In parliament today chancellor Rishi Sunak announced a series of measures to help households as the cost-of-living rockets. He began the Spring Statement with a tribute to Ukraine and reminder that the conflict presents a risk to the UK’s economic recovery. It’s uncertain what the full impact of the war will be, but with inflation at 6.2% and ongoing supply chain pressures, it’s expected to put a tight squeeze on living standards.
Here are our five key takeaways from the statement:
1. The UK economy is forecast to grow by 3.8% this year
According to the Office for Budget Responsibility (OBR), the forecast growth for the UK economy will be just 3.8% this year – a drop from the 6% growth forecasted prior to Russia’s invasion of Ukraine. The economy growth for 2023 is estimated to be only 1.8%.
2. Fuel duty will be cut
To help motorists, Rishi announced “the biggest cut to all fuel duty rates ever” by 5p per litre. According to the RAC, the cut – which starts at 6pm tonight – will take £3.30 off the cost of filling a 55-litre family car.
3. Employment Allowance will rise to £5,000
In a bid to boost business investment and innovation, an increase in the employee allowance was set in response to calls from small businesses. This new measure is claimed to be a tax cut worth up to £1,000 for half a million small businesses, making it cheaper to employ workers.
4. The National Insurance threshold has increased
A £3,000 hike in the threshold for paying National Insurance (NI) has been announced in what was described by the chancellor as “a tax cut for employees worth over £330 a year. The largest increase in a basic rate threshold ever.”
From July, the point at which people start paying NI has been moved to £12,500 meaning that those earning up to approximately £34,000 a year will be better off. Sunak said 70% of workers earn less than this and so will receive an effective tax cut.
5. A cut to the basic rate of income tax is promised
The chancellor also pledged to cut the basic rate income tax from 20% to 19% before the end of parliament in 2024. Revealing the change Rishi said, “given the evolving situation in the war in Ukraine and the global response, there is significant uncertainty around the outlook for global Gross Domestic Product.”
The chancellor's 'mini-budget' statement comes in the wake of last week's MPC meeting where the Bank of England announced a hike in the base rate to 0.75% in a bid to control inflation.