‘A failure of courage, a failure of compassion and a failure of justice‘ – Peter Kelly, The Poverty Alliance
- Chancellor announces Spring Statement tax cut for 2.4 million Scottish workers through rise in National Insurance thresholds – saving the typical employee over £330 a year.
- Unveiling plans to give families further help with the cost of living, Rishi Sunak also slashes fuel duty on petrol and diesel by 5p per litre for the next 12 months.
- Spring Statement also sets out measures to help businesses boost investment, innovation, and growth – including a £1,000 increase to Employment Allowance to benefit around half a million SMEs across the UK
- The UK Government is providing an additional £45 million to the Scottish Government next year as a result of measures announced by the Chancellor today.
The Chancellor delivered a Spring Statement today that ‘puts billions of pounds back into the pockets of hard-working people in Scotland’– unveiling a series of tax cuts to ease the cost of living.
Rishi Sunak announced that National Insurance starting thresholds will rise to £12,570 from July, meaning hard-working people across the UK will keep more of what they earn before they start paying personal taxes.
The cut, worth over £6 billion, will benefit 2.4 million working people in Scotland with a typical employee saving over £330 a year, whilst the typical self-employed person will save over £250. This means the UK now has some of the most generous tax thresholds in the world.
Mr Sunak also announced that fuel duty for petrol and diesel will be cut by 5p per litre from 6pm tonight (23 March) to help drivers across the UK with rising costs. Worth £2.4 billion, this is the biggest cut ever on all fuel duty rates and means a one-car family will now save on average £100.
As a result of a cut to the basic rate of income tax for savings income, taxpayers in Scotland will see benefits worth £3 million. As other income tax rates are devolved in Scotland, the Scottish Government’s funding is automatically increased as a result of this tax cut as set out in the agreed Fiscal Framework. This is initially worth £350 million in 2024-25.
The Chancellor also set out a series of measures to help businesses boost investment, innovation, and growth – including a £1,000 increase to Employment Allowance to benefit around half a million businesses.
As a result of measures in this Spring Statement the UK Government is providing the Scottish Government with an additional £45 million through the Barnett formula next year.
Chancellor Rishi Sunak said: “We’re slashing taxes for millions of hard-working people in Scotland, getting pounds in people’s pockets and helping pay cheques to stretch further – from July more than 2.4 million in Scotland will get a tax cut with the typical employee keeping £330 more each year.
“By cutting fuel duty, we’re making it cheaper for people in Scotland every time they go to the pump, which together with the freeze means people save £100 per car on average a year.
“We’re boosting small business growth by increasing the Employment Allowance – a tax cut worth up to £1,000 for thousands of businesses.”
To grow the world’s very best talent in AI, the UK Government will partner with industry and academia to create 1,000 new AI PhDs. The Government will invest £117m to create PHDs across the UK at Centres for Doctoral Training, building on the existing three sites in Scotland. This will train a new generation of AI researchers who will develop and use AI in areas such as healthcare, climate change and creating new commercial opportunities.
Delivering the statement, the Chancellor made clear that our sanctions against Russia will not be cost-free for people at home, and that Putin’s invasion presents a risk to our economic recovery – as it does to countries all around the world.
However, announcing the further measures to help people deal with rising costs, he said the extra support could only be provided because of the UK’s strong economy and the tough but responsible decisions taken to rebuild our fiscal resilience.
The immediate financial support for people and businesses comes as part of a wider tax plan announced by the Chancellor that will create better conditions for growth and will share proceeds from growth more fairly – ensuring people can keep more of what they earn.
Mr Sunak also announced that the Scottish Government will receive £41 million more funding as there will be an extra £500 million for the Household Support Fund, which doubles it’s total amount to £1 billion to support the most vulnerable families with their essentials over the coming months.
The Chancellor also reduced the VAT on energy saving materials such as solar panels, heating pumps and roof insulation from 5% to zero, helping families become more energy-efficient.
This cost of living support comes on top of the measures that the Chancellor has already announced over the recent months to support families. This includes an over £9 billion energy bill rebate package, worth up to £350 each for around 28 million households, an increase to the National Living Wage, worth £1,000 for full time workers, and a cut to the Universal Credit taper, worth £1,000 for 2 million families.
The Spring Statement also confirms that:
- A new Efficiency and Value for Money Committee will be set up to cut £5.5 billion worth of cross-Whitehall waste – with savings to be used to fund public services.
