Rising inflation is putting real pressure on everyday living costs. This was the focus of Wednesday’s Spring Budget.
Every economy across the world is seeing inflation and costs rising. In part, as the global economy re-opens post Covid, pent up demand is exceeding supply and in part the impact of the Russian invasion of Ukraine, with the sanctions reducing supplies of energy, again pushing costs up.
The Chancellor has a difficult juggling act. Balancing the need for further targeted support to protect households where possible from rising prices against a deteriorating tax base, with both the Government’s debt interest jumping from £20bn to £80bn (greater than we spend on our entire Education budget) and economic uncertainty hitting growth and tax revenues.
Thanks to restoring the public finances pre-Covid, allowing debt to fall, and delivering record employment and the strongest growth in the G7, despite all the challenges, the Chancellor has been able to set out a number of measures to help ease the burden of rising prices.
A £5bn cut in fuel duty, saving motorists 5p per litre for 12 months – estimated to save car drivers £100, van drivers £200 and HGV drivers £1,500.
A £6bn tax cut for 30m workers, by increasing the National Insurance threshold from £9,500 to £12,570. This is the largest increase in a starting personal tax threshold in British history, worth over £330 a year. Whilst the National Insurance increase announced previously to fund the new Health & Social Care levy, the change to thresholds means that 70% of workers will now pay less National Insurance after the levy comes into effect next month.
To support businesses, the Government is also increasing the employment allowance to £5,000, cutting the National Insurance bill for over half a million businesses by £1,000. In essence, we are making it cheaper for businesses to employ people and helping them weather the storm.
Earlier this month the Government announced it would provide a £150 cash rebate for homes in Council Tax bands A-D, as well as £144 million of discretionary funding for local authorities to support households not eligible for the council tax rebate.
We have increased the National Living Wage to £9.50 an hour will also mean an extra £1,000 in the pockets of millions of people. The Government has also cut the Universal Credit taper rate and increased work allowances - which represent an effective tax cut for low income working households in receipt of UC worth £2.2bn.
Finally, we have doubled the existing Household Support Fund to £1bn. We are adding an additional £500 million to the Household Support Fund, which helps our most vulnerable families with the cost of living. The fund is distributed through local authorities in England, who have discretion over exactly how the funding is used. We expect it will benefit 3 to 4m vulnerable households.
We are only able to provide the support announced because of the tough but responsible decisions we have taken to repair the public finances and ensure our economy recovers strongly. Where possible, this is targeted at those most in need and not forgetting business who are so crucial to both our future growth, but maintaining record employment.
