Markus Andrews

Chancellor Rishi Sunak has been branded a “fiscal illusionist” by a respected economic thinkthank, which found his tax cuts in Wednesday’s mini-budget “will not be enough to protect poorer households from a significant hit to their living standards”.Institute for Fiscal Studies director Paul Johnson said that the apparent tax giveaways in Mr Sunak’s spring statement in fact amount to a “substantial takeaway” when earlier tax hikes are taken into account, with most workers paying more in the long run.And he said that the chancellor’s refusal to increase benefits to match soaring inflation will leave many of the country’s poorest people worse off.In a scathing analysis of Mr Sunak’s measures, Mr Johnson said that the increase to £12,570 in the threshold for paying National Insurance contributions (NICs) this July, coupled with a £9bn package of help with energy bills announced earlier, “is not enough to offset the fall in real earnings that we expect to see”.An average earner on £27,500 a year will be about £360 worse off in the next financial year, while someone earning around £40,000 will be almost £800 worse off, he said.Meanwhile, the failure to upgrade departmental spending in areas like health and education to reflect the expected surge in inflation to almost 9 per cent later this year will effectively mean “hefty real pay cuts across the public sector”.And Mr Johnson said that the chances of Mr Sunak being able to restore fuel duty to the level set out in his long-term plans, with a 6p hike in 2023 to reverse the one-year 5p cut announced yesterday, were as great as his chances of winning the National Lottery, adding: “And I don’t play the lottery.”The net effect of the measures announced by Mr Sunak on Wednesday amounts to a “relatively modest” giveaway to households struggling with a cost-of-living crisis of around £5bn in 2022-23, at a time when the Office for Budget Responsibility predicts the biggest one-year fall in living standards since the 1950s, said Mr Johnson.Mr Johnson branded Sunak a “fiscal illusionist”, after the chancellor presented his spring statement the biggest tax cut for a quarter of a century, while actually delivering a package which will see overall taxes rises to their highest level since the era of rationing in the late 1940s.The 1p cut in income tax announced by the chancellor for 2024, at a cost of £5bn to the Treasury, will hand back only half of the additional windfall Mr Sunak can expect from a previous decision to freeze thresholds for the basic and upper rates, he said.“He told us that he cut taxes yesterday,” said the IFS director. “In a sense he did. He increased the floor for NICs and promised a cut in income tax in 2024.“So Mr Sunak’s statement contained big new tax cuts. But it also allowed taxes to rise. He can now expect to raise more in tax as a share of national income by 2025 than he expected last October.“In fact, taxes are set to rise to their highest level as a fraction of national income since Clement Attlee was prime minister.”The chancellor’s illusion was achieved by leaving untouched the four-year freeze in income tax thresholds announced last year.At the time the freeze was unveiled, low inflation meant that it delivered a relatively small but appreciable sum to the Exchequer. With inflation running out of control, and wages likely to keep pace to some extent, millions more workers than previously expected will be pulled into higher tax rates – and to pay income tax on a larger share of their income – in a phenomenon known as “fiscal drag”.“The proposed cut in the basic rate gives back only about half of the additional windfall he is now expecting to enjoy from that measure,” said Mr Johnson.“On current plans Mr Sunak’s income tax changes won’t actually depress income tax revenues in 2024/25. Despite the cut in the basic rate planned for that year, the income tax take will stay about the same as in the previous year, and then continue rising. “That’s the effect of inflation and fiscal drag. They have magically doubled the scale of the tax rise he announced last year.” Mr Johnson acknowledged that the chancellor was “caught in a bind” thanks to the triple blow to the economy from Brexit, Covid and the Ukraine war, along with the lingering after-effects of the 2008 financial crash.Far from helping boost the UK’s prospects, as its proponents claimed, the evidence so far suggests that Brexit will have “a substantial long-term negative effect on our national income”, he said.But Mr Johnson said the chancellor had taken decisions which failed to protect the poorest in society and had chosen almost simultaneously to raise NICs thresholds and cut income tax in a way which was “indefensible from an economic point of view”. And he pointedly concluded: “Other choices were available.””He has not taken the opportunity to protect the poorest more fully simply by uprating their benefits more closely in line with actual inflation,” said Mr Johnson. “His choice to increase NI rates and reduce the basic rate of income tax looks indefensible from an economic point of view, though one can see the political attractions. “He continues, despite his rhetoric, to be a chancellor presiding over a very big increase in the tax burden. What he did yesterday was not enough even to stop the expected tax burden rising yet further.“He is sharing the inevitable pain of continued bad news between public services and taxpayers, with benefit recipients suffering in the short term. He had tough decisions to make. Other choices were available.” More

