U.K. Labour’s Dodds Attacks Sunak as ‘Economically Illiterate’

(Bloomberg) -- U.K. Chancellor of the Exchequer Rishi Sunak is “economically illiterate,” while his policies have cost jobs and risk strangling the country's recovery from the coronavirus pandemic, according to Anneliese Dodds, the opposition Labour party's finance spokeswoman.

Two days before the chancellor is due to deliver his annual budget, Dodds attacked Sunak for overseeing a “year of short-termism” that has led to mass firings, wasted money and uncertainty among businesses and families about support from the government.

“After a year of last-minute scrambles, of U-turns, waste and mismanagement, what families and businesses need from the chancellor is a clear plan,” Dodds told a Bloomberg webinar on Monday.

She called for a “responsible” budget program rather than continuation of “a rolling cycle of chopping and changing, leaving businesses and families scratching their heads and anxious about what's coming next.”

The chancellor should make his furlough program more flexible, fix gaps in support that means “millions” of people have been excluded, and extend support for people asked to self-isolate because of infection with or exposure to the virus, Dodds said.

Sunak has consistently been rated the most popular member of Prime Minister Boris Johnson's cabinet after rolling out 300 billion pounds ($418 billion) of spending to fight the coronavirus and support workers through the pandemic. But the U.K. has also suffered one of the worst economic hits in the world, with output plunging almost 10% last year.

Polls still show the Tories remain better rated by voters than Labour on the handling of the economy by a double-digit margin, something Dodds acknowledged as a source of frustration. She said that Sunak's successive short-term extensions of his furlough program have led to tens of thousands of redundancies.

The ‘Sunak Effect'

“While he dithers and delays, people right across the country lose their jobs,” she said. “Coronavirus may have closed large parts of our economy. But this government crashed it.”

The Treasury didn't immediately respond to a request for comment.

The Conservative government's willingness to boost public spending during the pandemic has deprived Labour of one of its traditional lines of attack, and even earned Sunak praise at one point from Len McCluskey, the left-wing leader of the Unite Union.

The chancellor now faces the thornier and less popular task of unwinding his support programs as the government starts to lift the restrictions it imposed to contain the outbreak. The prime minister has said he hopes the last businesses will be able to reopen from June 21.

‘Spectacularly Unjust'

With the government's assistance programs due to end in March and April, Dodds called for Sunak to extend measures including the furlough program, a business rates holiday, as well as a reduction in value-added tax. She also questioned his decision in November to freeze the pay of millions of public sector workers.

“That is spectacularly unjust. It's also economically illiterate,” Dodds said. “If you take money out of people's pockets, they'll tighten their belts and spend less.”

The chancellor gave a series of interviews at the weekend in which he hinted at the need for tax rises to close a peacetime record budget deficit, while promising to keep supporting companies and workers through the pandemic.

Sunak Hints at U.K. Tax Rises and Vows to Maintain Covid Support

Officials have suggested U.S. plans to raise corporate taxes give the U.K. scope to do likewise, while still retaining the lowest rates in the Group of Seven major industrialized economies. U.K. media have also suggested Sunak may freeze the thresholds at which different rates of income tax kick in, drawing hundreds of thousands of Britons into higher tax brackets.

“Now is not the time for tax rises on struggling businesses or families,” Dodds said.

©2021 Bloomberg L.P.