Jeremy Hunt’s sombre Autumn Statement

This is an audio transcript of the Payne’s Politics podcast episode: ‘Jeremy Hunt’s sombre Autumn Statement’

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Sebastian Payne
Jeremy Hunt delivered a £5bn fiscal squeeze this week as the chancellor announced Britain was facing its steepest fall in living standards in over 70 years.

Jeremy Hunt
Anyone who says there are easy answers is not being straight with the British people. (MPs shout “Hear! Hear!”) Some . . . Some argue . . . Some argue for spending cuts, but that would not be compatible with high-quality public services. Others say savings should be found by increasing taxes. But Conservatives know that high-tax economies damage enterprise and erode freedom.

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Sebastian Payne
Welcome to Payne’s Politics, your essential insider guide to Westminster from the Financial Times, with me, Sebastian Payne. In this week’s Autumn Statement special, we’ll be dissecting Jeremy Hunt’s de facto first budget, the dire state of growth and the public finances, the stealth tax rises where spending will be chopped, where some extra cash is going, and the prospect of high inflation for some time. The FT’s top gurus will take you through it all — political editor George Parker and economics editor Chris Giles. And later, we’ll be asking what this means for the Labour party. Has Jeremy Hunt shot their fox with a statement that includes a big windfall tax and puts the highest burden on the richest in society? We’ll be exploring the alternative with chief political correspondent Jim Pickard and special guest Carys Roberts, executive director of the progressive IPPR think-tank. Thank you all for joining.

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Sebastian Payne
This week’s Autumn Statement has been trailed for so many weeks that none of the announcements on Thursday came as a huge shock. But Jeremy Hunt did set out a dire state of the British economy. Low growth, high inflation and little prospect of any sunlit uplands, or a plan to get there. Instead, it was all thin gruel. Some pain today, much more pain tomorrow, with only a hope that something might turn up to improve the situation. The best the chancellor could claim that it was being done in a way that would put the burden on the richest in society and he said it was being done in a compassionate way. Announcing the statement in the House of Commons, Hunt confirmed that the UK was now in recession.

Jeremy Hunt
The OBR forecast the UK’s inflation rate to be 9.1 per cent this year and 7.4 per cent next year. They confirm that our actions today helped inflation to fall sharply from the middle of next year. They also judged that the UK, like other countries, is now in recession. Overall, this year, the economy is still forecast to grow by 4.2 per cent. GDP then falls in 2023 by 1.4 per cent before rising by 1.3 per cent, 2.6 per cent and 2.7 per cent.

Sebastian Payne
Chris Giles, welcome back to the podcast. Give us your overview of the Autumn Statement. It broadly seemed to have landed with where we thought it was going to. I mean, there’s been so many leaks and trails and kites being flown. Some of the more outlandish ideas like the return of the 50p top rate of tax, did not come to pass. But most of the core stuff and the stuff £55bn fiscal black hole was where you’ve been reporting it for weeks.

Chris Giles
We need to stand back a little bit and say, “Just have a look at what the economic forecasts look like. What does it tell us about Britain at the moment?” And really there’s very little good news there at all. The Office for Budget Responsibility’s forecast was slightly more optimistic than the Bank of England’s really dire ones, but really not very much at all. So that 4.2 per cent growth this year, all of that happened in 2021. That isn’t happening in 2022. The economy is now sliding into recession, it’s contracting. It’s gonna contract all the way through 2023, according to both the Bank of England and the Office for Budget Responsibility. That is going to be compounded. So what the real problem is, is that the UK just got poorer. We spend a lot of money on energy, particularly gas, and we have to do that. We have to heat our homes and generate electricity. That the cost of gas has gone up eight times. It’s more expensive now than it was at normal times. This is happening to some extent across Europe as a whole. If that’s the case, you are poorer, you’ve got less money to spend on other things. And that is what’s generating this recession, along with the global rise in interest rates and the UK-specific problems from the “mini” Budget. So put all that together and household incomes are taking a pasting. So real wages after adjusting for inflation are going to see a 20-year stagnation. We haven’t seen that really since just after the Napoleonic era in the early 19th century. And household incomes are down in the OBR forecast, down 7 per cent over the next two years. And that’s not something we’ve seen in 60 years of national accounting. So the overall outlook for households is terrible. It’s going to be nasty. People are gonna feel it both in their wallets and some people will lose their jobs. So the backdrop to all of this is just a really unpleasant economic experience we all have to go through because we are just poorer than we hoped we would be, and the recovery thereafter is going to be quite slow. And that’s where the ongoing problems of Britain’s poor productivity performance and sort of lacklustre economic performance is going to hit. So we don’t have great sunlit uplands to look forward to. So unfortunately that is the outlook. And then if the UK economy or UK as a whole is poorer, then we can’t afford the public spending plans on the tax basis that we had before. So we have to cut spending and raise taxes. I’ll stop there.

