The Chancellor of the Exchequer, Rishi Sunak, delivered the Treasury’s Spring Statement
to the House of Commons on the day that the UK Consumer Prices Index rate of inflation rose to a 30 year high of 6.2%. Against the backdrop of rising costs for fuel and food, and with the expectation that the inflation rate will increase further, there were rumours that the Chancellor may delay the 1.25% hike in National Insurance contributions. Commentators anticipated that it would mainly fund a health and social care levy that is due to rise from April 2022 and expected to raise £12bn per year. The Resolution Foundation and the Institute for Fiscal Studies have warned that the rise is likely to disproportionately hit younger and lower-paid workers.
There had been suggestions in the press that the Chancellor was considering whether to raise the threshold that people start to pay the tax, which would provide some protection for lower-paid workers. Today’s statement intended to give an economic update to inform the latest forecast from the Office for Budget Responsibility. However, given the rising costs to households and businesses, it assumes a much greater significance.
Inflation is likely to reach 8%. Indeed, the Bank of England has projected that it could reach 10% by the end of 2022. The Treasury will also have to address public sector pay and universal credit to ensure that even greater numbers do not fall into poverty.
Steve Jamieson, Chief Executive of the Royal College of Podiatry said:
"The announcement of a cut to Fuel Duty by 5p per litre, whilst welcome, doesn’t go far enough as costs soar. Many of our members not only use their vehicles in their day-to-day lives but as an essential tool for domiciliary working and commuting, all the more vital in rural areas. It is especially true in the NHS, and members have already been in contact to say that they are effectively subsidising the health service as the mileage rates paid do not cover the cost."
The HMRC Mileage Rate of 45p per mile remains at its 2011 level, the year it increased from 40p. Money-Saving Expert Martin Lewis estimated that 10m in the UK could be in fuel poverty.
Many were surprised not to see a windfall tax on oil companies, especially given the reported profits. Shell recently reported an increased surplus of £19.3bn (2021), compared to £4.85bn (2020) due to a surge in oil and gas prices. The energy regulator, Ofgem, announced last month the maximum price of home energy bills would rise by up to 54% in April.
Given the ever-increasing cost of fuel and the climate emergency, it was shocking not to hear of any investment in sustainable measures. There was no mention of resources to help people to insulate people’s homes, which helps reduce carbon emissions and save fuel. There was a scrapping of the VAT on solar panels.
In summary, Rishi Sunak did not go far enough to prevent the millions of people, particularly the low and middle-income households, from slipping into poverty. And whilst the Chancellor claims that his plans lay the foundations for a stronger and more secure economy, how can this be true? When many households slide into poverty and numerous businesses may close?