Rishi Sunak found himself in the spotlight today as he delivered his Spring Statement to a country that is currently dealing with a significant rise in the cost of living. It is unsurprising that many people up and down the country have been curious as to what the plan might be for the near future, especially with the added complexities of coming out of a pandemic and the war in Ukraine due to Russian invasion.
In this blog we will go through some of the important statements Sunak made which are likely to effect the most people, from the economic growth to the cost of living.
Economic Growth
The economy grew by 7.5% in 2021, after a fall of 9.4% in 2020 which accoutred during the first wave of the pandemic, unsurprisingly one of the biggest economic declines in history. Sunak said forecasts from the Office for Budget Responsibility showed the economy would grow by 3.8% this year, which is down from their previous prediction of 6%.
While there is still predicted to be growth, the growth is hindered by potentially costly sanctions on Russia, which Sunak is keen on emphasising will not come free of charge to the UK.
Cost of Living
The price of essentials have been on the rise for some time, with energy, food, phone bills and fuel being more expensive than ever. The main concern is that the rise in wages is not happening in-line with inflation, leaving many people in a financially unstable situation.
Fuel duty will be cut by 5p per litre, for both petrol and diesel, until March next year, in a bid to help drivers and businesses. This will be a welcome bit of news for many who have seen fuel prices go through the roof in recent weeks.
Also, the government will cut to zero a 5% VAT rate for households installing solar panels, heat pumps or insulation. This will reward those who are taking a more environmentally friendly approach to energy consumption.
National Insurance
The threshold for paying National Insurance will increase by £3,000 from July. He says:
“People will be able to earn £12,570 a year without paying a single penny of income tax or national insurance.”
Sunak claims this change is worth £6bn to 30 million people.
Income Tax
Sunak said the basic rate of income tax would be cut from 20% to 19% in 2024. Explaining this decision, he said it would be irresponsible to make such a tax cut right now, given the uncertainty in the economy.
Our thoughts
We are happy with some of the statements made today, especially those which will directly help the public in an immediate way, such as the reduction of fuel costs and raising of the threshold of National Insurance. However, we will have to wait and see how Sunak’s plan fares in reality, in a world which is becoming increasingly harder to predict.
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