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Opinion

This Spring Statement is not about Ukraine, no matter what Sunak says

Our policy decisions over the Ukraine war will add, slightly, to the cost of living crisis – but they are not the main driver of it, writes James Ball.

When he stood up at the House of Commons’ famous dispatch box for his Spring Statement, Chancellor Rishi Sunak had a clear narrative about the UK economy and the difficult months that are to come.

The UK, he said, was coming out of the economic doldrums of coronavirus strong, with world-beating economic growth, with less inflation than other countries, and with great wage growth. Everything was going well – until Russia invaded Ukraine.

So great was the UK’s determination to stand up to Russia that we sanctioned 1,000 individuals and companies (the majority of these were already sanctioned) and took other serious economic measures against Russia. These, he cautioned, would come with a price: we can’t impose pain on Russia without also imposing some pain on ourselves.

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It’s a handy narrative for Rishi Sunak as treasurer. It accepts there is a cost of living crisis coming, but paints it not just as a result of the Russia/Ukraine war, but as a result of our doing the right thing over it – an implicit bid to tap into a sense of wartime solidarity. We will struggle to pay our bills because we are helping Ukraine so much.

The reality is, of course, totally different. Had Russia gone nowhere near invading its neighbour, we would be in a cost-of-living crisis. UK growth was relatively strong this year, but in large part this was because the UK (for largely technical reasons) experienced a deeper Covid recession than other countries.

Real wages had already been falling, even before the invasion, and energy prices were soaring. Sunak’s 1.25 percentage point tax hike on both employers’ and employees’ National Insurance was already due to kick in next month.

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We would be living through a cost of living crisis come what may – due in large part to global factors, but exacerbated by Sunak’s determination to balance the books at any cost. Sunak’s only response to this crisis had been to organise a one-off council tax cut for 80 per cent of people, and a strange loan-to-ourselves for energy prices – which came nowhere near covering the energy price cap hike.

The economic figures used by Sunak to calculate his budget don’t take in much of the impact of the invasion of Ukraine – these are just what had already happened prior. We will have to address the rest of it later, as Sunak has refused to get ahead of things now, despite everyone being aware it will exacerbate this problem.

Our inflationary woes from the Russia/Ukraine conflict are also largely not a result of government action. Between them, Russia and Ukraine produce around a third of the world’s wheat for export markets – meaning those prices will soar. Ukraine produces around 80 per cent of the world’s sunflower oil. Russia, of course, is a huge energy exporter and those prices are now soaring further.

None of those are a result of our sanctions or the backlash. Our policy decisions over the war will add, slightly, to the cost of living crisis – but they are not the main driver of it.

Sunak is not alone in trying to pin the current crisis on Putin and our response to him. In the US, President Biden has referred to “Putin’s price hike” as a campaign talking point, as has House Speaker Nancy Pelosi.

All of them should trust their electorates more: people don’t want cheap tricks over who to blame for a crisis which is leading millions of families choosing whether to heat their homes or feed their families. What they want is help.

James Ball is a journalist, author and global investigations editor at The Bureau of Investigative Journalism.

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