF, but also such as Scottish Power (owned in Spain). How much pressure is Hunt going to come under not just from large supply companies here (eg British Gas or SSE) but also from abroad to offer some subsidy to them. Note the reference to “fund the energy cap freeze”.
These though are only parts of the Hunt’s statement – we get the cuts next week he says, completing the similarly with Cruz. “The Chancellor is yet to reveal a clear strategy to finance its growth package (or planned expense cuts) so for now, his intent to reduce debt as a percentage of GDP does not seem plausible.”
All we can do is see who is taking the rap for this. Truss has been shoved all about concerning cuts – for instance the difference between increases to cover inflation (so protected in real terms) or the rise in wages (the latter a real terms cut), or to leave them at the level they are now (so the biggest real terms cut). Hunt though is not subject to this.
Let’s see what he’s got in due course since as Chris Mason notes “What a day. And it’s not even lunchtime.”