Rishi Sunak has denied his family is profiting from Vladimir Putin’s regime in an awkward interview about the Russian invasion of Ukraine.The chancellor was asked about reports of “family links” to Russia, which has been hit by sanctions over the war it is waging in eastern Europe. Mr Sunak called these sanctions “of unprecedented scale and scope” in the House of Commons on Wednesday. He previously told businesses to “think carefully” about making any investments that would benefit Mr Putin’s regime, as UK firms scrambled to cut ties with Russia.The chancellor was quizzed on Thursday about his wife’s stake in Infosys – a Indian IT company founded by her billionaire entrepreneur father which has operations in Moscow and reported links to a large Russian bank. Sky News presenter Jayne Secker asked him: “Are you giving advice to others that you are not following in your own home?” Mr Sunak replied: “I’m an elected politician and I’m here to talk to you about what I’m responsible for. My wife is not.”It has been reported the UK chancellor’s wife has a stake in the company worth hundreds of millions of pounds. But Mr Sunak brushed off suggestions his family could potentially be “benefitting from Putin’s regime”. “I don’t think that is the case. As I said, the operations of all companies are up to them,” the chancellor said. “We have put in place significant sanctions and all the companies that we are responsible for are following those – as they rightly should – sending a very strong message to Putin’s aggression.” Asked whether Infosys – which has four offices in the UK – was sending such a message, Mr Sunak said: “I have absolutely no idea because I have nothing to do with that company.” More

Boris Johnson has admitted “we need to do more” to tackle the cost-of-living crisis, as Rishi Sunak’s spring statement faces intense criticism for not going far enough.The Office for Budget Responsibility (OBR) – the spending watchdog – said last night that Britons are set for the biggest fall in living standards in a single financial year since records began in 1956.In an analysis published on Thursday, the Resolution Foundation also warned that 1.3 million, including 500,000 children, could be pushed into absolute poverty by the cost of the living squeeze.Speaking less than 24 hours after Mr Sunak unveiled his spring statement in the Commons, the prime minister said the cost-of-living crunch “is the single biggest thing we’re having to fix”.Mr Johnson acknowledged: “It will continue to be tough, it will continue to be chippy, but we will get through it and we will look after people throughout”.He insisted the chancellor had done a “huge amount to address the increase in cost of living” and cited the announcement on cutting the national insurance contribution threshold.However, he told LBC: “Yes… as we go forward, we need to do more.”He added: “I’ll be bringing forward a British energy security strategy, which is intended to make good some of the mistakes of the last 25 years in which we haven’t really done enough to ensure that we have our own energy supplies, we need to go big on nuclear in this in this country.“We need to go much bigger on offshore wind, we can make sure that by investing in energy production, domestic energy production, independent energy production, we can have sustainable, long term supplies and that will bring down the costs for consumers over the long term.”The prime minister’s remarks came as the chancellor also hinted the government could intervene ahead of another expected hike in consumers’ energy bills in the autumn.Asked whether the government would take action in that case, he told the BBC: “Yes, of course we’ll have to see where we are by the autumn and it’s right for people to recognise that they are protected between now and the autumn because of the price cap.”Pressed on whether that meant yes, he will intervene before October, Mr Sunak said: “I always keep everything under review, and the Government, as it’s shown over the past two years, is always responsive to what’s happening.“But I would say with energy prices, you know, they are very volatile, and I don’t think you, I or anyone else has any certainty about what will happen in October right now.”On Wednesday, the chancellor also faced criticism from charities for the decision not to uprate benefits for the most vulnerable in line with inflation — which is expected to average 7.4 per cent over the next year.The Trussell Trust foodbank group suggested the decision not to increase the “dangerously insufficient” levels of social security would mean more people have “no option but to use a food bank”. More

