November 30, 2023


LONDON — Rishi Sunak’s latest tax-and-spend plan will ease the pressure on at least one important constituent: the U.K.’s top finance minister himself.

The chancellor, long at pains to highlight his free-market credentials, moved to burnish his personal brand at Wednesday’s spring statement, amid continued whispering he’d be the obvious pick to succeed a politically-bruised Boris Johnson.

But some question whether Sunak sold himself short and should have gone further in the face of an intense cost-of-living crunch in the U.K. that could spell big trouble for his Conservative Party at the next election.

Sunak took office just as the economy-rocking COVID-19 pandemic hit, and has consistently made himself out to be a low-tax conservative.

His fellow MPs have not been entirely convinced so far, with Sunak presiding over a host of new taxes and big-spending, interventionist measures to steady the economy.

His biggest immediate pledges on Wednesday — softening the impact of a controversial rise in employment tax and slashing fuel duty — seemed designed to reassure Tory colleagues he’s still one of them.

And by pledging to deliver a rare, direct cut to income tax by 2024 — the expected date for the next election — he’s unlikely to have hurt his chances with the Tories he wants on his side.

One former minister said Sunak had been stung by criticism he was not a low-tax chancellor, and that the statement showed him trying to prove he really is. “You can pick holes in it, but ultimately what more could he have done in a responsible way?” they argued.

Sticking to his guns

Speculation in Westminster over an imminent leadership challenge to Johnson has died down in recents weeks after a scandal over boozy government parties amid pandemic restrictions took a backseat to the war in Ukraine.

But Sunak’s maneuvers could still help him hold onto the keys to the powerful Treasury in the next government reshuffle and improve his standing in a future leadership bid.

Some of Sunak’s choices Wednesday show a chancellor sticking firmly to his guns as a fiscal conservative, despite grim warnings about the cost of living. Inflation was logged at 6.2 percent shortly before he gave his speech, and watchdog the Office for Budget Responsibility predicted living standards would sink to the lowest level since records began 66 years ago.

Since withdrawing a temporary increase in social security benefits last year, Sunak has held fast to the principle that any new assistance for the poorest has to come in the form of one-off, or time-limited payments. Multiple MPs and Tory strategists suggested this was because the chancellor is fiercely opposed to allowing extra benefits spending which might then become difficult to claw back.

While reports had circulated that Sunak could adjust Universal Credit — the main social security scheme in the U.K. — he instead offered a much more modest boost to local authority handouts for the most vulnerable.

Sonia Khan, a former Treasury special adviser who is now an associate director at communications firm Cicero/amo, said Sunak had been “hardline,” citing his lack of action on Universal Credit. “He’s proven that he is actually a very fiscally conservative chancellor and he has stayed true to his Thatcherite roots by choosing not to invest in a huge amount of public spending,” she added.

A Conservative MP for a deprived seat cautioned the package would not be enough for his constituents: “We are in danger of looking like we are burying our heads in the sand.” 

Tax timing

Meanwhile, some of Sunak’s colleagues are skeptical as to whether the trailed tax cuts will matter in the long run. “People will still remember we are taxing too much,” said a second ex-minister. “We didn’t need to have these tax increases and we are squeezing people’s incomes when we don’t need to, and cutting growth rates.” 

A Conservative Party strategist suggested, however, that the full force of rising inflation and energy prices had not yet bitten and that Sunak could be holding back more dramatic action for when intervention becomes unavoidable.

The chancellor’s decision to announce his income tax cut so far in advance also puzzled many Westminster-watchers. By setting out his proposed cut for 2024, he appeared to rob himself of the chance to make a big splash in the immediate run-up to the next election. A former No. 10 aide said Sunak “had to” offer something headline-grabbing now, and insisted he would have the option of going further before the election is held. 

On other measures, some believe he’s on safer territory as the Tories try to hang on to the diverse coalition of voters that handed them electoral victory in 2019. Will Tanner, director of the Onward think tank, pointed out that fuel duty has a disproportionate impact on voters outside London and the south east. “Some of these tax cuts are specifically designed to alleviate costs in the parts of the country where the Conservatives can package a strong argument at the next election.”

By aligning his spring statement so closely with his personal brand — his boss barely got a mention — Sunak will also have to own any potential fallout if things do get worse.

Keiran Pedley, head of politics at pollster IPSOS, pointed out that while the Conservatives still hold a steady advantage over Labour when it comes to being trusted with the economy, the chancellor’s actions now will define whether he is seen as a drag or an asset to his party’s fortunes. 

“If he was to be seen as not rising to the moment, and not responding to public concerns, that’s the way in which the Conservatives’ reputation on the economy does shift,” he said. “And that would matter.”


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