STAND BY FOR ANOTHER CRISIS BUDGET NEXT WEEK?
Published 16 March 2022
Rishi Sunak will deliver his spring ‘Budget’ next week to address a triple whammy of inflation soaring to a 30-year high, fiscal drag from frozen tax allowances and National Insurance increases from April.
Commercial property trends are a good indicator of what is going on in the wider economy; the two are inextricably linked. And with the Chancellor’s spring statement next week, it’s appropriate to devote this column to that wider economy.
When Mr Sunak planned his March statement, he probably thought that he would be addressing a world which was heaving a sigh of relief as it finally started to emerge from the two year nightmare which has been the Covid pandemic. The chances were that he was planning to turn away from the enforced high spending of the past 24 months and return to his more natural position as a low tax Tory.
Best laid plans and all that. In reality, what he will be delivering next Wednesday is yet another crisis Budget. The conflict in Ukraine has us all feeling that we have once again been plunged into a emergency situation. But the truth is that even without the Russian invasion, the UK was facing troubled economic times – it has just become a lot more serious with the added inflationary pressure.
What was already a cost-of-living crunch now looks like it will be deeper and more long-lasting than even the most gloomy pessimist predicted.
Householders are starting to receive emails from their energy providers telling them that they are facing increases of £100 or more from next month; motorists are shocked to find that simply filling their tank is now costing them more than they can pay for on contactless; and to top it all, the 1.25% increase in national insurance takes effect just as inflation reaches levels we haven’t seen for more than 30 years.
Against this background, the Chancellor cannot pretend it’s business as usual. He has to find a way of helping people who are finding it hard to make ends meet. He has limited options: cutting spending is nigh on impossible – the NHS backlog worsened during the pandemic, and now is certainly not the time to be reducing defence spending, the opposite most probably.
But raising taxes is not really an option either. He has already done this for both individuals and businesses, with the hike in corporation tax from 2023. And surely he will have to freeze fuel duty, to keep inflation under control and keep the trucks rolling, not to mention to ease further pressure on the ‘squeezed middle’.
The only answer is increased borrowing, something which will go very much against the Sunak grain. In normal times he would want to work towards balancing the budget; there is nothing intrinsically wrong with that, but these are not normal times.
Make no mistake, this is another crisis Budget, and in times of crisis you have to take extraordinary measures. His natural inclination to spend small and tax even smaller is going to have to wait for another year.
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