The UK has imposed new sanctions on Russian billionaires and businesses, as well as the Wagner Group mercenaries tasked with assassinating Ukrainian president Volodymyr Zelensky.The paramilitary Wagner Group is a private military company employing fighters from civil conflicts around the world, and has been active in Ukraine since 2014 supporting pro-Russian separatist elements in the eastern Donbass region.Widely regarded as Vladimir Putin’s private army, it has reportedly been given orders to track down and murder Ukrainian leaders including Zelensky, but has so far failed in this objective and is reported to have taken numerous casualties.Also sanctioned are key parts of Russian industry supporting the Ukraine invasion, like military drone manufacturer Kronshtadt and Russian Railways, six more banks and the world’s largest diamond producer Alrosa.Individuals sanctioned include the billionaire oil tycoon Eugene Shvidler, founder of Tinkoff bank Oleg Tinkov, Herman Gref, the CEO of Russia’s largest bank Sberbank, and Polina Kovaleva, foreign minister Sergey Lavrov’s ‘step daughter’.Galina Danilchenko, who was installed by Russia as the mayor of Melitopol is also sanctioned – the first time an individual has been sanctioned for collaboration with Russian forces currently in Ukraine.The new measures were announced as prime minster Boris Johnson arrived in Brussels for talks with Nato allies on the Ukrainian emergency.Mr Johnson said: “Vladimir Putin is plainly determined to double down on his path of violence and aggression, absolutely brutal the way he’s treating the Ukrainian people.“We’ve got to step up, we’ve got to increase our support, we’ve got to tighten the economic vice around Putin, sanctioning more people today – as we are – looking at what we can do to stop Putin using his gold reserves and also doing more to help the Ukrainians defend themselves.”Announcing the new sanctions, foreign secretary Liz Truss said: “These oligarchs, businesses and hired thugs are complicit in the murder of innocent civilians and it is right that they pay the price.  “Putin should be under no illusions – we are united with our allies and will keep tightening the screw on the Russian economy to help ensure he fails in Ukraine. There will be no let-up”. More

Boris Johnson has said Vladimir Putin is “failing” in Ukraine as he unveiled a new military support package for the country’s defenders. Britain is to provide 6,000 new defensive missiles and £25m for the Ukrainian armed forces in a bid to help push back the Russian invasion.It comes as Mr Johnson is set to meet with Nato leaders at a summit in Brussels on Thursday, with the focus of discussions on how to bring an end to the conflict.Mr Johnson has promised to use the meeting to push for extra support for Ukraine’s military. Other issues on the agenda include humanitarian assistance for Ukrainian refugees, and sanctions on Russia. Ukraine’s president Volodymyr Zelensky is also expected to speak to leaders at the gathering. Mr Johnson also spoke to Mr Zelensky on Wednesday afternoon ahead of the summit.Kicking off the meeting on Wednesday Nato secretary general Jens Stoltenberg said the alliance was “concerned” over Russia potentially using chemical weapons in the country.And he said Mr Putin’s government “must stop its nuclear sabre-rattling”, branding the approach “dangerous and it is irresponsible”.“Russia must understand that it can never win a nuclear war,” Mr Stoltenberg added on the eve of the summit – a major gathering which EU officials in Brussels are describing as an “extravaganza”.But Mr Johnson faces an apparent snub as he arrives in the city, facing exclusion from the second part of the gathering of world leaders.US president Joe Biden has been invited join the 27 EU presidents and prime ministers for a European Council meeting in the same city on the same day, where discussions about the conflict are expected to continue following the Nato summit. But despite reports that Mr Johnson wanted to attend the second meeting, he was not invited and will miss the second part of day’s proceedings.The lack of an invitation raised speculation that the prime minister’s comments over the weekend, comparing the war in Ukraine to Brexit, played a role in the snub.Those words sparked fury in Brussels and other EU capitals, with former council president Donald Tusk branding them “offensive” to Ukrainians, British people, and even “common sense”.Officials in Brussels are however downplaying any link between what Mr Johnson said and the lack of an invitation.A senior EU official noted that European Council president Charles Michel had had “a long phone call with Prime Minister Johnson on Monday” and that this took place after Mr Johnson’s remarks.The official said Mr Johnson would have another opportunity to meet EU chiefs at a meeting of G7 leaders.“The feeling was that we invite the president of the United States to the European Council, but we are not repeating the formats that we have had around the day,” the official added.Britain was automatically allowed to attend the European Council as a member of the EU, but no longer has a seat on the body, which meets four times a year in the Belgian capital.Speaking ahead of his attendance at the Nato leg of the gathering, Mr Johnson said: “Vladimir Putin is already failing in Ukraine. The Ukrainian people have shown themselves to be extraordinarily brave and tenacious in defending their homeland, in the face of an unprovoked onslaught.