The Chancellor, Rishi Sunak, announced his Spring Statement to the House of Commons on Wednesday 23 March.
The world has changed a lot since the Autumn Budget, with The Chancellor outlining, only 6 months ago, measures that focused predominantly on a country taking its first steps in a post-pandemic world. So, this year’s Spring Statement, which is usually seen as a ‘mini-budget’, has become eagerly anticipated.
With an intended rise in National Insurance declared in September last year, the energy cap rise, which will see an increase of more than 50% on gas and electricity bills, and the war in Ukraine causing soaring fuel prices, Rishi was under increased pressure to help alleviate these fears.
Even before Rishi got to the despatch box, The Office for Budget Responsibility (OBR) announced that inflation in February was at a 30 year high of 6.2%, with predictions it will go as high as 7.4% before the next budget.
In our DJH Mitten Clarke Spring Statement Report we look at The Chancellor’s announcements in detail but here are some of the key highlights:
To kick things off he announced:
- Fuel duty will be cut by 5p per litre, effective from 6pm on Wednesday 23 March and will remain in place until March 2023.
- Introduction of the Green Tax Cut which will see VAT removed on the purchase of energy saving materials for the next 5 years.
- Doubling the Household Support Fund to £1 billion to support the most vulnerable families with their food, energy and water bills.
The Chancellor then went on to outline his 3-step tax plan:
1. Helping families who need it most
- The threshold for paying National Insurance will increase by £3,000 from July 2022, equalising the National Insurance and Income Tax starting thresholds.
- This means lower-income workers will be able to earn £12,570 without paying any Income Tax or National Insurance – a tax cut worth £330 per year.
- An additional £500 million of funds has been allocated to the Household Support Fund to help vulnerable families with essentials over the coming months.
- These announcements are on top of the already announced £9 billion energy bill rebate package and an increase to the National Living Wage.
2. Creating an environment for higher growth
- An increase in the Employment Allowance, from £4,000 to £5,000 in April 2022, will reduce the employer’s National Insurance contributions.
- No business rates due for a range of green technology and eligible heat networks will also receive 100% relief.
- A commitment to R&D relief in the future and extending it to cover data, cloud computing and pure maths.
- This was on top of the 50% business rate relief already available to those in the retail, hospitality and leisure industries.
3. Sharing proceeds of higher growth fairly
- By 2024, the OBR expect inflation to be back under control, debt levels to be falling sustainably and the economy to be growing – meaning the Country will be in a position to share the proceeds of such growth.
- A future cut in income tax from the current basic rate, 20%, to 19% in 2024 – which will be worth £175 to the average taxpayer.
Our special Spring Statement 2022 Report sets out the economic background, the measures introduced by The Chancellor and the early reaction to his speech.