After the right turn, the U-turn. Despite abandoning his top rate tax cut, the chancellor, Kwasi Kwarteng, has left £43bn of his £45bn tax cuts intact. A panicked overnight climbdown does not add up to a change in strategy. He is still doubling the tax-free giveaways to those with share options, cutting £1bn from tax on dividends and sanctioning a free-for-all in bankers’ bonuses. He is also going ahead with his tax avoiders’ charter: £2bn for employees who are able to declare themselves self-employed. Still in place is the £2bn he set aside for tax-free shopping for foreign tourists and the £19bn of corporation tax cuts, which Rishi Sunak claimed did nothing for investment; and by continuing to reject a new windfall tax, the chancellor might as well be handing over billions to the oil and gas tycoons.
Kwarteng’s meeting with the Office for Budget Responsibility on Friday will have killed off his belief that he could pay for his tax cuts by conjuring up 2.5% annual growth. So after the crash comes the bloodbath: an onslaught of public spending cuts bigger than Osborne’s austerity or the IMF cuts of 1976 – so severe that they will impede rather than spur growth, ruin education and undermine our most precious asset, the NHS. Lying ahead, as inflation erodes the value of departmental budgets is, according to the Resolution Foundation, a public spending cut by 2026 of between £37bn and £47bn, the equivalent of closing every English school. While the prime minister has ruled out changes to the triple lock on pensions, the typical family on universal credit – already around £1,500 short as a result of last October’s £20 a week cut and April’s lower-than-inflation uprating – will now see their losses rise to £2,000 a year if benefits are linked to earnings and not prices. No family I know can afford to lose so much.
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