Austerity fears ‘unfounded’ after tax-cutting autumn statement, says Sunak

Prime Minister Rishi Sunak described as “simply unfounded” warnings that the Chancellor’s autumn statement will likely usher in a period of austerity for public services.

It comes as he prepares to welcome hundreds of business figures to a major investment summit at Hampton Court Palace.

It is taking place days after Chancellor Jeremy Hunt announced a national insurance cut worth £10 billion as well as savings for businesses.

The Prime Minister rejected warnings from economists that his fiscal plans will result in painful and “implausible” savings for already-squeezed departments and public services beyond the next general election.

Speaking to Bloomberg TV, Mr Sunak rebuffed a suggestion that he will be presiding over austerity as “simply not the case”.

“Actually, government spending in the UK right now is at very high levels historically over this parliament.

“It’s grown at very high levels, even in real terms, after the impact of inflation. So I think any commentary or accusations that that’s what’s happening is just simply unfounded.

“And we’re at a point now, given how people are feeling, given the amount that’s being spent, where I think the priority has got to be lowering the tax burden.

“Government’s already spending a lot of people’s money and what we need to see going forward is more productivity out of the public sector, needs to match what we’ve seen in the private sector post-Covid.

“And I’d rather focus on efficiency in the public sector and prioritise cutting people’s taxes, rather than the Government spending ever more of their money.”

Despite the earnings bonus, millions of workers will face a squeeze on their finances with the tax burden still set to reach a record high.

The continuing freeze of personal tax thresholds will wipe out the benefit of the national insurance reductions for many workers, as higher earnings see millions pulled into paying more to the Exchequer through “fiscal drag”.

Mr Sunak has already faced calls from some MPs, many worried about losing their seats at the next election, to go further on tax cuts.

The Prime Minister refused to speculate on what could follow, but said that the autumn statement was the “start of a journey”.

He will mingle with top chief executives and investors at the Global Investment Summit in the grand surroundings of Hampton Court Palace.

In advance of the summit, he hailed a total of £29.5 billion committed by investors in the UK, triple the sum raised at the last global investment gathering in 2021.

The Prime Minister will join Business Secretary Kemi Badenoch to open the event, which is being attended by bosses from Blackstone, Aviva, Goldman Sachs and JP Morgan Chase among others.

Ms Badenoch said the investment was a “huge vote of confidence” in the UK economy, as the Department for Business and Trade pointed to a range of investments in renewable energy projects.

Among them was Australia’s IFM Investors, which will sign a memorandum of understanding with the department with the intention of investing £10 billion over the next four years for large-scale infrastructure and energy projects.

BioNTech, which developed the mRNA-based Covid vaccine with Pfizer, has committed to a new lab in Cambridge, as well as a centre of expertise for artificial intelligence in London.

Ministers also announced plans for a new expert panel to look into how to best create a UK corporate re-domiciliation regime, to make it easier for foreign firms to relocate here.

The Government has hailed the opportunities for thousands of jobs to be created as a result of the new investments.

A reception will also take place at Buckingham Palace, hosted by the King.

Labour said that the last 13 years have been a “total failure on growth and business investment”.

Shadow business secretary Jonathan Reynolds said: “The past 13 years of Conservative government have been marked by a complete lack of stability, consistency and ambition which has turned potential investors away from Britain.

“Only Labour has the plans to create the step change needed, working in partnership with business and investors, through our Industrial Strategy, Green Prosperity Plan and commitment to get Britain building again.”