Spring clean sweep — Robbing Rishi to pay Sunak — Biden in Europe – POLITICO

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What’s driving the day in London.

By ALEX WICKHAM

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Good Thursday morning.

DRIVING THE DAY

SPRING CLEAN SWEEP: Rishi Sunak is braced for a difficult morning broadcast round after his spring statement endured a very rough landing Wednesday. The chancellor is waking up to a clean sweep of hostile front pages and stinging criticism from economics think tanks, Conservative MPs and the opposition. The alarming testimony of LBC radio phone-in callers in distress about their own fuel poverty crises will likely be ringing in his ears, and it’s only getting worse: Most papers lead with the devastating blow that living standards will see their biggest fall since records began in the 1950s, just in time for the next general election.

Wednesday morning’s Playbook reckoned the key question was whether Sunak’s statement would do enough to calm concerns about the cost of living crisis. It usually takes major Treasury announcements a day or two before they unravel, but the consensus answer after just a few hours yesterday was already a resounding “no.”

Broadcast rounds: The chancellor is in the studios in the next few minutes: Sky Sunrise (7.10 a.m.) … BBC Breakfast (7.32 a.m.) … Times Radio (7.50 a.m.) … BBC Radio 4 Today program (8.10 a.m.) … Good Morning Britain (8.30 a.m.) … TalkRadio (8.45 a.m.). Shadow Chancellor Rachel Reeves is on the round for Labour: BBC Breakfast (7.05 a.m.) … GMB (7.20 a.m) … BBC Radio 4 Today program (7.30 a.m.) … LBC (7.50 a.m) … TalkRadio (9.05 a.m.) … Reeves is also doing a phone-in with Iain Dale on LBC at 7 p.m.

Top line announcements: Here’s a quick recap of Sunak’s main giveaways … Fuel duty cut by 5p … the threshold at which people start to pay National Insurance will rise by £3,000 to £12,570 … the basic rate of income tax will be cut from 20p to 19p by the end of this parliament … VAT will be removed from green home renovations such as heat pumps and solar panels. Fair play to the Mail on Sunday’s Glen Owen and Brendan Carlin, who called both the income tax and fuel duty cut at the weekend, and the Sun, whose knowing pre-statement leader column tipped a 5p cut in fuel duty and a rise in the NICs threshold.

Look away now: The Times, the Telegraph and the Indy all lead on the 1950s living standards bombshell — or as the i memorably puts it, it’s the “biggest hit to living standards since the age of rationing.” The Mail hopes Sunak is “under pressure to move further and faster on tax cuts.” The Mirror says “thanks for nothing” and the Star calls it the “up yours mini budget.” The Guardian accuses Sunak of squeezing the poorest. The Sun spares Sunak any photoshop treatment but leads on the living standards “pain.” The Metro says there’s “no heat to eat” for people relying on food banks. City AM calls it a “risky balancing act.” The FT’s front page warns of “dark economic times.”

5 months is a long time in politics: It’s worth comparing Fleet Street’s response this morning to the front pages the day after October’s budget. Back then, the Telegraph pictured a beaming Sunak and Boris Johnson clinking pints under the headline “Hey, big spenders!”, while the Express rejoiced: “Cheers! Rishi on a mission to cut taxes.” Today, the Telegraph bemoans “the biggest fall of living standards on record” and the Express goes with the most savage splash of the lot, blasting: “The forgotten millions say: What about us?”

Losing the Telegraph: The comment pages of the Tory-leaning papers show how yesterday’s supposedly crowd-pleasing statement for the tax-hating right bombed with its target audience. Allister Heath has written another of his traditionally scathing post-chancellor-speech columns, lambasting Sunak and Johnson in equal measure and concluding: “The Tories don’t deserve to survive if they keep treating their voters like fools.” The rest of the paper is arguably even harsher, with David Frost calling for no less than a “fundamental redesign” of the British state, Juliet Samuel arguing the Tories are “too cowardly to embrace real reform” of the NHS, Ben Wright asking: “Is that really it?,” Roger Bootle criticizing the decision not to scrap the NICs rise, and its leader column judging that the Conservatives do not have a plan for growth.

