Sunak must ditch tax hikes now
Two phrases are ringing around my brain: “When the facts change, I change my mind” and “Events, dear boy! Events”. As European energy policy is horribly exposed by the Ukrainian war, the green rhetoric and net zero targets are rightly being questioned. Now, as we prepare for sanctions against Russia to bite at home, the government must rethink its policies to ensure it doesn’t further exacerbate the cost of living crisis.
Boris Johnson was right to make it clear that there will be a cost to us all for the necessary sanctions on Russia. He must keep banging that drum and preparing the British people for the inevitable. Any financial pain we endure will be nothing compared to the unbearable suffering of the Ukrainian people. Nonetheless, the cost of living crisis at home will hit the poor hard and bite the middle classes and the government must be straight with us about that.
At the same time, we must not let the government conflate issues to cover up its own mistakes. There is an existing cost of living crisis, and its root causes are the global pandemic and leaving the single market. The Russian invasion of Ukraine and the sanctions against Russia will exacerbate this and we must monitor the government narrative to ensure it doesn’t pull a fast one and blame the war for a crisis it seems determined to make deliberately worse.
Next month, the energy price will go up – the misguided energy policy of successive governments must take a major share of the blame. We decided against exploiting the vast reserves of shale gas to obtain a degree of energy independence and we are now in a mad, single-minded dash to meet net zero targets.
Now would be a good time to remove the green levies on our household bills and instead fund them via general taxation. This would move around £185 per year from the bills of the average household to general taxation and help to cut energy bills. This would have more effect than the frankly bizarre plan to “loan” us our own money whether we like it or not and then have us repay it over five years in the hope that energy prices will stabilise.
In the very same month as our energy bills shoot up, the government is still planning on increasing both employers’ and employees’ national insurance, despite the extra inflation this is bound to cause. It really is a baffling folly to hit us all in the wallets and throw a spanner in the works of the jobs market during such volatile economic times. If there was ever a good time to do this, it certainly isn’t now.
There will be no political cost to performing a U-turn under the current circumstances. In fact, the Chancellor, Rishi Sunak, could claw back some lost credibility now if he addressed the nation and told us that, in response to the unfolding crisis in Europe – and to help the British people as we economically punish Russia for its war mongering – the government will scrap the planned rise in National Insurance Contributions.
To further alleviate the crisis, the government should then increase Universal Credit by restoring the uplift introduced during the pandemic and put £20 a week back into the bank accounts of the poor and vulnerable. It’s easy to quibble about the costs, but this doesn’t even come close to making up for the drastic cuts to welfare that were implemented during the age of austerity.
Waging economic warfare against Putin’s squalid regime is the least the West can do. YouGov polling has found that Britons supported the initial sanctions against Russia but are hesitant to support further sanctions if it means accepting further price increases. By 45% to 35%, Britons would oppose further sanctions that increase the overall cost of living.
The government is doing the right and necessary thing, but it must gain the buy-in of the public. The best way to do that is to do what it can to ease the cost of living crisis and ensure it does not do anything to make it worse. Voluntarily increasing taxes in the middle of a spending squeeze that is about to get worse is utter madness.