Firstly, with inflation up again at 6.2% from 5.5%, the growth forecasts are fairly conservative at the moment and “we don’t really know how the situation in Ukraine will affect all of this” runs like a subtext to all of today’s announcements, fears about how the cost of borrowing will continue to rise with record interest payments are also a big factor here and form the backdrop to the 2022 Spring Statement.
Everything else we can hear in the statement should be heard against the deafening noises-off from the cost of living crisis though.
— Office for Budget Responsibility (@OBR_UK) March 23, 2022
So the chancellor is in a very unenviable situation, and he’s responded with a relatively short Spring Statement, the highlights of which are…
- a goal of cutting the basic rate of tax to 19% by 2024 (when the OBR forecasts falls in inflation and the cost of servicing debts)
- an increase (from July) of the employed and self-employed NICs threshold to £12,570
- fuel duty cut by 5p
- 0% VAT on energy-saving materials
- money for councils to support vulnerable households – will be doubled to £1bn from April.
- plans to cut taxes on capital investment in the autumn
- employment allowance will increase to £5,000 for small businesses, allegedly with £1,000 per company affected.
There will be a continued 50% discount on business rates for the hospitality sector and the Health and Social Care Levy (H&SCL) that was announced in the autumn is here to stay. Critics will note that the changing thresholds will reduce the money available to the health services is it were true that the H&SCL was all going to go to health services (it isn’t).
In a strong response for Labour, Rachel Reeves said that the country “can no longer afford the Conservatives” and damned the statement for…
- it’s failure to include a windfall tax on energy companies
- not scrapping the Health and Social Care Levy
- the amount of fraud that it has failed to confront
She said the Chancellor has been…
“”signing cheques to fraudsters”, losing £11.8bn to fraud, and is asking taxpayers to pay more “to fill his black hole” in the finances.”
She condemned the goverment for it’s fundamental failure to promote productivity, skills and growth and repeated Martin Lewis’ observation about the huge cost of living crisis affecting lower earners
“I am virtually out of tools to help people now,” says the Money Saving Expert
— BBC Politics (@BBCPolitics) March 20, 2022
As ever, Paul Johnson from the IFS gives a useful verdict on all of this.
IFS Director @PJTheEconomist on #PoliticsLive quotes the @OBR_UK’s report which calls this year the "worst year for living standards since records began in 1956-57."#SpringStatement pic.twitter.com/eyabbIACZk
— Institute for Fiscal Studies (@TheIFS) March 23, 2022