- £50 million new funding to create a Public Sector Fraud Authority to hold departments to account for their counter-fraud performance and to help them identify, seize and recover fraudsters money.
- Local residents across the UK will benefit from a fresh set of infrastructure projects as we open the second round of the £4.8 billion Levelling Up Fund. It will continue to focus on regeneration, transport and cultural investments.
Chancellor’s statement ‘a failure of courage and compassion’, says Poverty Alliance
Reacting to today’s Spring Statement, Peter Kelly, director of the Poverty Alliance, said: “Government should be about compassion and justice, and making sure people are able to live as full a life as they can.
“The Chancellor said his Spring Statement today was all about security. Yet his plans show a failure to comprehend the situations being faced by households across the country, leaving them with insecure and falling incomes in the face of rising costs.
“Amid a rising tide of poverty, the Chancellor could have thrown a lifeline by increasing benefits in line with inflation and by scrapping the unjust benefit cap. Instead he has provided additional funding of only £500m to the Household Support Fund which, although welcome, will quickly be consumed by the rising cost of living for families on the lowest incomes.
“The increase in the National Insurance threshold has also been presented as a support to people living on low incomes. In reality two thirds of this effective tax cut will go to middle and higher income households.
“By ignoring the tidal wave of rising living costs that is pulling so many people into poverty, the Chancellor has made clear his priorities. His tax cutting agenda will generate positive headlines, but could see another 400,000 people across the UK swept into poverty.
“Ultimately, the Chancellor’s statement is a failure of courage, a failure of compassion, and a failure of justice.”
The UK Government has not delivered the support and help that families and businesses need today, according to Finance Secretary Kate Forbes.
Responding to the Spring Statement, Ms Forbes said the Chancellor failed to help thousands of worried households facing poverty as a result of soaring energy bills and a cost of living crisis.
In 2018/19, the Scottish Government introduced a more progressive approach to tax, including a 19% starter rate band below the basic rate, ensuring those who can afford to pay a little more do so.
Ms Forbes said: “The Spring Statement has failed to address the biggest challenges facing households today. With soaring energy bills and a cost of living crisis, the Chancellor has not used his Spring Statement sufficiently to provide lifeline support that could prevent households facing fuel poverty.
“The Scottish Government is providing a further £10 million to continue our Fuel Insecurity Fund into 2022-23, which supports people struggling with their energy bills. Most powers relating to the energy markets remain reserved and Scottish Ministers have repeatedly called for the UK Government to urgently take further action to support households – including a reduction in VAT on household energy bills and support for those on low incomes.
“We are doing all we can to tackle the cost of living crisis – including doubling the Scottish Child Payment from £10 per week per eligible child to £20 next month. The UK Government should have followed our lead and matched the 6% uprate on social security benefits which the Scottish Government is adding to eight of the benefits we deliver. The Chancellor failed to match that commitment which could have provided lifeline support to thousands of households.
“On taxation, we have already acted to introduce a 19% starter rate of income tax below the basic rate, in line with our commitment to progressive taxation, which makes Scotland the fairest taxed part of the UK. We will continue to take that approach when we set taxation policy in future budgets.”
In the midst of the biggest wages and bills crisis in living memory, Rishi Sunak’s Spring Statement has failed families who need help NOW, says the TUC.
He didn’t stand up for families. He didn’t take the opportunity to stand up to the bosses who’ve sacked hundreds of workers at P&O. And he didn’t set out a plan to get wages rising – leaving the average workers facing a wage cut of over £500 this year.
Last week, we set out what we needed to see from the Chancellor to get a spring statement that is fit for purpose.
We were looking for the Chancellor to:
- Deliver an immediate boost to pay
- Fund efforts towards a peaceful solution to the conflict in Ukraine
- Take additional measures to support families in the UK with rising energy prices
- Deliver the long-term changes needed for a high-wage, high skill, high productivity economy
Below we set out how the spring statement matched up to our tests and assess what it means for working people.
The Chancellor didn’t deliver an immediate boost to pay
Workers’ pay prospects from the statement don’t look good. The OBR forecasts real weekly wages to fall by £11p/w (2.0 per cent) in 2022, and fall again in 2023. This will put wages back below their 2008 levels (after a brief recovery in 2021), where they’ll stay until 2025. And even this contains some optimistic wage forecasts, with the OBR forecasting pay before inflation to rise by as much as 5.9 per in Q3 2022.
The OBR forecasts that the 2022-23 financial year will see the biggest fall in living standards since records began in 1956-57, explaining that the “failure of nominal earnings growth to keep pace with rising inflation” is a “key factor” in this.