Sebastian Payne
Well George Parker, welcome back to the pod after that very cheerful picture that Chris just gave us. The politics of this are obviously very difficult for Rishi Sunak and Jeremy Hunt, that this is not a Conservative Budget at all. It raises taxes, it cuts spending, it’s the opposite of the 2019 manifesto, it’s the opposite of what Liz Truss in that “mini” Budget, which feels like a century ago, even though it was only a couple of weeks ago that was delivered. How has it gone down in Westminster that Jeremy Hunt did not make a secret that this is difficult and that things are going to be difficult for the foreseeable future? And the reaction in the House of Commons — I was watching it remotely — you were in the chamber for it. It seemed to be Labour was being very raucous. The Conservative benches were muted, but they were not mutinous.

George Parker
That’s true. I mean, it’s very unusual, I think, for MPs to start mouthing off about the Budget on the day itself. It usually takes a while to crystallise. It usually takes a while for people to digest some of the negative media coverage. There was some very hostile coverage in the media the next day after . . . 

Sebastian Payne
Front pages universally, including some pro-Tory papers . . . 

George Parker
Absolutely, absolutely coruscating and that sort of will shape the way that MPs address things. But they know that this is their one shot at redemption. They can’t afford to start to undermine this Budget package straightaway because as you said, Seb, I mean, this is only two months after the last Budget and diametrically the opposite. I mean, what’s the country make of a party which thinks two months ago the way to save the economy is to have £45bn of unfunded tax cuts and then two months later comes up with exactly the opposite prescriptions? So obviously people are nervous. I think they’ll be relieved. And Conservative MPs were relieved that Jeremy Hunt delivered it in a competent and confident fashion. So there was a strong performance. I thought the package was well delivered and well constructed.

Sebastian Payne
It was the opposite of the sort of swaggering blasé attitude we saw from Kwasi Kwarteng and not much when he stood there and was very flippant about the whole thing. Jeremy Hunt, it felt like every word was precise, careful and practised.

George Parker
Absolutely. It was a very polished performance and I thought the package to begin with was reasonably balanced. But as Chris has just described in painful, gory detail, the package itself is extremely uncomfortable for Conservative MPs. They obviously hate the fact that taxes are rising to the highest level since the second world war. But the other thing I was picking up very strongly in the immediate aftermath of the statement was the fact that it’s ordinary middle-income voters — core Tory voters — who are gonna be covered most by this. And I met one minister who said, “Your headline tomorrow should be ‘Ordinary voters hammered’”, which I think we did use that. (Laughter)

Chris Giles
For years to come . . .

George Parker
Thanks, thanks very much! That is a real Achilles heel of this Budget insofar as the politics are concerned. And you still are being picked on by the Daily Mail — in particular the Bible of middle Britain — saying that, you know, the middle Britons, the hard-working strivers, who are being clobbered by this.

Sebastian Payne
Now, let’s start unpicking some of the message in this, ’cause there was actually an awful lot in it, Chris, certainly much more comprehensive than the “mini” Budget from the Liz Truss and Kwasi Kwarteng. So many of the tax rises which again are being tried well in advance in terms of personal allowances being frozen, all that is coming in the longer term, that there’s not a huge amount of that coming immediately. Obviously the people being the top rate of tax that has been lowered. So 125,000 people are being dragged into that top bracket. But again, there’ll be some very small violins in that sense. And I think one theme of the tax rises was very much focused on the richest in society, because under the “mini” Budget it was, you know, the bankers’ bonus cap, getting rid of the 45p top rate. And the politics of that were fundamentally awful, really. Whereas now Jeremy Hunt seems to have gone out of his way to go in the opposite direction, to say to the ordinary folks that George was talking about the richest are bearing the biggest burden, So take us through the tax elements.

