Squeezing the poor

The chancellor’s spring statement means increasing numbers will have to choose between eating or heating, writes Eddie Ford

Sometimes a little story tells you a lot. Following his spring budget, pictures appeared in the media of the chancellor, Rishi Sunak, filling up his car with £30 worth of petrol at a London forecourt after announcing the temporary five pence fuel duty cut.

Only it was not his car: he had borrowed it from one of the attendants at the garage just for the purposes of the photo shoot. We later found out he and his wife, Akshata Murthy, own several cars - including a high-end Range Rover worth £94,000 new and a top-of-the-range Lexus that can cost between £50,000 and £80,000.1 Not that they ever have to worry about filling it up, as she is a billionaire with an estimated £690 million stake in the IT services and consultancy company, Infosys (which continues to operate in Russia, while most big IT firms have closed down their activities in the country).

Sunak’s post-budget tour of the media was just as disastrous as his stupid PR stunt at the garage. It is not difficult to see why. Knocking five pence off the price of petrol when it is skyrocketing amounts to nothing and everyone knows it. In fact, according to the New Economics Foundation, only 7% of the savings from cutting fuel duty would go to the poorest fifth of households anyway - given that most do not own a car, of course. By contrast, a third of the savings from the fuel duty cut will go to the richest fifth of households. Indeed, even on its own less than generous terms, less than half of the fuel duty cut announced by Stingy Rishi has been passed on to drivers filling up at pumps. According to the AA and other specialists, the average price of a litre of petrol at UK forecourts has fallen by just 3.7p. This is mainly because duty is charged on the wholesale cost of fuel, so many retailers wait for new deliveries in order to buy fuel at the cheaper rate. Furthermore, what happens to the oil price, and in turn wholesale costs, in the coming weeks and months will ultimately decide what you have to pay at the pumps. Logically, if prices rise (say, because Russia tit-for-tat cuts off oil and gas exports to Europe) it is more than likely that the fuel duty cut will be cancelled out, as retailers face higher costs.

Sunak’s defence of his spring statement in front of the treasury select committee was particularly disastrous - coming across as almost sociopathically insouciant. He insisted that his spring statement and earlier £9 billion energy support package were “progressive”, but, alas, it was not possible to “fully insulate” every household in Britain from high levels of inflation. And, of course, coming out of the pandemic, he did not want to borrow more, as any possible rise in interest rates could worsen the fiscal situation for the UK. This left him with a choice, he argued, between cuts to public spending or increasing taxes. The self-professed tax-cutting chancellor opted for the latter, raising the tax burden to the highest level since the late 1940s. Within these self-imposed constraints, Sunak claimed he had used his statement to “target support” at those in work by increasing the national insurance threshold in July rather than channelling money to the poorest through the benefits system or some other means. But he said he was “comfortable with the choices” he had made.

Nobody else is, judging by the near-universal negative response to his budget - including very many Tory MPs and the rightwing press. Savings on the scale proposed by the chancellor will do almost nothing to offset the £1,500 increase every household is expected to see in their energy bills this year - a topic on which the chancellor bizarrely had very little to say, either in the statement or before the treasury select committee. He merely said that an extra £500 million would be added to the “household support fund”, taking it to £1 billion - which looks more and more inadequate by the day. Apparently, the media has been briefed that a council tax rebate is “on the cards” in the autumn budget, once the new energy price cap has been set - presumably in an attempt to reassure voters that more help is on its way. Infuriatingly, when questioned by the committee, Sunak would not even accept that the £200 “discount” was actually a loan that would saddle people with more debt - suggesting it was something halfway between a grant and a loan, whatever that is.

Also, in another acknowledgement of reality that almost provided a spot of light relief, Sunak - who campaigned strongly for ‘leave’ - revealingly admitted to the committee and the world that a drop in trade since 2019 compared with other economies “might well be” related to Brexit. He awkwardly confirmed that it was “inevitable if you change the exact nature of your trading relationship with the European Union, that was always going to have an impact on trade flows” - as the Office for Budget Responsibility would readily agree, with its graph showing the UK worse off because of leaving the EU. Perhaps “Brexit will make you poorer” should have been written on that red bus. Still, he and wife will not lose any sleep over it - let alone any money.

Just about summing it all up, Labour’s Siobhain McDonagh asked Sunak on the committee, “Do you think people are stupid?” for not realising that the promised income tax cut of one penny in 2024 was a transparently cynical election ploy. He did not answer the question directly, so you can only assume that he does indeed think the British population are fools. Instead, Sunak oleaginously said he wanted to give people a sense of the “direction of travel” to cut taxes in the future - the promised land of low taxes and high wages is just around the corner, if you have enough faith.

