What happened at Spring Statement?
Chancellor Rishi Sunak faced a tough task at this year's Spring Statement. He delivered his Statement against a backdrop of soaring inflation with rising fuel, energy and food prices hitting both businesses and households. This created pressure from business groups, consumer groups, politicians and charities for the government to take action.
Here, we look at the Chancellor's announcements at Spring Statement.
Tax cutting measures
The Chancellor started and finished his Spring Statement speech with two tax-cutting flourishes. It began with the widely expected cut to fuel duty, which saw 5p per litre cut from petrol and diesel. Although this was welcomed by motoring groups it also drew criticism as the cut will likely be swallowed up by rising costs and may not be passed on fully by retailers.
Mr Sunak's grand finale saw him pledge that the basic rate of income tax will be cut by 1p in the pound in April 2024. By then the Chancellor said that the Office for Budget Responsibility (OBR) expects inflation to be back under control, with debt falling sustainably.
Giving and taking on NICs
In between these announcements the Chancellor disappointed those who hoped he would cancel the Health and Social Care Levy, which adds 1.25% to national insurance contributions (NICs) and will be implemented this April.
However, he softened the blow of this rise by raising the starting thresholds for NICs to £12,570, which brings them into line with income tax thresholds.
The Chancellor also gave some businesses a boost with a £1,000 increase to the Employment Allowance, which will benefit SMEs.
Meanwhile, he revealed that no business rates will be due on a range of green technology used to decarbonise buildings, while there will also be 50% business rates relief for eligible retail, hospitality and leisure properties from April 2022.
The Federation of Small Businesses (FSB) gave one of the more enthusiastic responses to the Spring Statement. It said that uprating the Employment Allowance and cutting fuel duty would 'provide crucial breathing space' to small businesses.
However, other business groups did not hide their disappointment that the Chancellor had not laid out further measures. The British Chambers of Commerce (BCC) said the Statement fell short of the action needed and 'did not fundamentally address the huge cost pressures [businesses] are facing'.
Meanwhile, the Confederation of British Industry (CBI) warned that the measures announced by the Chancellor 'don't do enough to tackle the current challenges facing firms'.
Soaring energy costs
Coming into the Spring Statement, soaring energy costs had been one of the major issues facing the Chancellor.
The government had previously announced that over £9 billion in state-backed loans will be made available in England, Scotland and Wales, with households set to be given up to £350 to help with their energy bills this year. Many were hoping the Chancellor would go much further in the Spring Statement.
However, he made just three announcements on energy, including the fuel duty cut.
The other measures saw the removal of 5% of VAT from the cost of energy saving materials. In addition, vulnerable households will be aided by £500 million of new funding.
No rabbit from the hat
These measures drew a scathing response from consumer champion Martin Lewis.
Taking to social media, he said: 'If that's all he's doing on energy - it is limited and won't impact the majority of households who will see a likely £1,300 average increase in year-on-year bills by October. My head has sunk. I just hope there's a rabbit to come out of the hat.'
However, the only rabbit to come out of Mr Sunak's hat saw him pledge to make a cut to income tax in two years' time.
Tough times ahead
The response to the Chancellor's Spring Statement has highlighted that there are some tough times ahead due to the crises in the costs of both living and doing business. We are here to help: if you need advice on improving your cashflow, please contact us.