Rishi Sunak was today warned not to plunge the UK into a new era of austerity, as fresh polling showed voters would prefer to see taxes rise than cuts inflicted on public services.
The survey for The Independent by Savanta ComRes found overwhelming support – including among Conservative voters – for an extended windfall levy on energy companies and for the introduction of a wealth tax on property and other assets to ease the financial crisis facing Britons.
With half (50 per cent) saying their personal finances were deteriorating, one in five (20 per cent) fearful for their jobs and nearly a third (29 per cent) worried they may not make their rent or mortgage payments, only a third (32 per cent) trusted the Conservative government to handle the economic crisis – 17 points behind Labour, with Keir Starmer ahead of both Sunak and chancellor Jeremy Hunt.
The prime minister and chancellor will use Thursday’s Autumn Statement to the House of Commons to outline plans to fill a gap of as much as £60 billion in the public finances, and are understood to be aiming for a split of £35bn in spending cuts and £25bn in tax hikes.
Proposals to slow increases in planned annual budgets from 3.7 to 1 per cent after 2025 could deliver £25bn, but below-inflation rises would deliver a brutal blow to services like schools, policing and local government and intensify pressure on the beleaguered NHS.
Sunak and Hunt are coming under intense pressure from Conservative MPs to limit the scale of tax rises.
But unions and economists warn that slashing public spending risks lengthening the UK’s recession – already forecast to be the longest in 100 years – in a repeat of the lost decade for growth which followed George Osborne’s austerity measures in the 2010s.
“For the last decade, we’ve had this idea that economic or fiscal credibility required us to demolish public services and let wages fall,” TUC economics head Kate Bell told The Independent. “And what did we get? The lowest growth for decades, rising levels of debt and a country that was totally unprepared for the shocks that hit us over the last few years.
“I really challenge anybody to look around the UK right now and say what we’ve got is overfunded public services and overpaid public servants. There’s nothing left to give.”
Economics professor Arun Advani of Warwick University, told The Independent it would be a “wasted opportunity” if Mr Hunt took the “easy way out” of tinkering with the existing tax regime, rather that seizing the chance offered by public backing for reform to a system which currently taxes earnings from work more harshly than income from wealth.
Prof Advani, a member of the Wealth Tax Commission which in 2020 recommended a one-off levy on the property and assets of the richest to pay down some of the costs of Covid, said it would be “natural” to extend the windfall tax during the current energy price spike.
But he said Mr Hunt should go further and consider equalising capital gains tax – currently levied at 20 or 28 per cent on higher-rate taxpayers – with the 40p income tax rate, as well as reforming national insurance to capture income from assets in the same way as earnings from work.
And he said that a 1 per cent tax on total wealth over £10bn could raise £11bn a year – the equivalent of 2p on income tax and enough to massively reduce the pressure on public spending.
“Given that we’ve got this big crisis in which we have lots of money to raise, the chancellor has two options,” said Prof Advani. “One is to take the quiet, easy way out and do things that aren’t really helping the economy, but hopefully won’t bother people too much because they aren’t politically bold.
“The other – which would make much more sense – is to use this as an opportunity to reform the system in a way that would raise money, support growth and fix the unfairness that means that work pays less well than wealth does.
Jeremy Hunt warns ‘there are going to be some very difficult choices’ as UK enters recession
“For a Conservative government to make it harder to make money from work than from wealth seems very odd.”
Today’s poll indicated that voters are fearful of the impact of cuts on everyday lives already blighted by travel disruption, overcrowded schools, a crumbling care system and lengthy waits for GP appointments.
The findings highlight the political risk to Sunak that an austerity budget could further erode the Tories’ parlous position in the polls, with Labour recording leads of 20-30 points just 18 months ahead of the likely general election.
Just 22 per cent of those questioned said they would support cuts to public services in Thursday’s statement, against 55 per cent who would oppose them. Opposition rose to 66 per cent when asked if NHS resources should be cut back, with just 17 per cent backing reduced spending.
And the resistance to cuts reached across the political spectrum, with 69 per cent of Conservative voters opposing reduced spending on the NHS and 51 per cent on public services in general. Just 14 per cent of Tory voters backed NHS cuts and 22 per cent in other services.
By contrast, 31 per cent backed rises in income tax or national insurance – with 40 per cent opposed in each case.
And a massive 66 per cent supported an extension to the 25 per cent windfall tax on North Sea oil and gas – currently due to expire in 2026 – with just 11 per cent opposed. Wealth taxes also garnered decisive support, with 56 per cent in favour and just 18 per cent opposed. Tory voters from the 2019 election were even more enthusiastic, with 77 per cent backing windfall tax extension and 58 per cent wealth taxes.
Ms Bell said that the multi-billion consolidation package being drawn up by Sunak and Hunt is “a political choice, not an economic necessity”.
Markets would not react to an alternative package involving borrowing to invest with the same panic sparked by Liz Truss’s unfunded tax cuts, she said, arguing that businesses would welcome the boost to growth resulting from improved infrastructure, better-trained staff and reductions in sick leave.
“We’ve already seen the Bank of England warning of recession, we’ve seen warnings of an extra million people being out of work. We’re in the longest pay squeeze for 200 years,” she said.
“What the economy does not need is slowing down. What it needs is a credible plan for growth, which would require us to invest in not cut our public services. Nothing we’re hearing so far looks like it’s doing that.
“Instead, Sunak and Hunt are choosing to repeat the mistakes of the Cameron and Osborne government by giving up on growth and imposing a heavy dose of austerity on the UK economy.”
– Savanta ComRes interviewed 2,236 British adults on 5 and 6 November.