From the first minutes of the first PMQs of 2024, it was obvious that Rishi Sunak was set to make a big announcement about the Post Office scandal.
But despite his pledge to quash the appalling convictions of postmasters, it became equally obvious that the Prime Minister would have preferred to talk about something else entirely. And that something else was tax cuts.
In his joust with Sir Keir Starmer, Sunak followed up on the message that he’s tried hard to push via a string of events in recent days: this is a Tory Government that marked the new year with a 2p cut in employees’ national insurance contributions. The PM is clearly hoping that the cut, which came into force on 6 January, will lead to some kind of epiphany for a public currently out of love with the Conservatives.
Until the Post Office issue got in the way, it dominated his messaging immediately before and after the rate changed. “Just this weekend, we are delivering on our plan to cut people’s taxes,” Sunak told MPs today. Then Tory backbencher Chris Clarkson asked a planted question, trilling that “it is almost spring, when a young man’s fancy turns to tax”.
After Clarkson highlighted how business taxes were going up in Labour-run Wales and income taxes up in Scotland, Sunak repeated his line: “Just this weekend, we are cutting taxes for an average person in work by £450.” The PM at least refrained from Jeremy Hunt’s inflated boast – on tax-cut epiphany day itself – that the NI reduction would be worth “nearly £1,000 for a typical two-earner family“. Hunt was referring to families with two earners earning £70,000 in total, but they’re far from typical. The average income for a family household in 2022 was £35,000.
Of course, the real problem with the Tories tax “cut” claims is that the tax burden has been rising. The independent Institute for Fiscal Studies estimates that frozen income tax rates will mean that from April this year the average earner would be saving £130 a year instead of £450 from the NI cut. The Office for Budget Responsibility expects the personal tax measures implemented in 2021 and 2022 to raise an extra £44.6bn in 2028-29 – which puts into real perspective the £10bn tax cut of the NI change.
Starmer got his retaliation in first in PMQs, pointing out “taxes are going up”. Labour has been running hard its own new year campaign on “Rishi’s Raw Deal” (even putting online ads on ConservativeHome, the Tory activists’ bible), pointing out that “for every extra £10 people are paying in tax they are only getting £2 back”.
Millions of TV viewers will have seen consumer champion Martin Lewis (who has been called, don’t forget “the most trusted man in Britain”) make exactly this point in an interview with the Chancellor on Tuesday night. Hunt did however hint that if he had fiscal “headroom” in his Budget in March, he would try to cut taxes further. And there’s no question that his NI cut was one of the biggest for many years.
Moreover, thanks to his reputation for fiscal responsibility, the market barely blinked, whereas Liz Truss’s unfunded tax cuts caused a meltdown in 2022. It’s those memories of Truss that Labour clearly thinks trashed the Tory brand on the economy for many years to come. Perhaps the most notable aspect of Starmer’s own new year messaging was that a Labour government would only deliver tax cuts once the economy was growing strongly – while signalling it would not actually reverse any cuts the Tories brought in beforehand.
Given Sunak’s own record as a tax-raising chancellor, Labour strategists believe the Tories simply can’t repeat the “tax bombshell” attack adverts that nuked Neil Kinnock’s chances in the 1992 general election. MPs recall that one of Labour’s most successful campaigns in recent years was the 2022 local elections leaflet that mocked up a brown enveloped bill, complete with the words “FINAL DEMAND” franked on it. It listed “Tory tax rises” of £1,060 for energy, £690 for petrol, £275 for the food shop and £295 for the mortgage. One can imagine them repeating that this year, with even bigger numbers for rents and mortgages.
Speaking of energy, even a big subsidy off people’s bills failed to result in any uptick in Tory fortunes. More broadly, there has been a singular lack of “gratitude” from the voters for the billions Sunak points out he devoted to helping with the cost of living crisis. And even though every Tory MP is desperately searching for the first “twitch” in the polls that suggests a possible recovery, the polls have in recent weeks shown the Government is further behind Labour, not closer.
Only on Wednesday, Savanta showed that the first poll taken since the 6 January NI cut had increased Starmer’s lead. Of course, it will only be towards the end of this month when people actually see the 2p NI cut on their wage slips. But if there’s no bump in the polls even then, maybe the penny will drop that whole idea of tax cuts as an electoral elixir now looks out of date.
That won’t stop Tory MPs from demanding income tax cuts or inheritance tax cuts in the Budget. Although northern Conservatives worry that inheritance tax cuts will fall into Labour’s trap portraying them as a party of the rich, those in the “Blue Wall” think it’s an invaluable way to reconnect with basic instincts of aspiration. Although only the top 4 per cent of the population pay inheritance tax, polls show many of the public think it’s deeply unfair to stop parents from passing on money to children. And some in Labour think they can actually shoot the Tories’ fox on this subject by themselves proposing a cost-neutral change. Ending inheritance perks for the very richest to pay for lower tax rates on smaller estates (for those who don’t see themselves as mega-wealthy but who are paying 40 per cent).
After a new Deutsche Bank forecast that inflation will plunge below two per cent from this April, and possible interest rate cuts to follow, some Conservatives hope the public will see the UK has “turned a corner” and deserves another five-year term. The danger, as Joe Biden is discovering, is that no matter how much the headline figures suggest your economy is on the mend (and US growth dwarfs the UK’s), unless people actually feel better off they won’t reward politicians with any payback of their own.
Rishi Sunak may quash the convictions of the wronged Post Office staff. But it’s a lot harder to change the convictions of voters that his party is too tired and too out of touch with their everyday lives.
Tax cuts are no longer the electoral elixir the Tories think they are
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10.01.2024
From the first minutes of the first PMQs of 2024, it was obvious that Rishi Sunak was set to make a big announcement about the Post Office scandal.
But despite his pledge to quash the appalling convictions of postmasters, it became equally obvious that the Prime Minister would have preferred to talk about something else entirely. And that something else was tax cuts.
In his joust with Sir Keir Starmer, Sunak followed up on the message that he’s tried hard to push via a string of events in recent days: this is a Tory Government that marked the new year with a 2p cut in employees’ national insurance contributions. The PM is clearly hoping that the cut, which came into force on 6 January, will lead to some kind of epiphany for a public currently out of love with the Conservatives.
Until the Post Office issue got in the way, it dominated his messaging immediately before and after the rate changed. “Just this weekend, we are delivering on our plan to cut people’s taxes,” Sunak told MPs today. Then Tory backbencher Chris Clarkson asked a planted question, trilling that “it is almost spring, when a young man’s fancy turns to tax”.
After Clarkson highlighted how business taxes were going up in Labour-run Wales and income taxes up in Scotland, Sunak repeated his line: “Just this weekend, we are cutting taxes for an average person in work by £450.” The PM at least refrained from Jeremy Hunt’s inflated boast – on tax-cut epiphany day itself – that the NI reduction would be worth “nearly £1,000 for a typical two-earner family“. Hunt was referring to families with two earners earning........
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