In a long-awaited statement yesterday in the House of Commons, Conservative Chancellor of the Exchequer, Rishi Sunak, set out fiscal measures in an attempt to ease the cost-of-living crisis. We’ve covered the cost-of-living crisis and the autumn Budget before on our blog with insightful quotes from our MD, Paul Goodman.
This month’s spring statement comes after the energy price cap is set to increase in April, the war in Ukraine causing rises in fuel prices, and other factors generally affecting quality of life for UK citizens.
Spring Statement Summary:
Due to rising costs in fuel, energy, and food, Sunak has had to act to ease the financial burden on the average UK family. So, what measures have been taken?
- The threshold for paying National Insurance has risen by £3,000 although the National Insurance increase is still going ahead
- A 5p cut to fuel duty, effective as of yesterday evening.
- The basic rate of income tax will be lowered from 20% to 19% by the end of Parliament in 2024, there have been calls to say this isn’t soon enough.
- The Employment Allowance (this gives relief to smaller businesses’ National Insurance payments), will increase from £4,000 to £5,000 from April
- Local authorities will be given another £500m for the Household Support Fund
Opposition parties and a number of charities have noted how the Conservative’s measures have not gone far enough to help the lowest earners cope with the cost-of-living crisis – many are still having to decide between heat or eat.
Shadow Chancellor, Rachel Reeves, has criticised Sunak for not scrapping the 1.25% rise to National Insurance and for not introducing a windfall tax on oil and gas companies. These measures would have lessened the burden on the average working-class family.
Before the Spring Statement, figures pointed to prices raising by 6.2% – the fastest for 30 years. Furthermore, the Office for Budget Responsibility (OBR) said inflation and higher taxes from April will mean that household face the biggest decline in living standards since 1956. Sky News has come up with a useful calculator to check out how your household will be fiscally affected by the crisis.
The Resolution Foundation has stated how low- and middle-income families are still painfully exposed to the crisis, and it has been predicted that at least 1.3 million people will be pushed below the poverty line by next year.
The Foundation has also pointed out how it is the first time that there will be a steep increase in the number of families pushed into poverty outside of a recession. They estimated that a typical family is due to see a £1,100 fall in income this year, with the poorest families facing a 6% fall. Only those earning between £49,100 and £50,300 will pay less income tax when the cut goes through and only those earning between £11,000 and £13,500 will pay less tax and national insurance. And finally, of the 31 million people in work, 27 million are going to end up paying more in tax and national insurance in 2024-25. You can read about this fully in this article by the Guardian.
This Daily Mail article has useful graphs and more information on the crisis as well as interviews with struggling families on their take.
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