Rishi Sunak has just unveiled his plan to tackle the cost of living crisis in his Spring Statement.
The Chancellor made a host of announcements, from cutting the fuel duty to raising the National Insurance threshold.
But he resisted calls to scrap a planned tax rise due to come in this April.
Money Saving expert Martin Lewis says none of the measures put forward today will help households pay for their soaring energy bills.
Labour also tore into the statement, accusing the Chancellor of making ‘incredible claims’ and living in ‘Sunak-land’.
The plans were further criticised by union leaders who said the finance minister was ‘tinkering around the edges’ of the cost of living crisis.
The mini-budget came after official figures showed inflation has risen to its highest level in 30 years.
Here’s a look at the main points at a glance, and what they mean for you.
Opening remarks – impact of war in Ukraine
- The chancellor opened the statement by warning the war in Ukraine would have an impact on economic recovery.
- He said Britain’s economic strength was underpinned by freedom and liberty, which the UK was protecting by supporting Ukraine
- However he acknowledged that unprecedented sanctions on Russia ‘are not cost-free for us at home’
Help with Fuel, energy and living costs
- Fuel duty will be cut by 5p per litre from 6pm today until March 2023
- Homeowners installing energy efficiency materials such as solar panels, heat pumps, or insulation will not pay VAT, to help bring down energy costs
- Mr Sunak said 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
- The Household Support Fund will double to £1 billion so local authorities have more cash to help vulnerable households with ‘targeted support’
Increased Taxation
- The income threshold for when people start paying National Insurance will rise by £3,000 to £12,570 in July, which Mr Sunak said was tax cut for employees worth over £330 a year
- Mr Sunak also pledged to cut basic rate of income tax from 20p to 19p in the pound before the end of this Parliament in 2024
- The Employment Allowance, which gives relief to smaller businesses’ National Insurance payments, will increase from £4,000 to £5,000 from April
- Hoping to prompt a new ‘culture of enterprise’, Mr Sunak said there would be tax cuts ‘on business investment and innovation with final decisions to be announced in the autumn Budget’ and a reform of research and development tax credits.
Growth – State of the economy and public finances
- The Chancellor told the Commons that The Office for Budget Responsibility has downgraded the growth forecast for this year to 3.8%
- However, he said downgraded growth forecasts had ‘not affected our strong jobs performance’ and unemployment was back to levels seen before the pandemic.
- Mr Sunak said the government is ‘meeting all our fiscal rules’ but that the nation must prepare for ‘the economy and public finances to worsen, potentially significantly’ because of the impacts of Russia’s invasion of Ukraine.
- The cost of borrowing is set to continue to rise. The Chancellor said £83 billion will be spent on debt interest, ‘the highest on record and almost four times the amount we spent last year’
- Mr Sunak said underlying debt is expected to fall steadily from 83.5% of GDP in 2022/23 to 79.8% in 2026/27
- He added borrowing as a percentage of GDP is 5.4% this year, 3.9% next year, then 1.9%, 1.3%, 1.2% and 1.1% in the following years
What is the cost of living increase for 2022?
The invasion of Ukraine has put an additional burden on economies across the globe, including the UK.
But households were already feeling the squeeze due to soaring inflation and energy prices, as well as the 1.25% tax rise in National Insurance coming into effect in April.
Today a supermarket boss warned that people using food banks are turning down potatoes because they cannot afford the cost of boiling them.
The Office for Budget Responsibility (OBR) says that Brits are experiencing the biggest fall in living standards since records began.
Meanwhile, analysis from the New Economic Foundation suggests next month, 3.4 million people – 34% of the UK – will be struggling to stay afloat.
What does the budget mean for me?
Some analysts believe using the war in Ukraine to set the tone for the statement looks like the beginning of a strategy to swerve political blame for the cost of living crisis, which was a brewing problem well before Russia invaded.
Sky News’s political editor, Beth Rigby, tweeted that overall, the mini-budget has offered some help for low or middle earners on the cost of living crunch, ‘but set against OBR prediction of the biggest cost of living squeeze since the 1950s, means Sunak will surely have to do more in the autumn. Tough times’.
Meanwhile, money saving expert Martin Lewis has poured scorn on Rishi Sunak’s ‘limited’ plan to deal with soaring energy bills.
He said the increased Household Support Fund and Vat cut for homeowners using green energy won’t help the millions of people who face a £1,300 jump in year-on-year bills.
Unions, charities and opposition MPs have all called on the Chancellor to go further with support, such as a windfall tax on profits made by oil and energy companies.
Even Tory MPs called for the National Insurance hike to be paused or scrapped.
Shadow chancellor Rachel Reeves said the government’s plan did nothing for people on the edge of fuel poverty or for pensioners who are facing a ‘real-terms cut’ to their incomes.
She said the current £200 a loan to help people with rising energy bills was not good enough.
The Labour frontbencher said: ‘Perhaps the Chancellor has been taking inspiration from the characters of Alice In Wonderland – or should I say Alice In Sunak-land, because nothing here is quite as it seems either.
‘It’s the sort of place where a Chancellor celebrates giving people £200 to help them with their spiralling energy bills before explaining he needs it all back.
‘In Sunak-land, the Chancellor claims ‘I believe in lower taxes’ while at the same time hiking Alice’s national insurance contributions. So Alice asks the Chancellor ‘when did lower taxes mean higher taxes, has down really become the new up?’
Unite said working families will now be ‘overwhelmed’ by rocketing prices.
The union today announced it was setting up a commission on profiteering which will target companies that took advantage of Covid-19 and soaring energy costs to make ‘obscene’ profits.
Referencing the P&O ferries scandal, Unite general secretary Sharon Graham said: ‘With inflation at its highest for 30 years, Rishi Sunak’s spring statement just tinkers around the edges of this shocking cost-of-living crisis.
‘Workers will still be facing sleepless nights worrying about how to make ends meet, overwhelmed by rocketing prices.
‘His spring statement does nothing to tackle the corporate elite, the billionaires who stash their loot but sack UK workers by Zoom. Once again, ordinary working people bear the broadest burden while the super-rich get off scot-free.’
Meanwhile, the Tax Payers Alliance said the cuts announced today will be offset byother rises.
And Miatta Fahnbulleh, CEO of theNew Economics Foundation, also said the measures would do little to help the most vulnerable people in society.
She said that a fuel duty cut of 5p will only be worth £1.80 a month to the poorest households. The expert added that cutting income tax by 2024 ‘is little comfort to families struggling today, & once again benefits the richest much more than those who need the help’.
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