Spring Statement 2022: Sunak raises NI threshold as OBR warns families face record fall in real income
Chancellor hails his ‘largest ever tax cut’ as OBR projects ‘biggest fall in living standards’ on record
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Your support makes all the difference.Rishi Sunak has delivered his mini-Budget to give people a helping hand with their finances as inflation hits a 30-year high.
The chancellor announced a 5p fuel duty cut and a rise in the National Insurance threshold by £3,000. He also announced that the OBR expects inflation to rise further this year, to 7.4%.
The rate of Consumer Price Index inflation jumped to 6.2 per cent in February, from 5.5 per cent in January, the ONS said on Wednesday morning.
People will have an extra £3,000 that they will not pay national insurance on, under the “largest ever” tax cut announced by Mr Sunak.
He said the government’s cut to fuel duty would represent the “biggest cut to fuel duty rates ever”. Labour criticised Mr Sunak for “not understanding the scale of the challenge.”
The Office for Budget Responsibility revealed that the rise in inflation to a predicted 40-year high this year would trigger “the biggest fall in living standards in any single financial year since ONS records began in 1956-7”.
Lack of action on energy costs for business ‘hard to fathom’, says industry group
An industry group representing manufacturers has called the lack of action from Rishi Sunak on business energy costs “hard to fathom”.
Make UK said that rising energy bills were pushing many firms towards a “tipping point”.
Chief executive Stephen Phipson said: “Companies would have been looking for substantial business support measures to help alleviate these. In particular, the lack of action on energy costs for business is especially hard to fathom.
“It has been two years to the day since lockdown began and there is very little in today’s statement to support a sector that kept working throughout the pandemic.
“The promise of jam tomorrow with consultations through the summer and action in the autumn will also be of little comfort for many who would have liked to have seen action and support immediately”.
Fuel duty cut a ‘boost’ but ‘more could have been done’, say motoring groups
Rishi Sunak’s decision to cut fuel duty by 5p has had a mixed reaction from motoring groups, with some saying that the chancellor had “ridden to the rescue” of families and others saying “more could have been done”.
AA president Edmund King said that they welcomed the cut in fuel duty but were “concerned that the benefit will be lost unless retailers pass it on and reflect a fair price at the pumps.”
Steve Gooding, director of motoring research charity the RAC Foundation, said the duty cut “doesn’t go very far to help low-wage key workers who rely on a car to get to their place of employment, often at times which are antisocial and when other travel options are non-existent”.
Rod McKenzie, executive director at the Road Haulage Association, described cutting duty as “a common sense move” that will “be a boost for the economy”, but he warned “more could have been done”.
He said: “The Chancellor missed an opportunity to announce a rebate to relieve more pressure on businesses.
“We’ll continue to press the Government hard for this measure as firms grapple with huge operating cost hikes.”
Green Party: Spring Statement ignores those on lowest incomes
The Green Party has criticised Rishi Sunak for looking after the interests of fossil fuel companies “while ignoring the plight of millions on lower incomes”.
Party co-leader Adrian Ramsay said that Mr Sunak’s Spring Statement ignored “those struggling through this cost of living crisis.” He said that the Universal Credit uplift could have been restored or doubled to help those on the lowest incomes.
Mr Ramsay added: “The Green Party has repeatedly called for a ‘Dirty Profits Tax’ on the excessive profits from UK oil and gas extraction, and to use this money to provide proper support for every household, and particularly those who need it most.
“Instead, the Chancellor has turned a deaf ear to the pleas of those on the lowest incomes, ignored the plight of those on benefits and has done next to nothing to tackle the climate crisis.”
Spring Statement: Sunak increases household support fund to £1bn
Rishi Sunak announced that he would double the household support fund to £1bn “to do more to help our most vulnerable households with rising costs”.
Local authorities can distribute money from the fund to households to manage the cost of essentials. It was announced in October as a £500m pot.
Spring Statement: The moves Rishi Sunak decided not to make and why they matter
Rishi Sunak has offered some new help through the tax system for millions of workers worried about the mounting cost-of-living crisis and the impact of the Ukraine war on the economy (Adam Forrest writes).
The chancellor cut 5p off fuel duty and eased some of the impact from the forthcoming national insurance hike by raising the threshold at which people start paying by £3,000.
However, Labour dubbed the chancellor “Alice in Sunak-land” and accused him of ignoring the scale of the crisis since there was no new help on energy bills or benefits.