In the real world, the chancellor is squeezing the pips out of the poorest sections of the working class, whilst pretending he is making them better off in the long run. He has been accused of being a “fiscal illusionist”, when in fact he is a fiscal conman. Of course, this reveals the stupidity of those who were calling for Sunak to replace Boris Johnson - look at what you would have got.


Worryingly, the Office for Budget Responsibility this week predicted that inflation would hit a 40-year high of 8.7% in October - fuelling the biggest fall in living standards in any single year since records began in 1956. As for the Bank of England, after initially hoping 7.5% would be the peak, it has reluctantly accepted that the economic landscape has changed. Prices will inevitably get higher still, making double-digit inflation a real possibility.

In the opinion of both the Resolution Foundation and the Institute of Fiscal Studies, Sunak’s deliberate decision not to target real support at those who will be actually hardest hit by rising prices will leave low-and middle-income households painfully exposed. Far from alleviating economic hardship, the spring statement will push 1.3 million people - including half a million children - below the poverty line next year, while perversely raising taxes to the highest level since the post-war Attlee government. No wonder everybody is unhappy with the chancellor.

The Resolution Foundation calculates that just one in eight workers would see their tax bills fall by the end of this parliament in May 2024, when the rate of income tax is likely to drop by 1p to 19p. In its more detailed analysis of the spring statement, the foundation further estimates that a typical family will experience a £1,100 (about 4%) decline in income this year, with the poorest households facing a 6% fall. It also found that only those earning between £49,100 and £50,300 would pay less income tax in 2024-25. Therefore, of the 31 million people in work, 27 million would be paying more in tax (and national insurance). Never before outside a formal recession has there been such a large increase in the number of people falling into poverty.

What needs to be emphasised is that extreme economic hardship is not something you can judge simply on inflation alone - as if, say, a 3.3% rise in inflation would make you 3.3% poorer. For the most part, pauperisation is an insidiously slow process - it may be some time before you have to buy your child a new pair of shoes or replace household necessities. Sure, on a day-to-day basis you can more or less survive, but what if something goes wrong, as it always does? You have an accident at work, or your hours get reduced, which quickly plunges you downwards into crisis. That is going to happen to very large numbers of people. In other words, it is not just an issue of inflation eating away at pensions or universal credit. The cost of living crisis will hammer those people just about scraping enough together - they used to be called the ‘Jams’ (‘just about managing’), but then the Tories forgot about them.2 When they get suddenly walloped by economic and financial obstacles, they can find themselves in dire circumstances, resulting in family breakdowns, homelessness, substance abuse, criminality and other disastrous consequences.

According to latest research from market analysts Kantar, as a result of grocery prices rising by 5.2% in March, the UK’s poorest families will see the amount of spare cash at their disposal drop by a fifth this year, with £850 less to spend on non-essentials. Spare cash is also under pressure from increases in the price of clothing and furnishings, with non-food retail price inflation accelerating from 1.3% in February to 1.5% in March - the highest rate since February 2011. Additionally, price rises are being fuelled by the rising cost of labour and basic commodities, as well as energy and packaging - driven by a toxic combination of Brexit (ask Sunak), resurgence in demand following the pandemic lockdown and the continuing war in Ukraine, which has the potential to be very protracted.

Inevitably, with the rising costs of food, clothing and fuel, the burgeoning economic crisis has already seen a surge in credit-card spending - meaning many in low-income households could get caught in a debt spiral that is near impossible to escape from. Figures from the Bank of England showed credit card borrowing jumped by £1.5 billion in February to £59.5 billion - the highest since records began in 1993, pushing the total amount of unsecured lending up by 90%, compared to the previous month, to £1.9 billion. The central bank said the rise pushed the annual growth rate for all forms of unsecured credit from 3.2% to a two-year high of 4.4%, raising the total outstanding balance of consumer credit to £199.5 billion - a pretty staggering figure. Now, 13% of households are only just about managing to cover minimum payments on credit card bills, with a further 6% already unable to do so.

Unsurprisingly, many shoppers are turning to cheaper supermarkets such as Lidl and Aldi to make ends meet, with increasing numbers of families saying they are being forced to choose between eating and heating. What are you going to do about that, Sunak?


  1. express.co.uk/news/uk/1587960/rishi-sunak-news-chancellor-four-cars-volkswagen-golf-spring-statement-spt.↩︎

  2. bbc.co.uk/news/uk-politics-38049245.↩︎