It doesn’t get much better … in the Mail, where Alex Brummer also says the NICs rise should have been reversed. Brummer hopes there is “method to the chancellor’s seeming madness” and warns he is “squeezing the pips of ordinary taxpayers.” In the Times, Iain Martin takes a skeptical view on Sunak’s claims to be a tax cutter and says the income tax announcement was an attempt to distract from the cost-of-living crisis. “The older, more cynical and experienced Tory MPs, veterans of these occasions, will be circumspect. They’ve seen so many of these manoeuvres down the years that they will know what was really going on, even if they usually won’t say so publicly,” Martin writes. The Sun’s leader is the most positive for Sunak, arguing he “mainly” got it right after he was “dealt the worst hand of any Chancellor of modern times.” But even they warn he should have scrapped the NICs hike and that his pre-election income tax cut “won’t change much.”

Grim reading: The FT’s analysis pages concede Sunak is faced with “a grim political and economic situation,” and accept the chancellor is in a tough position given the global living standards squeeze, inflation, soaring energy costs, COVID and the Ukraine war, not to mention working for a PM who would prefer to be more generous to the voters who put their faith in his leveling up promises. Ultimately, however, the pink ‘un makes for extremely gloomy reading for both No. 11 and everyone else. Chris Giles rules that Sunak “offered minimal short-term help” for households suffering from the cost of living, and concludes he has prioritized a pre-election “war chest” of future political giveaways. Martin Wolf expresses sympathy for the chancellor but blasts his failure to “address the hit to living standards,” writing: “It is hard to see a good justification for the chancellor’s decision to leave the most vulnerable worse off.” Robert Shrimsley reckons Sunak’s “luck has changed” and “it will not be long before he faces pressure to do more, especially given his mistaken and too obvious failure to offer more help to the poorest.”

Privately, many Tory MPs agree: In their wrap of the day, POLITICO’s Esther Webber and Annabelle Dickson foresee trouble ahead for Sunak after speaking to Tory MPs. One cautioned the package would not be enough for his constituents: “We are in danger of looking like we are burying our heads in the sand.” Some of Sunak’s colleagues are skeptical as to whether the trailed tax cuts will matter in the long run. “People will still remember we are taxing too much,” complained an ex-minister. “We didn’t need to have these tax increases and we are squeezing people’s incomes when we don’t need to, and cutting growth rates.”

Lukewarm readout: Sunak addressed the 1922 Committee of Conservative backbenchers last night, where the Spectator’s Katy Balls took the temperature: “As for the rub, there was some concern that Sunak had failed to adequately provide support for the incoming cost of living crisis. Tory MP John Redwood suggested that it would be worse than the Treasury predicted and called for more tax cuts to help. It’s the cost of living crisis that continues to worry MPs most when it comes to the political peril in the coming months.”

Real fight starts now: Speaking to ministers, aides and Tory MPs yesterday, there was one area of agreement — that Sunak will have to stage a much more considerable intervention in his autumn budget, as energy bills surge again and inflation soars higher still.

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HORROR NUMBERS

LIVING STANDARDS: The underlying forecasts for the U.K. economy are gloomy and then some. Real household disposable income on a per-person basis will reduce by 2.2 percent in 2022-23, which the Office for Budget Responsibility says is the “biggest fall in living standards in any single financial year since ONS records began in 1956-57.” (Scary OBR graph here.)

INFLATION: Is likely to rise to a 40-year high of 8.7 percent this year. Bloomberg’s Philip Aldrick notes this will put inflation at its highest point since the Falklands War.

GROWTH: Revised down. October’s forecast put 2022 growth at 6 percent — that has been slashed to 3.8 percent. In 2023, October’s forecast predicted 2.1 percent growth. That’s now down to 1.8 percent.

