Spring statement 2022
In what was supposed to be a low key economic update, the Chancellor’s Spring Statement turned into something more akin to a Budget. In the most challenging of economic circumstances, and on the day the Bank of England announced inflation had peaked at a 30 year high, the pressure to help alleviate the cost of living crisis was forefront.
The announcements will provide some support to lower earners, most notably the increase in the primary threshold for national insurance contributions from July. This measure will save 30 million workers £330 per year, but coupled with the 10% increase in national insurance rates, only those with earnings of less than £35,000 will be better off. Company directors and the self-employed will have to wait until 2023/24 to fully benefit.
The cut in fuel duty for the next twelve months will assist those for whom the use of petrol and diesel are a necessity, whilst the doubling of the Household Support Fund to £1 billion will support the most vulnerable in society.
Despite calls from the Opposition for a windfall tax on energy companies to assist households with the rapidly rising cost of energy bills, no further measures were introduced. The Chancellor may be keeping his powder dry, with the energy price cap expected to increase further when it is reviewed in October and as we approach the winter months.
The measures announced have, in part, been funded by lower than expected borrowing forecasts. However, the largest contributor to the Treasury’s finances is expected to be the changes previously announced to the student finance system. This is forecast to raise over £30 billion in the coming five tax years.
His final announcement, a cut in the basic rate of income tax to 19% from 2024, positions the Conservatives for the next General Election. Despite the highest tax burden in a generation, the Conservatives will attempt to assert their credentials as a tax-cutting party. As American strategist James Carville famously wrote during the 1992 Presidential campaign, “It’s the economy, stupid!”
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