Business

Four possible measures chancellor may bring in as he prepares another budget under emergency conditions

One of these days, Rishi Sunak will produce a fiscal statement which lays out his vision for the nation.

We will hear about his plans for skills, for productivity, dynamic enterprise and entrepreneurship.

But this is not going to be one of those days.

Ever since he took office, the chancellor has had to confront one economic emergency after another, and so it has happened again.

His latest fiscal event on Wednesday – the Spring Statement – was supposed to be a low-key update to the economic numbers.

Instead, it comes at a pivotal time for the country. Hard pressed families are already facing enormous increases in their cost of living.

Those costs are going to ramp much higher in the coming months as the impact of the Russia-Ukraine war intensifies.

More on Rishi Sunak

The upshot is that the numbers produced by the Office for Budget Responsibility this week are likely to include some scary looking figures: inflation rising towards double digits this year, compared with the previous forecast of “just” 4%, and the forecast for growth in gross domestic product (GDP) being cut.

And while GDP will not drop into negative territory it’s worth noting that at this stage the country was supposed to be bouncing back from the pandemic; instead that bounce looks like becoming a damp squib.

This is all happening because the kind of inflation we’re currently facing is not the fruit of an overheating economy but of a massive increase in energy costs and raw materials across the world.

Some of this is due to the Russian invasion, certainly, but a lot of that inflation was in the pipeline long before tanks rolled across the border.

Ukraine war live updates – the latest as thousands of children are ‘kidnapped by Russia’

Either way, the question now is what the chancellor does to mitigate those forces.

Here are a few things to look out for:

The first and most obvious is fuel duty. A host of countries across Europe and further afield have already cut taxes on petrol; it seems likely the chancellor will do likewise.

This is unlikely to make life especially comfortable for motorists, given prices will still be way above where they were last year, but such measures are designed to help at the margin.

The next thing to look out for is what he does to dull the pain of the health and social care levy, due to come into force in April.

This change – effectively an increase in National Insurance payments – will involve serious increases in tax payments for most families at the very point that inflation is nearing its peak.

The chancellor seems reluctant to cancel or postpone it, but he may fiddle it (for instance, raising the income level at which the tax becomes due) to help lower income people.

Will he consider a windfall tax on oil producers?

Given George Osborne did precisely that when oil prices were last so high, there is a precedent, yet Mr Sunak has previously sounded a little reluctant.

But there are strong arguments to say we are in one of those unusual periods when prices (and hence forgone tax revenues) have risen far beyond what anyone might reasonably have expected.

Finally there’s the question of what the chancellor will do on the financial issue most households will feel most keenly later on this year: heating and energy bills.

The word on the street is that the chancellor will refrain from further support this week, instead preparing another package for August, when Ofgem is due to announce the next increase in the price cap (which kicks in in October).

In other words, prepare yourself for yet another semi-impromptu fiscal package before the winter Budget.

But overshadowing all of this is another ominous question: how aware is the chancellor of the scale of what faces the country? We simply haven’t seen price increases quite like this for a long time.

Even though overall inflation is likely to peak well below the levels it hit in the 1970s, energy bills will be far higher than at any time in recent memory. The price of goods we buy are also set to multiply further in the coming months.

This will be a defining issue for the UK, not just for months but, potentially, for years.

During the pandemic, Mr Sunak was relatively late to provide support for households, but when he did so, he introduced a dramatic series of measures – the furlough scheme, self employed support and so on – which were about as big as one could imagine.

Will that be the pattern this time around? Or will this Spring Statement disappoint?

Watch and follow the chancellor’s spring statement on Wednesday from 1230 on Sky News

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