TAX BURDEN: Even after the income tax cut comes into effect, the tax burden as a percentage of GDP will rise further to 36.3 percent in 2026-27. That will be the highest tax burden since the late 1940s. Philip Aldrick writes that despite Sunak’s alleged tax cuts, the chancellor will still be raising £27 billion a year more in tax revenue than previously forecast.

DEBT: Payments on the national debt will cost a staggering £83 billion this year, nearly four times higher than what was spent last year.

ENERGY BILLS: Likely to hit £2,800 a year from October, a rise to the price cap of another £830 on top of April’s looming hike of £690. The Times’ Emily Gosden has the details.

REACTION ROUND-UP

ROBBING RISHI TO PAY SUNAK: Perhaps the chief criticism of Sunak’s paradoxical tax policy is, as the TaxPayers’ Alliance’s John O’Connell puts it, that “the Treasury is taking with one hand to give away with the other.”

Tax-raising chancellor: The Institute for Fiscal Studies’ Paul Johnson issued a series of damning tweets about the chancellor’s announcements, including one that makes almost every paper: “Oh for goodness sake. What is the possible justification for cutting income tax rate while raising NI rate? Drives further wedge between taxation of unearned income and earned income. Yet again benefits pensioners and those living off rents at expense of workers.” Johnson’s analysis is clear that Sunak’s claims to be a tax-cutting chancellor are untrue: “Almost all workers will be paying more tax on their earnings in 2025 than they would have been paying without this parliament’s reforms to income tax and NICs, despite the tax cutting measures announced today.” The IFS will give its full response to the spring statement at an event streamed here at 10.15 a.m.

Shirkers vs. workers: The Resolution Foundation’s Torsten Bell agrees, storming that it is “totally bonkers to be raising National Insurance (on earners) while cutting Income Tax (includes those with other income sources).” Sky’s Sam Coates wades through the smoke and mirrors to arrive at this key conclusion: “Rishi Sunak has ‘undone’ just over a quarter of the personal taxation rises he announced last year.”

Cutting through the spin: In the last few minutes, the Resolution Foundation has published its overnight analysis of the spring statement. Its top line conclusions are incredibly bleak: Some 1.3 million people will be pushed into absolute poverty next year … Families face £1,100 income losses thanks to the cost-of-living squeeze … Despite Sunak’s claims that he was cutting taxes for 31 million workers, the truth is — after taking all his tax changes into consideration — around 27 million (seven in eight workers) will pay more in income tax and NI in 2024-25 … This parliament will be the worst on record for living standards … And on top of all that, the average worker is in line for a £11,500 annual wage loss.

What was missing? Paul Johnson argues the real story of yesterday’s statement was what Sunak didn’t do: “In the face of what the OBR calls the biggest hit to household finances since comparable records began in 1956-57 he has done nothing more for those dependent on benefits, the very poorest, besides a small amount of extra cash for local authorities to dispense at their discretion. Their benefits will rise by just 3.1% for the coming financial year. Their cost of living could well rise by 10%.” The Mirror’s Rachel Wearmouth and Dan Bloom have found 12 “nasty details” in Sunak’s statement, including that people on Universal Credit will see half their gains from the change to the National Insurance threshold wiped out — expect to hear more about that.

What would Labour do? Shadow Chancellor Reeves told ITV’s Robert Peston last night that Sunak should have brought forward some of the benefit rise due next year and pay it out this year.

Then there’s public sector pay … Chief Secretary to the Treasury Simon Clarke told Peston it was “wildly unrealistic” for public sector pay to rise with inflation of 8 percent or more. “It is really important, clearly, that pay restraint is observed across the public sector,” Clarke said.

In the real world: LBC’s phone-in with Sunak and Iain Dale last night presented the real-world outcome of all the above. Hzul, a mum of two from Crawley working three jobs, told the chancellor: “Unfortunately, the rising costs of everything, especially energy, have now put an intense strain on my ability to provide for my children. The significant increase in our energy bill has meant that we don’t have the boiler on. The lights are always off unless absolutely necessary and when it’s cold, we wear jumpers and coats and sometimes you can see our breaths when we breathe. I’ve started cleaning houses, I spend every evening riding a bike delivering for Uber Eats, I’ve managed to cut my grocery shop down to just £15 a week for an adult and two children, and I often go without myself to make sure the kids get what they need and they’re fed.”

