The Intention to Deliver on Public Policies, but Fell Short? – The Spring Statement from UK Government, March 2022

On 23rd March 2022 the Chancellor of the Exchequer, Rishi Sunak, announced his Spring Statement in the House of Commons.

It was hoped that the Chancellor would announce at least some new plans to support households and businesses, although it would be challenging to see how this could be delivered amidst a foreseen cost-of-living crisis, aggravated seemingly by high inflation which developed from previous tax rises: As well as the recent escalation in civil conflict abroad.

The Office for Budget Responsibility (OBR), the independent watchdog for the use of public monies, also published its new economic forecast, which acknowledged the extent of the expected pressure on incomes over the coming seasons.

This OBR forecast also showed the most recent figures for public money use: This in turn would set out if the Chancellor had any opportunity to offer any relief on tax or public duty – or not.

Below are some of the highlights from the Chancellor’s Spring Statement:

The Chancellor reported that the OBR’s economic forecasts expects the economy to grow by nearly 4% this year, with GDP growing by over 1.5% year-on-year till 2026; this was compared to what had been said last October where it was expected the economy would grow by 6% because the nation should be recovering from the COVID pandemic – it was pointed out, however, the economy had been severely affected ever since the first wave of the pandemic.

Cost of living
It was reported by the Chancellor that the OBR forecast expects inflation to average over 7% this year.
Possibly in response to this, the Chancellor said fuel duty is to be immediately cut by 5p a litre for the next year (the second time in 20 years), and that there would be no more duty charged on solar panels, heat pumps or insulation to help households install energy efficiency devices.
The Chancellor also announced the Government’s budget for their Household Support Fund would double to £1 Billion.

Because the economy and public finances were expected to worsen, the Chancellor reported that borrowing for this year would be 5.4% of GDP - the measure of the value added when making goods or offering services in the UK – which would then go down to less than 4% next year.
Because of this, it was reported the OBR estimate that the gap between what the Government has to spends and what it receives should then drop to less than £128 Billion this year, falling to below £100 Billion in the next (and not the £180 Billion that was predicted last year).

National insurance
The threshold for paying National Insurance is to increase.
Referring to it as a “dedicated funding source for health and social care”, The Chancellor declared the planned 1.25-percentage-point rise in National Insurance contributions is staying - but did also say the contributions threshold is to increase by £3,000 this year and not the £300 that was planned.
Although it was not confirmed that this now makes the NI contributions threshold comparable to the duty on personal income, the Chancellor did point out this would be the largest single personal tax cut in ten years.

The Chancellor said it was observed that something was “not working” with UK investment in productivity. Because of this there will now be changes to research and development (R&D) tax credits; it was announced instead that the generosity of reliefs for business investment would be increased to “boost UK productivity”, and that tax rates on business investment would be looked at again for the Autumn Budget.
The Chancellor also said as of April 2022 the employment allowance for small businesses will increase to £5,000 – This means a tax cut of nearly £1,000 for approximately 500,000 small firms (although it was not made clear if this included charities.)

Income Tax
Income Tax is to be CUT from 20% to 19% in 2024.
The Chancellor declared that Tax cuts “..must be paid for.. be prioritised..” and that “..they must fit the economic circumstances of the time..”
Even though this would be seen as the first in Income Tax cut for over 15 years, The Chancellor advised it would not be responsible to do it right now because of the country’s economic uncertainty.

Other highlights included the launch of the second round of the Levelling Up Fund.

Following from our previous report, a new Prospectus was announced, inviting bids to come forward from all eligible organisations that offered projects designed to improve everyday life across the UK.

The Fund provides £4.8 billion for local infrastructure projects, with £1.7 billion allocated to over 100 successful projects already.

At the time of writing, the early indications from some of the charity sector was that although this Spring Statement was an intention to deliver on public policy, it was still falling short on what was needed for the country to move forward in these challenging economic times.

The Head of Economics at the Joseph Rowntree Foundation suggested the statement disregards less fortunate households, advising it only prioritised people on middle and higher incomes (a response echoed by the Policy Director of national charity Child Poverty Action Group)

The Head of Information Programmes at Turn2us, one of the UK’s leading charities helping people in financial need, indicated similar feeling, citing that many people “..will face a real-terms benefits cut come April..” and although welcomed the investment into the Household Support Fund, was disappointed the Chancellor did not use this opportunity to uprate benefits in line with inflation (an observation also pointed out by The Big Issue.)

The charity Campaign for Better Transport said the news about fuel duty cut will not help those most affected by the cost-of-living crisis, adding this will do nothing to cut dependence on oil or help people switch to more sustainable transport.

Although the Chair from the Charity Tax Group (CTG) did welcome some of the measures from the Spring Statement that will help charities as employers, he advised the Chancellor still had opportunity to do much more.

This too was seen to be the opinion from Charities Aid Foundation, who recognised the Chancellor had announced some measures to help tackle the cost-of-living crisis in the Spring Statement, but stressed more action was needed to avoid the worst effects.

For more information, Visit the Government website.

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