Chris Giles
The messaging, as George said, is diametrically opposite to what happened two months ago, and the messaging is that the rich and people are the broader shoulders are paying most, and the tax increases — do they build through the next five years? There’s not entirely to say nothing’s happening immediately because there’s £7bn being raised from April next year. So a lot of that is coming from freezing national insurance thresholds, particularly for companies. But that ultimately goes into our wage packets. But is all the freezes in income tax thresholds anything in the tax system that is a number has basically frozen until 2028. So as people’s pay goes up, they will pay more of their pay in tax than they used to. And it’s that rise in the average rate of tax — even though the tax rate stays the same — that people will feel. So they get a pay rise from their employer. But actually when they get a look at the bottom line, it doesn’t go up as much as they thought because more is being taken in tax. Now it’s uncertain I think whether the reaction to that will be, “Oh, it’s OK, I didn’t see this tax rise happening” or people go, “That’s a very stealthy, underhand way of raising my taxes”. And I think that’s an open question of whether the public like it or they hate it because they think the government’s not being straight with them when they are raising their taxes when they are pretending sort of not to.

Sebastian Payne
And then one of the other, of course, big tax is we’ve seen, George, is the windfall tax. This is obviously an idea the Labour party have been talking about for some time. We’ll talk about that later in the podcast. And again, the whole thing makes your head hurt in a way actually when you try and put your sense into where the Conservatives are going on this. To think that these diametrically opposed economic views are within the same party and were briefly in this government as well is so bizarre. But the windfall tax essentially is going to try and take some of those excess profits resulting from the energy wholesale price rise that Chris was talking about earlier. You can imagine that’s quite popular, but will it work?

George Parker
I think it was unavoidable. And just going back, it wasn’t just this. This was something that was opposed by Liz Truss and Kwasi Kwarteng two months ago. If you remember all the way back to the beginning of 2022, Rishi Sunak spent months saying he wasn’t going to levy a windfall tax. It wasn’t a Conservative thing to do. It would hammer investment by the energy companies. And now here we have an announcement of, was it £14bn next year? I mean, look, politically, it was unavoidable. And, you know, there is a windfall and somebody’s gotta pay, and surely, politically, it made absolute sense to do it. So looking back, I think that was unavoidable. I think the banks will be breathing a sigh of relief that they weren’t targeted for a windfall tax as well, because they’ve been making a lot of money on rising interest rates and the money that’s being held at the Bank of England on deposit. But in the end, you have to shield your voters as far as possible from the impacts of tax rises and the energy companies were an obvious place to look.

Sebastian Payne
Well, let’s hear from Richard Hughes of the OBR. He explained why the most difficult decisions in the statement were being pushed into the future.

Richard Hughes
It’s a budget which gives £100bn away over the next two years to help households with their rising energy bills; helps to take about 2.5 percentage points off a historic peak in inflation — a 40-year high. But then over the medium term, to meet the chancellor’s objective of getting debt falling in five years’ time, he then takes £40bn out of borrowing through spending cuts and tax rises in order to meet his objective of getting debt falling by the middle of the decade.

Sebastian Payne
Now Chris, let’s unpick two things that Richard Hughes mentioned there. First of all, the energy support package, because Liz Truss announced this very comprehensive package that was much bigger than many were expecting and some put some of the blame on what happened with the market reaction to the “mini” Budget on that. Jeremy Hunt has begun to curtail that. What did he announce on that, and do you think he’s made the right call?

Chris Giles
In lost weight? Liz Truss didn’t get much credit for the enormous amounts of money she spent on . . . 

Sebastian Payne
Her team still feels very sore about that, actually.

Chris Giles
And the thing is, it’s one of these things that politicians often find they don’t get credit if they prevent something happening. It’s because we’re still paying more for our energy than we were a year ago. Double the amount, roughly, households are, but we’re not paying triple or quadruple, which is what would have happened had they not done this. So this winter energy bills are capped at whatever the level we as households are paying in October. That cap is going to rise to £3,000 on an average bill. Doesn’t mean everyone will pay only £3,000. It will obviously depend on your use of electricity and gas. But for the typical household, will rise to £3,000 for the year starting in April. And then after that, the assumption is that energy price caps will disappear. We’ll just pay the market price again after that. Although if gas prices rise through the roof again in the next year, I’m sure they will revisit that. So we are gonna be paying more. There’s help for the most vulnerable through the benefit system. So it’s the middle-income households and richer households who will be hit with these increases in energy prices coming in April. But it’s that middle-income group who I think that’s where the problems might lie.

Sebastian Payne
Because on this, George, you know, there was a lot of helping in there. Obviously for pensioners — that core Tory vote — the pension triple lock was maintained again and a kite was flown that maybe it might not happen this year given inflation is running so high. But to the surprise of no one that was maintained. And so for benefits being uprated as well. So again, quite a lot of spending there for those parts of society. But you’re sort of — I hate to use sort of the David Cameron term of the strivers, but that sort of, or “alarm clock Britain” I think was the . . . 

