Sunak kicked off the statement by praising the courage of Ukrainian citizens as they continue to resist the Russian invasion, stating that “the sorrow we feel for their suffering and admiration for their bravery is only matched by the gratitude we feel for the security in which we live”.
“What Putin sees as division, we see as debate. What he sees as chaos, we see as creativity,” he went on.
He argued that it is the “strength of our economy” that allows the UK to maintain its security.
The chancellor’s first key announcement, trailed in the media over the past few days, was a cut to fuel duty by 5p a litre. Sunak said this cut will be “worth more than £5bn, and it will take effect from 6pm”. The cut will last until March 2023.
The chancellor admitted that his actions were not “cost-free”.
He highlighted the Russian invasion of Ukraine as posing a risk to Britain’s economic recovery following the pandemic, admitting that the Office for Budget Responsibility forecasts 3.8% growth this year.
He said the government was in a position to cut VAT on energy efficiency measures and that they will be reduced to zero on energy saving tech such as solar panels. The cut, which will last 5 years, will not extend to Northern Ireland due to the ongoing Protocol, however he said NI will receive equal funding.
The chancellor said the cut meant that an average family could save £1,000 on installation of solar panels and as much as £300 a year on their overall energy bills.
In another key announcement, Sunak promised to cut the basic rate of income tax from 20p in the pound to 19p in the pound during 2024- the year the next general election is currently scheduled for.
Sunak pointed out that income tax had only been reduced two times over the past two decades, which he said was proof that it was “hard to do”. He argued that “Covid and the war have made that harder”. He went so far as to say it would have been “irresponsible” to cut taxes this year, but that he “refused to let the ambition wither”.
He went on to explain that the Household Support Fund would receive a further £500million in funding, which local authorities will be in charge of managing.
Sunak also said that 70 per cent of workers will receive an “effective tax cut” recommended by the Institute for Fiscal Studies (IFS), as he will increase the threshold for contributing to National Insurance (NI) by £3,000.
“From this July, people will be able to earn £12,570 a year without paying a single penny of income tax or National Insurance,” he said.
Labour’s shadow chancellor Rachel Reeves then responded to her opposite’s plans, describing his claims of tax cuts as “increasingly incredible”.
She accused him of being inspired by the classic fantasy novel Alice in Wonderland, ” or Alice in Sunakland,” she jibed.
She argued that Sunak was offering people £200, but then asking for it back. “He says he believes in lower taxes, but taxes are going up,” she said.
“Alice would ask, do lower taxes mean higher taxes?”, comparing Sunak’s approach to the novel, she satirised his attitude: “When I use the word, it means just what I choose it to mean?”. She even claimed that the chancellor was “living in a different reality”.
She also joked that the chancellor was “Ted Heath with an Instagram account”.
Reeves finished to loud cheers from the opposition benches, stating: “The chancellor has failed to appreciate the scale of the challenge that we face. And yet again, he is making the wrong choices for our country.”
Torsten Bell, chief executive of the progressive Resolution Foundation think tank slated the NI changes as a “tax cut for the middle and top of the income distribution,” explaining that “only £1 in £3 of the benefit goes to the bottom half.”
IFS director Paul Johnson also issued a stark criticism of the chancellor’s announcement on tax, saying via Twitter: “Oh for goodness sake. What is the possible justification for cutting income tax rate while raising NI rate? Drives further wedge between taxation of unearned income and earned income. Yet again benefits pensioners and those living off rents at expense of workers”.
