ECONOMY
Spring Statement: Key points at a glance
Chancellor Rishi Sunak unveiled the contents of his Spring Statement in the House of Commons at the end of March. He had been under pressure to help households with the cost of living squeeze, with prices rising 6.2% in the 12 months to February - the fastest for 30 years.
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he chancellor announced he would cut fuel duty, raise the threshold at which people start paying National Insurance, and pledged to cut the basic rate of income tax before the next general election. Here is a summary of the main points:
State of the economy and public finances • The UK economy is forecast to grow by 3.8% this year, according to the Office for Budget Responsibility, a sharp cut from its previous prediction of 6.0% • The economy is then forecast to grow by 1.8% in 2023, 2.1% in 2024, 1.8% in 2025 and 1.7% in 2026 • The annual inflation rate was 6.2% in February, and is likely to average 7.4% for the rest of this year, but with a peak of 8.7% in the final quarter of 2022 • The unemployment rate is now predicted to be lower over the next few years than in the OBR’s previous forecast in October • Debt as a percentage of GDP is expected to fall from 83.5% of GDP in 2022/23 to 79.8% in 2026/27 • The government is forecast to spend £83bn on debt interest in the next financial year, the highest on record
Fuel, energy and living costs
• Fuel duty will be cut by 5p per litre until March 2023 • Homeowners installing energy efficiency materials such as solar panels, heat pumps, or insulation will see VAT cut on these items from 5% to zero for five years • Local authorities will get another £500m for the Household Support Fund from April, creating a £1bn fund to help vulnerable households with rising living costs • However, the OBR forecast that energy bills will rise by 40% again in October, if wholesale gas prices remain at the same level they are now
Taxation • The income threshold for at which point people start paying National Insurance will rise to £12,570 in July, which Mr Sunak said was a tax cut for employees worth over £330 a year • Mr Sunak pledged to cut basic rate of income tax from 20p to 19p on the pound before the end of this Parliament • The Employment Allowance, which gives relief to smaller businesses’ National Insurance payments, will increase from £4,000 to £5,000 from April
BCC gives response to Chancellor’s Spring Statement 2022 Giving her reaction to the Chancellor’s statement, Shevaun Haviland, Director General of the BCC, said: “The Spring Statement falls short of the action businesses needed to see today. While there are some positive announcements that firms will welcome, it did not fundamentally address the huge cost pressures they are facing.” “Businesses will be pleased that the employment allowance has been increased. This long running ask of the BCC will provide a small amount of financial headroom for firms facing rising costs.” “But today was a missed opportunity to rebuild and renew the economy and ensure business has the resilience to weather the uncertain and volatile times ahead.” “The cut in fuel duty, though very welcome, is just a drop in the ocean compared to the larger tsunami of surging costs that is bearing down on firms and households. Smaller businesses are particularly exposed as they have neither the protections or financial support provided to households, nor the negotiating power of larger businesses.” “As the economic outlook is likely to get worse before it gets better, many firms will be forced to continue raising prices, further fuelling the cost-of-living crisis.” “We urge the government to take further action – including the introduction of an SME energy
price cap - to tackle the escalating cost of doing business crisis. Firms need the headroom to keep a lid on prices, protect jobs and make investment that is so vital to sustaining our economic prospects.” On the Chancellor’s priorities for the Autumn Budget, Director General Haviland said: “Businesses will welcome the Chancellor’s firm commitment to cut taxes on business investment, something chamber business communities have long called for. Turbocharging investment is crucial to boosting productivity, levelling-up and the transition to net zero.” “We look forward to working closely with ministers on driving stronger business investment and reform to the apprenticeship levy and R&D tax credits.”
We urge the government to take further action – including the introduction of an SME energy price cap - to tackle the escalating cost of doing business crisis. Firms need the headroom to keep a lid on prices, protect jobs and make investment that is so vital to sustaining our economic prospects. INSPIRE
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