Last Wednesday the Chancellor of the Exchequer Rishi Sunak gave his Spring Statement in the House of Commons. As Chair of the Treasury Select Committee I was one of the first MPs to speak in response – a video of our exchange can be watched above.
Although not positioned as a major budget, the Chancellor announced several policies to help families with the rising cost of living. The UK is not alone in suffering from inflationary pressures – inflation within the EU is also running at around 6% and the United States is up around 8%. These levels, not seen in the UK since the early 1990s, are largely down to the speed at which economies have rebounded after the lifting of Covid-19 restrictions and by the Russian invasion of Ukraine which has resulted in rocketing energy prices. Economic forecasts predict that inflation will get worse before it gets better, potentially reaching 9% here in the UK before falling back to more normal target levels of around 2% in 2024. While UK wage growth is relatively strong at the moment, it will not keep up with this level of inflation and the result of this plus tax rises will be a squeeze on family finances over the next two years unlike anything we have experienced for many decades.
Turning to the Chancellor’s Statement and the measures he introduced:
- Fuel duty will be cut by 5p a litre until March 2023. This will make a difference to rural constituencies such as ours where we rely on cars to get around. This will save the average one-car family £100 over the next 12 months, the average van driver £200 and hauliers around £1,500.
- The National Insurance threshold (the amount someone can earn before paying National Insurance) will rise by £3,000 to £12,570. 70% of workers will benefit and will save an average of £330 a year. This will more than offset the 1.25% National Insurance rise (to boost Health and Social Care services) for anyone earning less than £35,000 a year.
- The Employment Allowance will increase by £1,000 to £5,000, a welcome boost for eligible businesses and charities who will be able to claim a greater reduction on their secondary Class 1 National Insurance liabilities.
- The basic rate of Income Tax will be reduced from 20% to 19% from 2024, reducing the tax burden by £120 a year for someone earning £25,000 and by £220 for someone on £35,000.
- The Household Support Fund, which enables local authorities to provide discretionary assistance to low-income families in need, will double from £500million to £1bn.
- VAT will be scrapped on home insultation, solar panels and heat pumps, helping families to reduce their energy bills and their carbon emissions.