Faisal Islam: The Budget was more radical than it looked

Rishi Sunak started the week giving a speech on a construction site in Swindon. The diggers were knocking down the town’s Honda factory, 35 years after Margaret Thatcher lured the Japanese car giant to the UK. There are hopes that the redevelopment of the site will lead to thousands of new jobs. By 2027, for every £1 NI cut, £1.

90 will be raised in taxes. This will mean over three million more higher-rate taxpayers, and nearly four million more low earners paying tax. On current trends, a recipient of the full basic state pension alone is also on course to pay tax. The government is shifting the tax burden away from workers towards all forms of income including savings and pensions.

Jeremy Hunt has cast this as a strategy that could lead to the abolition of National Insurance. The thinking is that these incentivise work. The Office for Budget Responsibility (OBR) said levels of inactivity were back at post-pandemic levels. OBR calculations do not offset the extra income tax being paid as a result of the tax thresholds being frozen.

But the fact that taxes on income overall are being raised means pensioners will see higher tax bills. There is a backlash against this, but it is due to their income rising, with the state pension set to increase by 8. 5%. In 2010, there were three million higher taxpayers, by 2029 there will be 7.

3 million. It was only three years ago that Mr Sunak was making the argument for raising spending on the NHS and social care. The policy now is to decrease National Insurance to 8%. The adult social care plan is officially on ice.

Details are sparse on the precise trade-offs for unprotected areas such as councils, courts, prisons and social care. The chancellor said this was because plans are undecided and reliant on a government spending review which he has now said will not be done until after the general election. Labour are also as yet unwilling to go into much detail, but leader Keir Starmer was in a hard hat meeting apprentices on a different building site in London. Think tank points to what it calls a “conspiracy of silence.

about the tough decisions required after the election. Labour’s promise is to fund services from higher growth, but the central plank of its growth plan, spending an extra £28bn per year on green investment has been parked.

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