PAGAN MAGGIE: It’s time for Rishi to prove he’s a true low-tax Tory
You know Middle England is feeling the pinch when shoppers tweet that they’ve just shelled out 81 pence for a courgette – admittedly from expensive Waitrose – and have to pay £1.75 for a slab of butter from Tesco, compared to 89 pence from a few years ago.
That’s also why the latest inflation figures that shot up to 9 percent for the year to April come as no surprise.
While the record numbers, the highest in 40 years, are shocking, they simply confirm what most consumers have experienced on a daily basis for the past several months.
Action plan: Foreign Minister Rishi Sunak (pictured) says the Treasury is seeking help for the poorest to pay heating bills, as well as possible tax cuts in the fall.
However, there may be one good thing to come out of the unfolding horror show, and that is that Rishi Sunak and his cabinet colleagues are finally springing into action.
After prevaricating for weeks, the Chancellor is now letting it be known that the Treasury is working on an action plan, one that includes more help for the poorest to pay their heating bills, as well as possible tax cuts in the fall.
How much has yet to be decided, but discounts of between £300 and £600 could be paid to 3 million of the poorest households in England and Wales.
Other proposals include bringing forward to this fall the planned 1p discount on the basic income tax rate, a measure that will come into force in 2024, and/or VAT cuts.
These are sensible moves. But time is of the essence. It is not only the poorest who are being punished by galloping inflation, but also the squeezed middle classes.
Add in the higher costs of heating and electricity bills, council taxes, rail fares and groceries, and most of us are seeing a loss in living standards not felt since the 1970s.
That is why the Chancellor should not wait until an Autumn Budget to introduce the tax cuts: that would be playing while Rome burns.
Waiting until then will prolong the pain. Waiting could worsen the outlook for the economy as consumers and businesses delay spending and growth plans due to fears about the future.
The Chancellor need only look at the Bank of England to see how the waiting game may have cost us dearly.
As is becoming clear, Governor Andrew Bailey’s decision to let the money supply run amok and not raise interest rates sooner may well have stoked rather than helped contain inflation.
With the pound so weak, a signal of strength from the Chancellor would also come as a much-needed boost to investors.
Liz Truss, the Foreign Secretary, was right when she said yesterday that the best response to the global crisis was to grow the economy and attract new business investment.
The problem, however, as Truss well knows, is that attracting investors requires creating a dynamic environment in which investors feel safe. Right now, they don’t.
As the increasingly impressive Rachel Reeves, the Labor Party’s shadow chancellor, has pointed out, public and private investment in the UK will be 18 per cent of GDP this year.
This compares with an average of 23 per cent in other G7 countries, and is likely to last for the next five years, creating an “investment gap” of £1tn.
Setting the right tone is Sunak’s job. He did very well at the beginning of the pandemic with his furlough plan and now he can do it again.
He must stop insisting that no ‘honest foreign minister’ can promise to reduce the impact of global inflation caused by the pandemic and now by Russia’s war against Ukraine.
People are not stupid. They know this, but they also know that more can be done to ease the pain.
It’s time for Sunak to show that he really is a low-tax conservative, not just a philosophical one. Even if it means a fight with the boss next to him in number 10.
China slow boat
Burberry’s new CEO, Jonathan Akeroyd, will be pleased with his first crop of results.
Profits were the highest in eight years as shoppers splurged after the pandemic.
But his reliance on China’s super-rich could prove a setback: Even fashion-savvy Chinese haven’t been shopping for fancy trench coats while cooped up at home.
Sales in the country fell 13 percent in the latest quarter with almost half of its 65 stores still closed and e-commerce disrupted.
Burberry claims that once the lockdowns end, the Chinese will buy hard again and stick to their growth targets. Looking at China’s recent growth numbers, that’s optimistic.
Could it be time to take some profit?
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