The Spring Statement – not the spring into action we were hoping for…
After chatting with colleagues and clients and reading the comments from various different industry bodies, the response to Rishi Sunak’s spring statement appears to be pretty unanimous – some good measures but not enough action. And I’d have to agree. Sunak is in a difficult situation, acting against an increasingly unstable, uncertain and challenging background, but the measures he has announced will make an incredibly modest impact at a time when so many are already struggling and a large impact was needed.
Having said that, it is hard to know how much the government should have to keep bailing us out when faced with extraordinary situations. Granted, COVID was an extraordinary time and without the government’s wage support schemes, grants and other financial help, many businesses would have gone under and thousands more jobs would have been lost. Wave certainly wouldn’t be where it is today without the help it received during the worst of the pandemic. But whether the government should step in and cover hardships every time the economy is in trouble is perhaps another matter – and a matter for another day.
In this case though, they really haven’t done enough. Inflation is through the roof – up to 6.2%, the highest it has been in 30 years – and will likely continue to rise. It’s expected to hit 8% next month. Energy, food and fuel prices have all shot up and as a result the cost of living has rocketed. As always, those on the lowest incomes are suffering the most. For many this is a crisis of epic proportions. And inflation will impact everything – the knock-on effect is huge. In simple economics, wages are under pressure to support the cost of living – businesses are having to pay more both to retain and hire – and this will stunt expansion plans and therefore lower the jobs available. I think it likely that we will see the jobs boom dissipate – jobs can’t possibly continue to soar in such a climate.
The changes to National Insurance (a £3,000 increase to the threshold) will help somewhat but not those out of work and relying on state benefits, who are the most vulnerable to rocketing inflation. The fuel duty cut sounds good on paper but I’ve not seen many petrol stations this morning with a noticeable price cut. Reports this morning suggest that prices should be cut at the pump by more than 5p when you factor in the VAT as well. And I know many haulage companies are saying that it will barely make a dent in their outgoings. The price of fuel is crazy but the catastrophic situation in Ukraine is something that wasn’t wholly foreseen and part of a much bigger issue of over-reliance on other countries. Supply chain infrastructures are likely on the brink of huge change as a result – we may be beginning to see a move to end the globalisation of supply chains – but that is a huge conversation for another day.
For me, energy prices is the biggest trick they’ve missed here. I do not think we should be letting up on the green policy and I would have liked to have seen big incentives for greener energy installation – 0% VAT from 5% is not enough. I would have charged a windfall tax on the biggest providers, but I’d also offer up a greater incentive for solar and heat pumps. Grants for home insulation, grants for new boilers, tighter insulation regulations on new builds. Why on earth does every new build not come with solar as standard? Self-sufficient energy and lower consumption means less reliance on the grid which could lower prices. The idea of a loan introduced a while back is terrible.
Ultimately, we’re in a for a tough few months with guaranteed price hikes in every area of our personal and professional lives. We will all need to tighten our belts a bit (and make sure the lights are always off when you leave a room!). As with any government help, it’s always a few months at least before the impact is felt (and 2 years before the income tax cut comes into force!), so until then it may feel like we’re on our own. There’s no denying this year will be extremely hard for millions of people. Growth is forecast to slow considerably and inflation could rise to 9% before the end of the year (which will be a 40 year high). It looks like we’ve already seen the end of the post-COVID boom. But we’ve been here before and we’ve come through it, emerging stronger on the other side. We can do it again. Walk more, waste less, help where we can. Work hard, stay lean, stay agile, stay in communication with your clients. Better times will come again.