George Parker
“Just about managing.”

Sebastian Payne
“Just about managing”, “alarm clock Britain”, all those wonderful catchphrases we’ve had — those are the people who are really going to get left out by what Jeremy Hunt announced.

George Parker
That is the concern of many Tory MPs and I think that we’ll see that amplified in the coming weeks because these are the bedrock support to the Tory party, the swing voters who determine elections, and there’s not an awful lot in the package for them. In fact, rather the opposite. They’re gonna be sucked into paying tax or into higher bands of tax by the freezing of the allowances and thresholds Chris was talking about. And in every other respect in their life, whether it’s not getting full protection on energy bills or higher inflation in the shops, the prospect of rising inflation and the prospect of their house prices falling as well, incidentally — all those things will combine to create a very, very grumpy electorate whose grumpiness will be compounded by the fact that they can’t get to see a GP and all the other things we know about in the public services. So how you manage to convince those people come the next election when unemployment’s set to double, house prices coming down by 9 per cent, disposable incomes down by 7 per cent, taxes the highest level since World War 2. You have to convince those very grumpy people that an incoming Labour government will make things worse. That’s the thing the Conservatives are going to maybe struggle to do.

Sebastian Payne
Now the second thing Richard Hughes talked about, Chris, was spending and this is the trap, as has been described, set by Jeremy Hunt here. So in the statement he announced that the capital spending would be frozen, that public spending will only rise by 1 per cent in the next parliament. And so the most difficult decisions on cutting things back only comes after 2024 when we expect the next election to be. Do you think that’s ever going to happen? Because particularly in terms of public spending, which is real terms cuts there, there’s not a lot of places you can cut without having real damage as George has hinted. There is this sense, which I think might reflect where we were in 1995, ‘96, and even up to ‘97, that many things in the British state and the public realm just aren’t working in a good way. It feels like the sort of infrastructure in the edifice is beginning to crumble a little bit, and if you then come along and you’re gonna then cut things in real terms, never mind if people are going to vote for that. That’s going to make things even worse.

Chris Giles
Yeah, it’s going to be a very difficult election for Labour, but I’m not sure the trap is as deep or as difficult for Labour as some people in the Right think. Because it’s difficult for everyone, because the Conservatives will have to answer how are they going to make the health service better with these spending plans? And if the Conservatives say, well, they’re not going to spend anymore, the health service will have to do it for efficiencies. Everyone will say, well, that’s not realistic. So that question at the next election, how are you going to make public services of a standard that’s acceptable to the British people without raising taxes is going to be a difficult question for all parties.

George Parker
Generally, I think there is a trap, but I agree with Chris on this that in the end, if the election is about the state of the public services, as indeed it was in 1997, then people will tend to think the Labour party will be better at doing . . . at fixing that.

Chris Giles
I’m sure Labour won’t say they are going to raise spending faster. They’ll do exactly what Tony Blair and Gordon Brown did.

Sebastian Payne
The old “all envelopes taste the same”.

Chris Giles
They’ll say we are going to stick to the spending plans. And they probably would for the first couple of years until the services fell apart. And then they could say to the public, we have to spend more than this because you want us to.

George Parker
And I think the better picture that the thing that Conservatives are rightly worried about is that a cumulative picture emerges over the next two years of a country breaking down — whether it’s the health service or not being able to get your driving licence renewed or the police not investigating your house burglary — or individual horror stories like the terrible story of the two-year-old boy who died after exposure to mould in his flat. The whole idea of the public realm being in a state of crisis and nothing working is a real problem for a government which has been in power for 12 years.

Chris Giles
And I think the other thing that will happen in the election will be the old-fashioned Ronald Reagan to Jimmy Carter question, “do you feel better off than five years ago?” And the OBR said yesterday there’ll be no growth in the UK economy between the end quarter of 2019, when the last election was, and the final quarter of 2024. So the answer will be no.

Sebastian Payne
Now, based on all this, there’s basically no good news whatsoever for the Conservatives throughout this, particularly in this place in the electoral cycle. If we were here one year or two years ago, you might say, again, as Mr Micawber would say, “something might turn up”, things might get a little bit better. But there’s so little time left in this parliament, Chris, in terms of things to get better. And we know there has to be a general election by January 2025. And I think the result of this to me is almost certainly going to be later in 2024. I think pushing it to January 2025 might look a little bit desperate, but I think the ultimate that is kind of place you could imagine them landing. Is there any scenario you can see where things get into a better space? You know, maybe inflation does come down better. Maybe the situation in Ukraine begins to change and energy costs start to come down. Or really fundamentally, is it all just bad news, bad news, bad news going forward?