The Independent took a closer look at what was left out:
The moves Rishi Sunak decided not to make and why they matter
Chancellor rejected calls for extra help with benefits, energy bills and military spending
Financial crash will have knocked £11k off wages by 2027 – IFS
The financial crash of 2008 brought an end to an upward wage trend that would have seen average annual earnings £11,000 higher than expected by 2027, according to Institute for Fiscal Studies research.
Wages have barely risen for more than a decade and are forecast to be 26 per cent lower than if the 1990-2008 positive trend would have continued, the think tank said.
The projection is based on an Office for Budget Responsibility (OBR) forecast published today alongside Rishi Sunak’s budget.
The OBR expects that rampant inflation this year will lead to the biggest fall in living standards since records began in 1956.
Projections for average wage growth this year have been revised upwards but are still not expected to compensate for inflation, the OBR said.
Green material will have VAT cut to zero
Rishi Sunak announced VAT will be reduced from 5 per cent to zero on retrofitting materials such as solar panels, heat pumps and insulation in a bid to help homeowners install more energy saving materials.
The chancellor said: “We’ll also reverse the EU’s decision to take wind and water turbines out of scope - and zero rate them as well. And we’ll abolish all the red tape imposed by the EU.
“A family having a solar panel installed will see tax savings worth over £1,000. And savings on their energy bill of over £300 per year.”
Mr Sunak said the policy will not apply immediately to Northern Ireland due to “deficiencies” in the Northern Ireland Protocol but said support would be offered.
The Green Party welcomed the measure but said “it will not have the impact we need without a proper government retrofit programme to support people to take advantage of it.”
“The fact there was no clear plan for a full retrofit programme, which would help keep people warm and reduce eye-watering energy bills, shows the absolute lack of vision this floundering government has.”
Despite flashing his green credentials with this policy the chancellor has been criticised for a non-environmentally friendly cut to fuel duty.
5p fuel duty cut: ‘It’s gone up a lot more than that anyway’
The rising cost of food, fuel and energy are among the top concerns for members of the public following the chancellor’s spring statement.
Delyth Jones, 43, a single mother from Deiniolen, Gwynedd, said she was concerned about the “bigger picture” and how the cost of fuel will impact on food prices.
Commenting on fuel duty being cut by 5p, Ms Jones said: “I think it’s gone up a lot more than that over the last few weeks anyway.
“That’s made a huge difference for me because I have to take my daughter to college, my son to work, and then I’m a carer for my youngest so I have to cart him here, there and everywhere as well.”
She added: “There’s not going to be that much excess money to do the nice things with.”
PA
Sunak didn’t think of disabled people, says Scope
Rishi Sunak has failed to consider disabled people in his mini-budget, one of the UK’s leading disability charities said.
James Taylor, director of strategy at disability equality charity, Scope said: “Amid the worst cost of living crisis in decades, we’re bitterly disappointed that the chancellor hasn’t announced direct support for disabled people.
“The chancellor has shown a distinct lack awareness that life costs more if you’re disabled. Many already face sky-high bills from needing more energy to charge vital equipment, or extra heating to stay warm.
“We hoped to see benefits rise in line with inflation and VAT receipts used to target support to disabled people who need it most. This hasn’t happened.”
The government is increasing benefits by 3.1 per cent in April, far short of the rate of inflation, which is expected to continue to rise.
Mr Taylor said: “Many disabled people are facing real terms cut to their benefits, just as prices rachet up and energy bills soar. This statement will leave many who rely on benefits worse off.
“The expansion of the Household Support Fund will provide some relief, but like the rise in National Insurance thresholds and a cut to fuel duty it’s not targeted at disabled people.”
Energy price cap to rise by another 40% in October – OBR
Energy bills may be around £1,500 higher by the end of this year, according to the Office for Budget Responsibility (OBR).
A 50 per cent lift of the energy price cap in April is set to drag bills up by more than £600 this year.
Due to an extreme rise in wholesale prices, the price cap is set to be raised again in October. The OBR forecasts it will go up 40 per cent, to £2,800 compared to £1,277 last October.
The chancellor today announced measures to ease the cost-of-living crisis but households are set to gain at most a few hundred from the relief efforts.
Even when adding in the £150 council tax rebate and £200 temporary refund, families cannot avoid being down several hundreds of pounds this year.
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