Both the Chancellor and Prime Minister discussed the Conservative Party’s economic policies at their Party Conference in Manchester. To a mixed reception from other conservatives and the business world.
Chancellor Rishi Sunak
During Chancellor Sunak’s speech to the conference, he addressed the recent National Insurance Contributions rise, saying:
“Whilst I know tax rises are unpopular, some will even say un-Conservative, I’ll tell you what is un-Conservative: unfunded pledges; reckless borrowing; and soaring debt,”
“There can be no prosperous future unless it is built on the foundation of strong public finances. And I have to be blunt with you. Our recovery comes with a cost…”
Rather stating the obvious with the last point. We’re all well aware of how much the pandemic has cost us personally – and not just financially. And there seems to be increasing awareness of how the impacts are affecting each different sector. Perhaps with a new appreciation of how industries are all interconnected. At its most basic level – if goods aren’t delivered, then shops can’t sell them.
Given their election pledge not to raise any of the big three taxes – corporation tax, income tax and National Insurance – Mr Sunak had to acknowledge that this is not what people expect from a conservative government. Given the hike to Corporation Tax coming in 2023 and next year’s National Insurance Contribution rises that have already been announced.
He then went on to explain the extent of our national debt:
“Our national debt is almost 100% of GDP, so, we need to fix our public finances because strong public finances don’t happen by accident.”
We have to pay for the long-term affects of COVID-19. The alternative to increased taxation is increased borrowing, which is not something Mr Sunak intends to do, saying:
“I believe in fiscal responsibility. Just borrowing more money and stacking up bills for future generations to pay is not just economically irresponsible, it is immoral – because it’s not the state’s money, it’s your money.”
What help is in place from now?
Millions of us benefited from the furlough scheme and other government financial support during the last two years.
But the furlough scheme is coming to an end and there are very real fears that a swathe of redundancies will follow, over the next few months. Businesses that are just starting to get back on their feet will have to pay 100% of their employees’ salaries again, and there’s no imminent boost to the economy to drive sales. The £20 rise in Universal Credit is another support beam that’s being taken down at the same time.
In actual fact, most people’s main financial worries include the possible huge rise in the cost of domestic fuel, increases to other basics and the stability of supply chains. All of these elements are vital for individuals and businesses.
During his speech, Mr Sunak listed some of the investments being made to support people during this next phase. They include:
- £500m of new money into the Kickstart scheme. This supports 16-24 year olds who are “at risk of long-term unemployment”. The money is to create new jobs for them and is available until the end of March 2022.
- Job Entry Targeted Support Scheme extended – for those unemployed longer than three months.
- Apprentices – the £3,000 financial incentive to take on an apprentice is being continued until the end of January 2022.
- National Youth Offer will continue until the end of 2025. This guarantees support for young people on Universal Credit.
- Job Finding Support Service is being directed to put those leaving furlough, on Universal Credit and looking for work at the top of their list until end December 2021.
- £34m National Artificial Intelligence Fund, giving 2,000 scholarships to ‘disadvantaged students’.
Prime Minister Johnson
The Prime Minister echoed Mr Sunak’s opinion of increased borrowing, telling Andrew Marr:
“If I can possibly avoid it, I do not want to raise taxes again.
“I can tell you that you have no fiercer and more zealous opponent of unnecessary tax rises than me, but we have had to deal with a pandemic on a scale which this country has not seen before in our lifetimes and long before.
“We don’t want to raise taxes, of course we don’t, but what we will not do is be irresponsible with the public finances.”
So, increased borrowing is irresponsible, we don’t want to raise taxes, but we might have to.
The Chancellor is due to present his annual Budget at the end of October, so we’ll have to wait to see what this actually means.