“But we cannot and will not stand by while Russia grinds Ukraine’s towns and cities into dust. The United Kingdom will work with our allies to step up military and economic support to Ukraine, strengthening their defences as they turn the tide in this fight. “One month into this crisis, the international community faces a choice. We can keep the flame of freedom alive in Ukraine, or risk it being snuffed out across Europe and the world.”A Downing Street spokesperson confirmed Mr Johnson had spoken to Mr Zelensky and said he was updated on the latest developments on the ground.“The prime minister reiterated his admiration for the bravery of the Ukrainian armed forces and their success in repulsing Russia’s onslaught,” the spokesperson said. “He said the bombardment of civilian areas, including the siege of Mariupol, is unconscionable and demands a response from the international community.“The prime minister set out his intention to use tomorrow’s G7 and Nato meetings to increase the pressure on Vladimir Putin’s regime and work with partners to substantively increase defensive lethal aid to Ukraine. Leaders would look to address Ukraine’s requests and ensure President Zelensky is in the strongest possible position in ongoing peace talks.” More

Nurses have been “short changed” by Rishi Sunak’s Spring budget and will be subsidising the NHS every time they buy petrol, unions said last night.The Royal College of Nursing said mitigating measures announced by the chancellor would not be enough to prevent frontline NHS workers “having to choose between filling up their cars and feeding their children.”It comes amid concerns that community nurses have been left out of pocket as they are not properly reimbursed for fuel used when travelling by car to patients.The Health Foundation said the government had not gone far enough to “protect the most vulnerable families from this latest economic shock.”NHS hospital leaders also said while the 5p-per-litre cut in tax on fuel was welcome they want nurses to be “better reimbursed for the petrol they buy through both mileage rate reimbursements and business tax relief.”The British Medical Association said Sunak’s statement was “disappointing” over the NHS care backlog and that ministers had failed to heed warnings over “punitive” pension tax rules that it says are driving doctors to retire earlyDr Chaand Nagpaul, chair of the BMA, said: “Given the unprecedented pressure that the NHS is currently under, with patients experiencing life-threatening waits for care and a serious workforce crisis in the NHS, it is disappointing that the government has failed to listen to our concerns around under-investment.“While the government has retained its commitment to boost NHS funding through the Health and Social Care Levy, we were disappointed that there was no mention of how they would fund the extra £7billion needed to clear the current backlog.”He added: “It is deeply disappointing that the chancellor has failed to heed the BMA’s call to address the punitive pension taxation rules, which is resulting in many doctors being unable to take on extra work or forced to retire early. This comes at a time when severe staffing shortages threaten the very sustainability of the NHS and compromises patient care.”Jo Bibby, Director of Health at think tank Health Foundation, said: “COVID-19 has further widened the health gap between the wealthiest and the poorest, who can on average expect to live shorter, less healthy lives. This announcement shows that the government has yet to fully grasp the pandemic’s stark lesson that health and wealth are fundamentally intertwined.“Despite the measures set out today, household incomes are set to fall by 2.2 per cent in real terms in the coming year.”There has been no action on benefits, while the additional £500m for the Household Support Fund falls well short of what is needed. Higher inflation will also erode planned spending on public services which support health.”RCN general secretary and chief executive Pat Cullen said: “Nurses feel extremely short-changed by this statement. The cost-of-living crisis means some are having to choose between filling up their cars and feeding their children.”Today’s fuel measures are not enough to stop nursing staff subsidising the NHS when they fill up their car.  When community nursing staff drive great distances to see their patients, giving vital care, this is not enough action – they need immediate additional payments and an urgent review of the rates.!Deputy chief executive of NHS Providers, Saffron Cordery, said: “As collective employers of 1.4 million people, trust leaders are keenly aware of the spiralling costs their workforce is facing in their day to day lives.“They are particularly worried about the impact on their younger and lower-paid staff who are likely to be hardest hit and who will need further financial support.” More