Chris Giles
No, there’s a clear scenario where things get a lot better, and it’s the Ukraine war and energy prices come down. So something happens in the Ukraine war, Europe begins to buy more gas from Russia again because the sanctions come off. And even though we know long term we don’t want to buy a lot of gas, we don’t be beholden to Russia again as we have been. But that really brings down the wholesale price of gas. And so you have the opposite thing. So instead of the nation becoming poorer because one of the essentials we buy has got a lot more expensive, we become richer because one of the essentials we buy gets a lot cheaper, and that can happen quickly. But it would need to happen, I think, before the start of 2024 to really be felt by the public. And the public will also have quite a long memory.

George Parker
I totally agree with Chris that things are not going be coming along in 2024. We get into this discussion about the 1992 elections and whether you can rerun the 1992 election, not that . . .

Sebastian Payne
What was the core theme of that?

George Parker
The core theme of that was not that the economy is going gangbusters — far from it — but that the “green shoots of recovery”, as Norman Lamont puts it, are starting to sprout.

Chris Giles
It does, because we’ve got the green shoots . . . 

George Parker
We’ve got a plan, stick with the plan, it’s delivering, don’t let Labour muck it up. That is the dream scenario for Rishi Sunak getting into ‘24 election.

Sebastian Payne
Now, finally, I just want to touch on how did we get here and who is to blame for this situation. Now, Jeremy Hunt was telling the BBC on Friday morning, and a lot of it was all about international factors.

George Parker
Yes, because we’ve had very exceptional situation. We’ve had a once-in-a-century pandemic. We’ve had the fuel price hikes caused by Vladimir Putin. Well, Conservatives win elections when they’re trusted with the economy. And what you’ve seen today is a Conservative chancellor outlining a very difficult path that gets us through this crisis.

Sebastian Payne
Now, Chris, of the Labour party says this is all the Conservatives’ fault, as you would expect them to do. Is there any truth on that? Is it about how they’ve managed the economy over the past 12 years and the decisions they’ve made? Is it about the international factors primarily?

Chris Giles
I think you take the short term, mostly international factors. Now that the sort of the UK more on of the UK specific factors have basically gone away. So the short term energy crisis, on top of the Covid crisis, you cannot blame on the Conservatives. But the longer term performance of the economy, the very low productivity growth, the effect of Brexit on the economy, which are now becoming clear. All of that is the response to some extent of this government. They’ll find it more difficult to just say this is international factors when the UK is performing worse than other similar countries.

Sebastian Payne
Well, I just want to finish, George, on that Brexit point because I was at the G20 summit with Rishi Sunak in Bali this week where the Ukraine war was a very dominant topic. But at the press conference, the end of summit, I actually asked Rishi Sunak, was there a Brexit element to this? And this is what he had to say.

Rishi Sunak
Well then, when you’re thinking about what the UK’s economic situation is, I point you back to the comments in the statistics that I’ve made in my opening remarks. If two-thirds of the global economy or G20 members seeing inflation rates above 7 per cent at the moment, the IMF thinks the third of the global economy either is or will be in recession. That is the global context. That’s what’s dominated the conversations that I’ve been having here. And we know why that is, it’s the legacy of Covid and it’s of course, what Putin is doing that is driving up energy and indeed food prices. And you talk to some of my colleagues from Africa and what they’re grappling with, they’re very cognisant of that. So that’s the global economic context. And I think that is what’s dominating what’s happening. You know, every country is gonna have idiosyncratic things, but those are the overwhelming dominating factors.

Sebastian Payne
So George, when you hear that in talking about idiosyncrasies of different countries, that may be the nearest we’ll get to an acknowledgment that the referendum in 2016 has added a drag on the UK’s growth, and it’s been many people involved in the Bank of England on the Monetary Policy Committee saying this week actually Brexit has been an extra anchor on where we’re at.

