The job of today’s statement – the reason it was urgent and necessary and painful – is because there was a huge black hole in the public finances that upset the markets and pushed up the public debt. However – surprisingly – for the next two years Jeremy Hunt has announced that the Sunak government will spend more money overall, not less. Britons face ‘stunning’ fall in disposable income as energy bills and taxes rise – latest updates An incredible change of style Yes, there are big direct tax increases that many, including Tory supporters, will hate (£7.4bn worth in the next financial year, for example). But this is offset by a staggering £9.4bn of extra spending on energy aid, school budgets, social care and the NHS. An incredible change of style. The chancellor’s argument is that a short-term boost in spending is needed to ease the recession we’re in now and keep more people in work. It’s just a very different message than what we’ve been hearing for the past month. Incredibly, as Sky News revealed last night, Mr Hunt is even keeping Liz Truss’ Energy Price Guarantee and extending it for another year – the very plan which is due to be scrapped in March because it was too risky. Such a thing, a month after he dramatically put it on TV. There is, however, much more theoretical pain, though not yet. In order to calm the markets, the Sunak government is promising an incredible squeeze after the election. Yes, there will be a small increase of 1% in real terms in budgets after 2025, but this is far less than Chancellor Rishi Sunak promised in March and after a decade of pain. This creates an accounting bonus: it means Mr Hunt can say he has theoretically saved £27bn in 2027 by reducing the theoretical future cost of borrowing. But this is a fantasy, because no one can make promises about public spending that far ahead, given that not a word has been written in either the Labor or the Tory manifesto. Read more about the Autumn Statement: Key announcements from the Autumn Statement How can the Chancellor reduce the ‘economic black hole’? Use Chrome browser for more accessible video player 2:52 All the key data and analysis A trap for Labour So in some ways, today’s autumn statement is a trick, a conjurer’s trick, aimed not so much at the public but at the markets. Will they buy it? Will the investment houses on which the UK is based trust Mr Hunt and Mr Sunak’s bleak, seriously phenomenal spectacle more than the Truss-Kwasi double project, even if the actual numbers don’t add up? In fact, there is a chance that they will, and in that respect it works. But maybe not. It’s a bet. All of this is very reminiscent of how George Osborne would approach his budgets – no wonder he has been seen going to Downing Street in recent weeks and his old lieutenants are advising Mr Hunt behind the scenes. The trademark Osborne move embodied in today’s decisions is to set a trap for Labour. By making a Labour-friendly set of tax rises targeting the wealthiest, then squeezing spending in the next parliament, Mr Sunak and Mr Hunt want to challenge Labour. If they want to go to the next election promising to spend more on public services, where are they going to get the cash, they will ask. It is a dilemma and it is not clear how Labor will respond. Use Chrome browser for more accessible video player 1:06 “12 weeks of conservative mayhem” But again that’s a gamble. Short-term tax rises are real – taking us to the highest tax burden since the Second World War – while the rise in what people will pay for energy will increase and mortgages continue to rise and public sector payments continue to be squeezed . The Office for Budget Responsibility is proposing a 7% drop in living standards next year. All this will be very real. Perhaps by the next election, Labor will be put on the spot and have to justify where the tax rises will come from. But perhaps people feel the squeeze to such an extent that they want change without having to interrogate the alternatives too much. This is the battle that will be fought in the next election.