Britain’s largest network of food banks has warned Rishi Sunak’s refusal to bring benefits in line with inflation will drive more people to emergency food parcels and turn the “cost-of-living crisis into an emergency”.The stark warning comes as the Office for Budget Responsibility (OBR) – the spending watchdog – said Britons are set for the biggest fall in living standards in a single financial year since records began in 1956.Benefits are set to increase by 3.1 per cent, but with inflation expected to average 7.4 per cent over the next year, campaigners had urged the chancellor to intervene and ease the cost-of-living crisis.The OBR added: “In the welfare system, lags in CPI uprating of benefits mean they fall by almost five per cent in real terms in 2022-23, reducing their real value by £12bn, and take almost 18 months to catch up fully with higher inflation”.In a statement Emma Revie, the chief executive of the Trussell Trust food bank group, said Mr Sunak had “failed to create any security for people on the lowest incomes by failing to bring benefit payments in line with the true cost of living in the spring statement.”She said the decision had created a real-terms cut to social security payments, which, she described as “dangerously insufficient”.After a leading supermarket boss claimed some food bank users were declining potatoes and root vegetable because they cannot afford the energy to boil them, Ms Revie said: “People are already making impossible decisions between heating and eating, and we know people are skipping meals, unable to afford to run cookers and fridges and taking on debt to buy the essentials.”She added: “This decision will mean many more people will have no option but to use a food bank. By failing to make benefit payments realistic for the times we face, the government is risking turning the cost-of-living crisis into an emergency.“People cannot afford to wait another year for this to be review. Action to rectify this situation and strengthen our social security system needs to happen immediately”.The homelessness charity Crisis also warned that despite Mr Sunak’s measures on Wednesday, “[The spring statement] will not give support to families facing the cost-of-living crisis”.Chief executive Matt Downie added: “What’s clear from this statement is that people up and down the country will be pushed into homelessness.”Speaking after the chancellor’s spring statement, Paul Johnson, of the Institute for Fiscal Studies (IFS), told Politics Live: “What was completely missing was anything for people on universal credit or the state pension, which is only going up by 3.1 per cent this month when inflation will be around 8 per cent. “It’s a big cut in living standards for those on the very lowest incomes”.Tackled on the issue of benefits in the Commons – after delivering the spring statement – Mr Sunak pointed to the autumn Budget when the government reduced the universal credit taper rate.He added: “I am pleased and proud of the fact that because of the actions of this government, increasing the national living wage in April by 6.6 per cent, by cutting the universal credit taper rate, and indeed by the increase in personal thresholds today.“Taken altogether, all tax and welfare changes, that single mother of two children working full-time on the national living wage will now be £1,600 better off.” More

Rishi Sunak has told a young woman struggling to find work to be “optimistic” because “lots of jobs” are being created at a new local freeport.The chancellor made the recommendation as he was confronted by protests that he has turned his back on benefit claimants – faced with a big cut in income, after he refused to halt real-terms cuts in payments.On a phone-in, 24-year-old Sarah, from Grimsby, warned that young people in her area “don’t have much hope for the future”, because of a lack of jobs and high house prices.“I can’t count the amount of jobs have applied for,” she told Mr Sunak, adding: “People don’t want kids because they can’t afford them. They’re putting off starting families.”In response, the chancellor urged Sarah to join the Kickstart scheme which had helped 125,000 young jobless people into work – although he then admitted it would be wound up next week.And, speaking on LBC Radio, Mr Sunak said: “The other thing we’re doing in your part of the world, actually, is creating a new freeport.“What that will do is create a zone in your part of the world which will mean that jobs are created as companies invest, because we’re providing them with lots of incentives to do so.”He added: “Yours is one of the first areas that is taking advantage of those new freedoms and there’s already been some announcements, with Siemens and other companies, and lots of jobs have been created.“So I’m optimistic about your part of the world, partly because of that new freeport that’s going to come in there.”During the phone-in, Mr Sunak also:* Rejected criticism that benefit claimants have been let down, as the uprating falls far short of rising inflation – arguing it is better to help them find “good jobs”.* Said the government is spending £58bn on disability benefits – “more than ever” and more than Japan, Germany or Austria.* Argued it would be the “easiest thing in the world” to bow to pressure to impose a windfall tax on soaring gas and oil company profits – but that would cut investment.* Ducked a call from the ‘Patriotic Millionaires’ group to impose a wealth tax on the super-rich – but said there was a mechanism for them to pay more tax voluntarily.* Refused to say if he wanted to be prime minister “one day” – because he is focused on “everything that is on my plate at the moment”.The phone-in came after a spring statement which has still left Britons heading for the biggest fall in living standards since the 1950s, experts are warning. More