George Parker
Describing Brexit as an idiosyncrasy, as an opaque way to describe of what is after all now, the centrepiece of our economic and foreign policy. It’s strange to describe it as a idiosyncrasy. Obviously, it would be foolish to say that the principal causes of the problems we’re facing are related to Covid and related to the war in Ukraine and the inflationary spike that’s happened. But you know, the elephant in the room and a contributory factor to all this without any shadow of a doubt is Brexit. The OBR in its report talks about the first signs of a significant adverse effects on trade as a result of Brexit. Just have the anecdotal evidence of companies that tried to do business with the European Union and you know, it’s an additional problem. And it’s an additional problem we’ve discussed this many times before. I recommend, if you haven’t seen or any of the FT video on this subject, The Brexit effect, which has had nearly 5mn views now, it’s the political elephant in the room. And in all of the discussions after the Autumn Statement, you could see the Labour party desperately trying to avoid talking about Brexit, even though you look at the economic outlook for the forecast in 2023 for all European economies, the UK has by far the worst outcome of any European country.

Sebastian Payne
And I think that’s actually would be a fascinating topic come the next election because as you said, Labour MP, half of them, absolutely desperate to talk about Brexit and how you could adjust the trading relationship. The other half know that if they do, then that will give the Conservatives an open goal come the next election. So, I don’t think that question is gonna be examined right now, but for now, Chris and George, thank you very much.

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Sebastian Payne
Hunt’s Autumn Statement may have not been the Conservative party’s finest cup of tea, but was there anything in it for the Labour party to like? With plenty of tax rises to help stabilise the finances, some commentators noted is the Statement not dissimilar to the sort that the opposition might deliver. But Hunt did set plenty of electoral traps for Labour, particularly on the most difficult decisions on the public finances. Can the party dodge them come the next election due in 2024? Rachel Reeves, the shadow chancellor, told the BBC that her priority instead would be trying to get more money from the richest in society.

Rachel Reeves
The point is, that you could raise taxes in different ways. It doesn’t all have to be through income tax. You could tax the banks more, you could tax the private equity bosses more, you could tax the non-doms more, you could tax the big energy giants more. And if you do that, you don’t have to keep coming to ordinary working people and putting all of the burden on them.

Sebastian Payne
With Jim Pickard, welcome back to the pod. So responding to these fiscal events is never easy. The opposition party, they don’t have much time to consider. Although so much of this particular statement was leaked in advance, I think Labour got a pretty good idea of what was coming. What did you make of it from a Labour perspective and a Rachel Reeves’ response?

Jim Pickard
So I think this turns that question, really. The first is that, there was actually a very open goal in terms of of Rachel Reeves, the shadow chancellor, being able to say everything’s a total disaster: inflation going through the roof, house prices set to fall, unemployment is set to rise, cuts the public spending, taxes going up. In terms of things to criticise the incumbent government for, they were myriad. And, what Labour’s sought to do for quite a long time now is talk about how these people have been in government for 12 years, and Boris Johnson’s very good at reinventing the Tory party as something relatively fresh and new, a sort of Brexit party remade. What Labour’s trying to do is complain about 12 years of that failure. The economic growth of the last decade or so has been much slower than the economic growth during the New Labour years, but for whatever reason. And she’s trying to make a point about incentive specific policies that the Labour party might criticise. That’s a little bit harder because, yes she’s criticising the fiscal drag on income tax, thresholds being frozen for years. But Labour had a huge point of differentiation a few months ago or the start of the year when they were calling for a windfall tax on energy companies. But in the spring, Rishi Sunak, when he was chancellor, wrote out a relatively slow, and as you went from tax, and yesterday Jeremy Hunt brought out a windfall tax, although no longer only on gas, but also on electricity producers, which is actually bigger than the one envisaged by Labour.

Sebastian Payne
With Carys Roberts, thank you very much for coming on the podcast, we’ll like to have you on. What did you make of the statement from a progressive perspective? Was there much or anything to like?

Carys Roberts
I think there was, Jeremy Hunt was making a pitch for the centre ground. And in doing so, he did do some things that look quite a lot, as we’ve heard, like what a progressive government might do. So the examples I’m thinking of in particular are cutting the allowances for capital gains and dividend income tax, something which progressives, including ourselves, have argued for a long time, and also extending the windfall tax. At the same time, he was uprating benefits in line with the inflation, which is something that lots of people have been asking for. So there was definitely some movement towards progressive goals, and I think he will have been thinking of those distributional charts that will be coming out this morning. That being said, there are some serious gaps from a progressive perspective. Key among them is obviously, this was a budget that was partly about cuts. The big focus has been the kind of deep cuts that are scheduled for after 2025 now. But actually, he also didn’t provide inflation-proof funding for all departments in the next couple of years. So there are going to be some real squeezes, including on public sector pay. And then the other element though, I would say, is that taxation point you just heard Rachel Reeves talking about, because while they made kind of steps in a direction towards wealth tax, the bulk of this really was about taxes that are gonna hit middle earners and high earners as well. And I think they did leave some tax options on the table that would have been fairer. So, for example, they could have gone the full way and they closed rates of tax on income from working income from wealth. That would have raised approximately 17bn. So I think there were tax options that he left on the table that would have been more progressive.

