Reactive and Reactionary – Health, war and the spring statement

First published in, May 2022

The P&O human resources fiasco will soon fade into the history of an industry where the lash is almost living memory. Rishi Sunak may find as Blair did that Teflon fades. When the undeniable righteous indignation dies over the mass video dismissals which will trigger vengeful inquiries, the extent of the government’s prior knowledge will be exposed. As one of the Coulson hackers said at the time, he rarely uncovered people doing good. Populism can’t last. Bloodlust demands extreme policies. One all but sympathizes with the management of P&O when lectured by politicians who collectively have made such a mess of Brexit. P&O is the paradigm of Brexit’s lessons. The only way to make a geopolitical exercise work is to leave it to the market that will in turn spiral to the depths of capitalist depravity. The anger expressed by ministers who had prior knowledge of the dismissals sticks in the throat. Are they angry because they’ve been caught colluding? A cynic might suggest that the government let P&O sail into the maelstrom so that Members of Parliament could enjoy some populist grandstanding. In an era when conspiracy theories are treated with suspicion, democracy is hardly in safe hands. In the past we knew what attracted left right and centre, but this lot have mismanaged the economy, Brexit and by extension Ukraine. By tapping into a mentality that wants lifeboats to leave desperate families to drown in the Channel and gunboats to send them back to France, Boris and his chums in Pop seem to be here for a generation. One person’s capitalist depravity is another person’s ultra-low margin enterprise struggling to survive as oil goes through the roof in time of war.

Like trimmer Halifax and the Glorious Revolution of 1688, Rishi Sunak seems to be treading the highwire of centralist unification. Blair made it look easy emphasising his eventual fall. Time will tell if inflation spirals higher, but Sunak seems to have managed COVID-19. The loans to business may have occasionally kicked the can. In my firm’s microclimate, plenty suffered but the only companies that failed during the health crisis were insolvent at the start, suggesting that Sunak’s measures erred on the generous but were proportionate. What will happen to the bad debts? It’s hardly worth bankrupting a business to evade a soft loan of £50,000 but the state might see £50,000 well spent seeing small businesses through.

This article was written the day after the spring statement of 2022, announced at an auspicious moment as the market discounts the probability of a third world war, while absorbing inflationary threats, cyclical downturns, lockdown, and Brexit combined with an Anglophobic American administration. A maelstrom of P&O proportions which may yet be the making of a chancellor turning safe hands into an art form.

The National Insurance Contribution increases have been flagged and are going ahead but he has raised the NIC threshold to £12,570 which is the same as the personal allowances. Tax practitioners will appreciate the efficiencies implicit in the equalisation. Owner-managers structure their finances in a tax efficient manner, mixing salary and dividends. The grim reality for most businesses is that the risks are financial and the rewards spiritual. All directors can now get £12,570 without triggering the NIC threshold which until now has been a little over £8,000. It’s not a huge benefit but makes life easier. Sensible measures for a better Britain.

With fuel duty down by 5p a litre, the financially astute will smile at a rebate of a tax that attracts 20% VAT gross, an egregious example of a tax on a tax. It’ll please Sunak’s fans without antagonising anyone else, the mark of the true populist. My firm has seen clients use Research and Development grants responsibly and effectively. It is delivered as tax relief and its European Union origins may have put it under Brexit threat, but is being refreshed and made more generous. Let’s see the detail, but if it’s being extended it doesn’t need too much tinkering. Similarly our less generous capital expenditure tax relief is to be reviewed by the autumn. These measures and his reaction to COVID-19 indicate Sunak is good at detail, necessary for a long political life.

I’m still getting my head around the employment allowance which goes up to £5,000 but there is one rabbit out of the hat: basic rate reduced to 19% from 2024. DSC Metropolitan believes in the Laffer Effect (lower rates counterintuitively increasing tax take).

Rishi Sunak has been an astute chancellor; as a politician he has been an astuter smooth talking bar steward.

Print Friendly, PDF & Email