Sunak’s spring statement fell flat because work no longer lifts people out of poverty

A Tory MP was branded was also “callous” for suggesting poverty-hit people are “sitting on benefits” and should “get any job”, as Britain braces for the biggest fall in living standards since the 1950s.

Katherine Fletcher was accused of an “insult” on struggling families after Rishi Sunak’s mini-Budget last week failed to offer the poorest help for the looming cost-of-living crisis despite soaring energy bills and food prices.

The Chancellor refused to reinstate the £20 uplift to Universal Credit and, despite inflation set to average 8% this year, uprated benefits by a measly 3%, meaning low-income families will in fact be hit hardest.

Sunak’s spring statement fell flat because work no longer lifts people out of poverty

Richard Partington 

Where did it all go wrong for Rishi Sunak? The most popular chancellor in four decades now pilloried for a spring statement which failed to meet the challenge of the worst hit to living standards since the Suez crisis.

Attacked for promising tax cuts while stealthily driving up the tax burden to the highest level since Clement Attlee was prime minister in the late 1940s, criticised for putting Instagram moments ahead of the serious task at hand, here was an out-of-touch ivory tower politician who would allow living costs to rise faster than pensions and benefits. It was the mini-budget to please no one.

In an earlier time the story would have been very different. Conservative chancellors promising tax cuts would normally enjoy support from their own party. Prioritising the public finances over benefit handouts should be a surefire winner for any would-be Tory leadership contender.

In the arid desert of support for Sunak, it was noticeable that George Osborne was among the few politicians willing to offer him praise, gushing that the Conservatives had been given back a “long-term economic plan” based on controlling spending, reducing the deficit and cutting taxes.

The trouble is the times have changed. Now is not the moment for an Osborne reboot of “fixing the roof while the sun is shining”. In case the chancellor hadn’t noticed, the economic weather has turned – with more than a million people expected to be pushed into absolute poverty.

A decade of austerity cuts to public services has swung public opinion behind more state intervention, not less, with the response to Covid highlighting how much can be done during extreme shocks to the economy.

That Sunak’s spring statement fell so badly flat highlights three things: how much has changed since Osborne was chancellor, how badly Sunak has judged the cost of living crisis and how poorly equipped the neoliberal toolbox is to deal with the big challenges facing the British economy.

A decade earlier the Conservatives had been on a branding exercise to claim the mantle of the workers’ party, taking aim at benefit scroungers to boost employment and discourage a life on handouts.

Sunak’s approach is in that vein – promoting work as the best engine to lift people out of poverty. Having cut benefits by £20 per week last October despite all the warnings, he was hardly going to turn back now.

However, there are serious problems with this approach when hard work isn’t making life any easier while living costs soar, and after a decade of economic mismanagement from the party of government.

The Resolution Foundation estimates average pay levels are on course to be just £18 per week higher in 2027 than they were in 2008, after adjusting for inflation. The upwards path for wages achieved in the years before the financial crisis has stalled in the decade since.

Far from levelling up or building back better, typical household incomes are forecast to fall by 2% between Boris Johnson’s election landslide in 2019 and 2025, making his the worst parliament on record for living standards.

The Tory advert for the world of work could hardly be worse. Failure to take action on workers’ rights has led to the scandal of 800 seafarers being fired without notice at P&O Ferries. Precariousness of employment and low pay are endemic.

Refusing to boost benefits ignores that millions of the lowest-paid workers are forced to rely on them.

Official figures show as many as 40% out of the 5.6 million universal credit claimants are in work. While the government is raising the minimum wage by 6.6% to £9.50 an hour this April, benefit cuts made last autumn and tax rises this spring mean many on low-pay will still be worse off.

Most people living in poverty are either in work or live in a working household, according to the Joseph Rowntree Foundation. As many as one in eight workers are now in poverty – about 4 million people. That is a rise of about 1.5 million from the late 1990s when one in 11 people in poverty had a job.

While research suggests poverty rates fall sharply when people move into work, it’s clear that even sustained employment does not eliminate a life below the breadline in 21st century Britain. An action plan to improve the outcomes of the economy for workers is needed.

This requires a twin-track approach. Firstly, additional help for the poorest with surging energy bills and the rising cost of a weekly shop. It took Boris Johnson less than 24 hours from the spring statement to admit this might be necessary.

Secondly, longer term measures to get the economy moving and provide access to well-paid, secure employment. This should start with an employment bill to ban exploitative “fire and rehire” practices of the type used by bosses at P&O, as well as ending zero-hours contracts.

A decade ago, the public did not believe Labour when the party insisted the best way to cut the deficit was to boost the economy with a Keynesian burst of public investment. Today, the shoe is firmly on the other foot. The Tory argument that the state must step aside and let businesses and workers find their own way through the latest economic shocks falls entirely flat.