Sebastian Payne
Now the windfall tax is a fascinating one. So we’ve actually been here before when Rishi Sunak was chancellor himself. He announced it as a form of windfall tax, which is now being extended as Jim was just saying. But it does create this problem for Labour that they come up with these ideas, they campaign on them and put it full font of their fiscal plan, and then Tories just take them. And on the windfall tax, you know, it has got that at least that veneer of fairness to it. And a lot of people will see the reports about Shell’s excess profits, lots of headlines get shared on social media about billions and billions of energy company profits. So when the Tories are doing that, the sort of the message that you talk about that it still could be done, is might be bit difficult to make it connect with a lot of kind of regular voters who are only gonna get a broad sense of what was announced.

Carys Roberts
In many ways it’s a win for Labour that the Conservatives have done the before-tax extension. It does mean that, as you say, they’ve lost that key dividing line that they had and they will now need to work out how they can set out more policies that show who they’re for and how that different to the Conservative party without giving away all of the things that they had planned to pull out for a general election. So I think that does leave them with a bit of a bind there.

Sebastian Payne
Now Jim, let’s talk about what Rachel Reeves were saying at the top about what she would like to do as an alternative. So one thing we’ve heard a lot from the opposition party is tackling non-dom tax status. And of course, this has an element of targeting Rishi Sunak personally when it was revealed that his wife, Akshata Murthy, held non-dom status. She no longer has that and will pay full UK tax on her earnings. But is that actually going to do anything or is it just a bit of a magic monetary, a bit of a fancy thing you can plot to say? And it sounds good by targeting the super wealthy, but in reality it’s not gonna help make the finances at a better.

Jim Pickard
Yeah, I mean, if we could come back to the non-dom status, the question is how does Labour differentiate itself from the ruling Conservatives? It’s a very big question when they’re 20 points ahead in the polls and the public are going to be increasingly asking what would you guys do instead? And if you look at the balance in this fiscal time we saw yesterday between tax rises and spending cuts, it was basically 50/50. And that’s very different to what George Osborne did a decade ago when he did austerity, not one where it was about 80 per cent spending cuts, 20 per cent tax rises. You have to presume that a Labour government, if it got in, would tilt the balance the other way. You’ve got to presume that the balance between tax rises and spending cuts would be more towards the former, whatever that balance would be. But they’re so frightened, the Tory newspapers and the Tory party of keeping the timing some tax bombshell that they’re going to be very, very cagey about that. So what are the distinct policy for difference? So Labour would do a tax rate on private equity that only raises a few hundred billion pounds. They would perhaps reintroduce the cap on bankers bonuses, which isn’t a fiscal tax raising, but it has totemic significance. The one massive thing that they would do is that they would borrow £28 billion a year for capital investment in a kind of Green New Deal. The last couple of policies that differentiate them they would had private schools with (inaudible) And yes non-doms. They would ban non-doms or they blend non-dom status. It would raise about £3 billion a year. There have been rumours that the Tories would look at doing this, but that’s not something they did this week. I said something interesting when I had Lunch with the FT with Angela Rayner a couple of weeks ago. She was saying, “Look, the thing about Sunak is that we don’t envy him his wealth. It’s great that he’s a successful businessperson. He’s made this money and I’m very worried about looking anti-aspiration, anti-people making money from sales.” The point she made is when you’re imposing tax rises on everyone else, having a wife with non-dom status is not a great look and said you just said that she abandoned her non-dom status. I think the truth is that although she started paying UK tax on the worldwide earnings, she’s still technically a non-dom. So that non-dom issue isn’t gonna go away,

Sebastian Payne
Now Carys, I want to talk about what’s been described as the trap for Labour that’s been set here, that when we look at some of the toughest measures within the Autumn Statement, that very handily coming after 2024, which is the time we all expect in the next general election, maybe in the spring or the autumn of that year. Now, in that situation, the election campaign, you can always go and say the Conservatives saying we have a plan to fix the fiscal black hole. We know how we’re going to get out of it. Labour, what are you going to do? And as Jim just said, they’ve got this big amount of money they want to borrow to invest in infrastructure as part of the Green New Deal. How does Labour navigate its way out of that and is it actually a trap?

