Michael Settle:

RISHI Sunak’s attempt to bandage up the wounded British economy with his Spring Statement could be regarded as his unofficial bid to join the Magic Circle.

The Institute for Fiscal Studies dubbed the Chancellor a “fiscal illusionist” after he employed a now-you-see-it-now-you-don’t sleight of hand on the public.

Insisting he was “on the side of hard-working families,” Sunak naturally talked up his 5p-a-litre cut to fuel duty and his raising of the National Insurance threshold; the “biggest single personal tax cut in a decade,” as he described it.

And, of course, to tickle the Tory tummy, he flagged up a 1p cut in the basic rate of income tax ahead of the scheduled 2024 General Election.

It has to be acknowledged the Chancellor has been dealt a difficult hand given the ravages of Covid, the fuel price surge, consequential higher inflation and the economic effects of the war in Ukraine.

His most ominous remarks came when he told MPs: “We should be prepared for the public finances to worsen – perhaps considerably.”

Yesterday, Boris Johnson admitted things would “continue to be tough, continue to be choppy” but he stressed: “We will get through it and we will look after people throughout.” And with an eye to more fuel hikes in the autumn, he added: “As we go forward, we need to do more.”

The Office for Budget Responsibility, the UK Government’s independent economic forecaster, pointed out household disposable income in this coming financial year would reduce by 2.2%; the biggest annual fall in living standards since records began in 1956.

And even after the promised income tax cut in 2024, the tax burden as a percentage of GDP will continue to increase to 36.3% by 2026-27; the highest since the late 1940s.

A snap poll summed up the public mood: 69% of people thought the Chancellor had not done nearly enough to ease the squeeze.

Labour’s Rachel Reeves insisted Sunak did “not get the scale of the challenge”. Her party wants a windfall tax on North Sea oil and gas companies to cover VAT on rising fuel bills.

She added: “The problem for this Chancellor is by the end of this Parliament seven out of eight people will be paying more taxes.”

Richard Thomson for the SNP likened him to a “pickpocket,” who expects credit for returning a wallet, having nabbed the cash.

More worryingly for Downing St is the mood among Tory MPs.

Conservative backbenchers gave the Chancellor a lukewarm reception at his post-statement private address to them. One told the Politico website: “People will still remember we are taxing too much. We didn’t need to have these tax increases and we are squeezing people’s incomes when we don’t need to.”

The criticism was reinforced by the icy blast from the Tory-supporting press to Sunak’s statement; “squeezing the pips of ordinary taxpayers” as one commentator put it.

Nor was there much comfort from the country’s leading think-tanks. The IFS asked what was the point of raising NICs on earners while cutting income tax, which includes those with other income sources? The Resolution Foundation’s Torsten Bell branded it “totally bonkers”.

The most astonishing omission was help for the most vulnerable. Pensioners and those on benefits will see their state payments rise by just 3.1% while the cost of living is expected to jump by more than 8%.

The Resolution Foundation, which focuses on low to middle incomes, warned 1.3m Britons were set to fall below the poverty line next year; the first time the UK will have seen such a rise outwith a recession.

Every fiscal event is a political cliché; an exercise in smoke and mirrors; giving with one hand and taking with the other.

While the raising of the NICs threshold to £12,570, to align it with income tax was welcome – the £6bn cut will benefit 30m workers to the tune of £330 a year – it will not stem the entirety of the painful hike, which amounts to £12bn; designed to pay for the new UK Government’s health and social care levy.

Indeed, as consumers struggle in the face of an average 50% hike in energy costs, yet more pain is on the way this autumn; which will amount to a more than doubling of fuel bills. The OBR forecast another £829 rise on top of the £690 arriving next month, raising average bills from £1,971 in April to £2,800 in October.

Its chairman Richard Hughes said the Chancellor’s £18bn giveaway “offsets around a third of the overall hit to living standards people would otherwise have felt had he not taken those measures”. In other words, the fall in living standards is not 3% but 2%, which was “still an unprecedented fall in people’s standard of living over the next 12 months,” he added.

Paul Johnson of the IFS said the Chancellor by allowing taxes to rise meant, with the effects of inflation and “fiscal drag,” the scale of the increases meant they had “magically doubled” in scale.

He calculated the 1p income tax cut in 2024 would only give back half the “windfall” Sunak was now expecting from having frozen the personal allowance and the higher rate threshold.

“Mr Sunak has proved to be something of a fiscal illusionist,” declared Johnson.

Underneath the tsunami of the economic numbers lies cold, hard politics.

Sunak held back most of the £50bn of headroom available to him; in part to fund his pre-announcement of a tantalising tax cut ahead of the 2024 UK election.

No surprise that this will emerge just a month before people go to the ballot box. Very handy for the election campaign.

And it may even be bigger. Suspicions abound, under pressure from all those nervous Tory candidates, it will magically become a 2p cut in income tax. What, one asks, will Nicola Sturgeon conjure up on Scottish rates?

The Chancellor’s fiscal trickery was, however, directed at Middle England, because that’s where most of the votes are, with a singular aim: staying in power.