As is now tradition, Rishi Sunak spent the final hours preparing for his Spring Statement by briefing colourfully on the scene in No. 11 – with newspapers aplenty and pizza in hand.
The Chancellor had been keen to make the Spring Statement the non-event he wants it to be and the Treasury spent recent days downplaying expectations accordingly. This is despite the wider context being anything but ordinary, with the war in Ukraine sending shockwaves through global politics and economic sanctions placed on Russia being felt strongly in global energy prices.
Ahead of the budget, there were widespread calls from across the political spectrum to scrap some of the upcoming tax rises, including increases to National Insurance Contributions and corporation tax. Sunak did not bow to the pressure, insisting that these rises are necessary to ensure money is available for the NHS.
With the energy price cap set to increase by 54 per cent in a matter of days, anyone hoping for a suite of measures to mitigate the worst of the impact on people’s financial outlooks would have been left disappointed and the plan to address forthcoming increases, released only weeks ago, already feels grossly inadequate.
The timely release of figures showing inflation hitting 6.2 per cent drove home the very real challenges facing many people at this difficult time, leading many to condemn the Chancellor for not doing enough.
Support for people and business
It wasn’t all bad news and there were certainly some measures that could be welcomed by both business and working people. Raising the threshold for National Insurance Contributions to be in line with income tax will be a welcome £330 per year boost to working people on lower incomes. The question that remains is how much this will mean in real terms set against the increases to daily household costs.
The decision to cut fuel duty by five pence per litre for 12 months is a move that will help motorists at the pumps, although it doesn’t sit comfortably with wider government emission goals.
Removing the 5 per cent VAT on buying and installing renewable energy equipment will help increase affordability of greener solutions for energy in housing, while business rates exemptions for green installations in industrial property also carry through this theme. However, these measures are ‘evolution, not revolution’ of existing policies that will likely nudge some of those on the fence into making home or industrial energy improvements, while failing to bring about a sea change in the journey to Net Zero.
Where to now?
Perhaps the most important commitment was Sunak’s promise of a 1p cut to the basic income tax rate beginning in 2024. This will provisionally come into effect just weeks before the next general election and Sunak is banking on being able to juxtapose a difficult today for working people with a brighter tomorrow. The move seems to be an acceptance that the cost of living is going to bite many in the coming months, and the sound you hear is that of the can being kicked down the road.
Government is not out of the woods on dealing with economic pressures, and the Autumn Budget is likely to be in the immediate lead up to further steep energy price rises heading into next winter. Sunak’s opposite number Rachel Reeves cheekily branded him “Ted Heath with an Instagram account” and government will be keen in the coming months to avoid a golden jubilee tribute to the Winter of Discontent.
Jason Heffron is a senior account executive at Camargue