Carys Roberts
I think it is a trap. I think it’s quite deliberate to push the bulk of spending cuts towards the end of the period because it conveniently pulls out a general election. And I think the idea is that it will force Labour to have to say, “We will raise taxes in order to pay for our programme”. Is it actually a trap in reality? I would dispute that. So there’s a huge amount of uncertainty going on in those forecasts. Small changes, for example, in the growth rate, which of course the government can influence through good policy, one would hope. Or indeed borrowing costs makes a massive difference to how much would need to be consolidated even under the existing fiscal rules. On top of that, the fiscal rules can be changed. At the moment it’s a rolling target. So it’s not actually that in five years’ time, but we’ll definitely have to fill the gaps that that’s been set out and that will roll on. And the Labour party could of course select different fiscal rules as we see chancellors pick their own. So that it’s not a dead certainty that Labour will have to agree to the consolidation that has been talked about this week. Instead, I think they will be looking at the economic conditions closer to the time. What really matters right now is actually Conservative policy and what they’re doing to make sure the economy is back on track and that the public finances as a result, because of course we’re looking at that GDP and so on, are also back on track.

Sebastian Payne
And we got a sense from Rachel Reeves about how she’s going to play the politics of the next two years in terms of the economy, when she’s speaking to the House of Commons and about how she said the Autumn Statement is benefiting the richest.

Rachel Reeves
Time and time again, we’ve seen how quick the Conservatives are to raise taxes on working people. (MPs shout “Hear!”) And now the chancellor has even compared himself to Scrooge. He’s asking working people to take the hit with less money in their pockets in the run-up to Christmas, but also for years to come. But if you’re a banker, a non-dom or a private equity manager, don’t worry. Scrooge hasn’t cancelled your Christmas. (MPs shout “Hear!”)

Sebastian Payne
Jim, it’s certainly Rachel Reeves has a very good use of analogies. I remember during a previous budget where she likened it to a sort of private equity manager on a private jet drinking champagne and how you would feel quite a lot better off, but you can feel how they’re going to try and play this in terms of the politics. But when is that going to be more detail from Labour on what they’ve turned off as is, Carys said, there’s still a lot of uncertainty about the public finances, but on these big questions about tax and investment public services, we have not got that much of an idea of what a Labour government would do and I think in the next 12 to 18 months the pressure is just gonna gradually increase on them to say yes, but what’s your alternative?

Jim Pickard
Well, they think for now is that they can say broad statements such as we would try and further equalise the tax treatment of money that derives from shared dividends or from being a landlord would try and narrow the gap between those lower levels of taxation than income tax paid on people’s earnings. I don’t think they want to be too specific because as soon as you get too specific, then you see all sorts of headlines condemning you. It’s quite clear where the direction of travel is. It’s not entirely clear to me that you can political benefit from being too explicit about it. And there’s no rules, as an opposition party has to say, precisely where capital gains tax would be or precisely where the 45p threshold might be. One difficulty that they might have is that this new chancellor is prepared to demonstrate that he wants to tax high earners, perhaps more than they previously were being taxed. The lowering of the threshold to 45p right 115 to about 125 grand with the opposite of what Kwasi Kwarteng wants to do and therefore that ground is there for Labour to take it if it feels confident enough. But is that the problem with boasting about taxing the rich or high earners is always that even people on not massive incomes do like the idea that one day they might have a huge amount of kids and a huge amount attacking aspiration as always. So it’s a slightly tricky one.

Sebastian Payne
And Carys, finally, last words to you. What do you think, Labour, how when should it set out so talent for as Jim say, should they just keep focusing on that critique and then leave it all for slightly later date?

Carys Roberts
They’ve been keeping their powder dry and how to critique this very much based on competence and the fact that the government has not managed to deliver growth. And indeed this parliament is looking absolutely terrible for living standards and I think that’s going to really play in their favour regardless of the choices that Hunt makes, quite frankly, over the coming years. And so I think the task for them will be over this next period, before the general election, to set out how they would actually deliver growth is different. So not just on a competence point, but how would that economic model actually be different under the Conservatives and what would that mean for living standards? How would they fix this problem?

Sebastian Payne
Well Jim and Carys, thank you very much for joining us. And that’s it for this week’s episode of Payne’s Politics. If you like the podcast then we recommend subscribing, you can find us through all the usual channels to receive episodes as soon as they’re released. We also do like positive reviews and nice ratings.

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Payne’s Politics was presented by me, Sebastian Payne, and produced by Anna Dedhar and Howie Shannon. The sound engineers were Breen Turner and Jan Sigsworth. And until next week. Thank you very much as always for listening.

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