A TALE OF THREE SUMMITS

BIDEN JETS INTO BRUSSELS: Away from the spring statement fallout, the major news of the day is in Brussels, where world leaders are holding G7 and NATO meetings, as well as a European Council summit for EU leaders. U.S. President Joe Biden landed in Belgium last night — picture here.

Here’s how the day plays out: Per the White House schedule … NATO leaders family photo (8.55 a.m. U.K. time) … Biden remarks to NATO meeting (9 a.m.) … G7 leaders family photo (1.10 a.m.) … Biden presser (7 p.m.).

Follow POLITICO’s live blog coverage for news and analysis throughout the busy day of summits.

NLAW order: Boris Johnson arrives this morning for the G7 and NATO meetings. Downing Street this morning announces a major new military support package for Ukraine, including 6,000 new defensive missiles and £25 million for Ukraine’s armed forces. Johnson will spend today urging fellow leaders to keep up the military support, after suggestions from Ukraine that some other major European countries were not fulfilling their commitments.

On the ground: Ukraine appears to have launched a successful counter-offensive against Russian forces around Kyiv, Britain’s defense ministry said overnight: “Ukraine is increasing pressure on Russian forces north-east of Kyiv. Russian forces along this axis are already facing considerable supply and morale issues. Ukrainian forces are carrying out successful counter attacks against Russian positions in towns on the outskirts of the capital, and have probably retaken Makariv and Moschun. It is likely that successful counter attacks by Ukraine will disrupt the ability of Russian forces to reorganise and resume their own offensive towards Kyiv.”

Russians encircled: The MoD also noted: “There is a realistic possibility that Ukrainian forces are now able to encircle Russian units in Bucha and Irpin.”

Zelenskyy latest: Ukraine’s President Volodymyr Zelenskyy delivered a video message in English last night, calling for people around the world to “come out of your offices and homes” to protest Russia’s invasion today, one month on from the beginning of the invasion.

TODAY IN WESTMINSTER

HOUSE OF COMMONS: DCMS questions (9.30 a.m.) … attorney general questions (10.10 a.m.) … any urgent questions (10.30 a.m.) … then business questions and any ministerial statements.

P&O in the dock: The transport and business committees have a bumper day scrutinizing the P&O Ferries scandal. Jesper Kristensen, chief operations officer of P&O owner DP World, and Peter Hebblethwaite, chief executive of P&O Ferries, will be in front of MPs at 11 a.m.

Wills tour: Prince William expressed his “profound sorrow” for slavery in a speech in Jamaica overnight, but stopped short of a full apology, Sky’s Rhiannon Mills reports.

ADVANCE OTTAWA! International Trade Secretary Anne-Marie Trevelyan landed in Ottawa, Canada last night to launch a renegotiation of the EU trade deal the two sides rolled over after Brexit. She faces a grilling from journos this afternoon at a press conference alongside her Canadian counterpart Mary Ng. It will take place at 3.30 p.m. U.K. time and will be livestreamed here. The first round of negotiations gets underway at the start of next week. My POLITICO colleague Emilio Casalicchio has written a story looking at some of the trade negotiators who will be working on this and other deals … most of whom are of the Millennial and Gen-Z generations.

LONDON CALLING

WESTMINSTER WEATHER: ☀️☀️☀️ Another very nice day. Highs of 19C.

RIP: Madeleine Albright, the first female U.S. secretary of state, has died at the age of 84. Read more here.

BIRTHDAYS: Farming Minister Victoria Prentis … Crossbench peer and TV entrepreneur Alan Sugar.

PLAYBOOK COULDN’T HAPPEN WITHOUT: My editor Emma Anderson, reporter Andrew McDonald and producer Grace Stranger.

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Alex Wickham

https://www.politico.eu/newsletter/london-playbook/spring-clean-sweep-robbing-rishi-to-pay-sunak-biden-in-europe/

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