It adds that the policy measures announced since October only “offset a third of the overall fall in living standards that would otherwise have occurred in the coming 12 months”.
But there was no action to tackle falling pay in the Chancellor’s statement: nothing on raising the minimum wage, or funding public sector pay rises, and no recognition that collective bargaining (and union presence) is the most sustainable way to get wages rising.
Measures to support families in the UK with rising energy prices and the cost of living were totally inadequate
The spring statement offers little good news for struggling families, especially those in receipt of benefits.
- Benefits uprating
Worst of all there was no increase in the basic rate of benefits. As it stands, the standard allowance for Universal Credit and legacy benefits is set to rise by 3.1 per cent in April 2022. But this is far below the latest inflation figure (CPI is 6.2% in Feb 2022 and RPI is 8.2%), with inflation forecast to rise higher in the coming months.
This will leave those on benefits facing a real terms cut at a time when energy bills are rising by 54 per cent. The families who need the most help have been left totally out in the cold by the Chancellor today.
The decision not to cut benefits in real terms will particularly impact those who are unable to work. This reflects a wider ignorance of the equalities impact of the cost of living crisis.
We also didn’t see a reversal of the decision to suspend the state pension triple lock. The decision to abandon the pensions triple lock will cost pensioners almost £500 a year. Pensioners are particularly vulnerable to price hikes as they spend a higher percentage of their income on food and fuel.
- Targeted support
The big new announcement for targeted support for low-income households was £500 million in additional funding for the Household Support Fund – a temporary discretionary fund run by local authorities. This scheme was set to end this month, and the initial funding was £500 million.
This extra money is worth less than £10 each to the six million families claiming Universal Credit – in the unlikely event they hear about it and are able to jump through the hoops needed to claim it. And contrast this £500 million to the £10 billion cut to benefit spending in 2022-23 as a result of not uprating benefits in line with inflation.
- Income tax and national insurance threshold
Changes to tax cuts won’t help the families who need it most now. Raising the National Insurance threshold mostly benefits middle earners and, compared to increasing benefits payments, does little to help those with low income. This can be seen in the chart below, from the Resolution Foundation.
And promises of income tax cuts tomorrow do nothing for families facing cuts to their living standards now.
- Childcare and sick pay
Recent TUC research found that 1 in 3 parents with pre-school children spend more than a third of their pay on childcare. And yet the spring statement made no mention of childcare –or even children.
And the Chancellor has missed another opportunity to raise sick pay and make it available to all. Living with Covid requires decent sick pay for all, yet we’re still waiting for government to take action on this.
- VAT-free insulation and solar panels
Alongside this was the removal of the 5% Value Added Tax currently applied to building materials, like home insulation and solar panels. But this only benefits families who own a home and can afford to renovate it anyway.
The Chancellor should’ve taken the opportunity to invest in home retrofits at scale. Improving the average UK home’s energy efficiency to band C would reduce the country’s gas demand by 15% and cut hundreds of pounds off fuel poor homes’ energy bills. A massive social homes retrofits programme, delivered by local authorities, could also create over a quarter million good jobs over two years. But here again the Chancellor failed to act.
- Transport
The 5p cut on fuel duty does next to nothing to support those at the sharp end of the wages and bills crisis. Analysis by NEF estimates that a third of this tax cut will go directly to the richest 20% of households, while the poorest 20% will on average only receive £5 per month. To make transport truly affordable for everyone, Government should be expanding bus and rail services in the public sector.
The Chancellor didn’t talk about the long-term changes needed for a high-wage, high skill, high productivity economy
We heard nothing on reforms to corporate governance, industrial strategy or expanding the public sector workforce to deliver the decent public services we need to level up.
The Chancellor did announce a review of the apprenticeship levy. We believe that any changes to the levy should focus on significantly increasing the number of high-quality apprenticeships and widening access to groups facing long-standing barriers. A review must not be an exercise in allowing employers to duck their responsibilities on apprenticeships.
And much more than this is urgently needed to tackle the shortfall in training, including increased government skills funding and new workplace training rights to expand opportunities for everyone to upskill and retrain.
The Chancellor didn’t stand up to the scandalous behaviour by bosses P&O
The Chancellor talked about security but did nothing to take on the bosses who take every measure to undermine their workers’ job security. He could’ve made it clear that no employer who treats workers with the contempt shown by P&O Ferries would receive a penny of public money until they reinstate their workforce, including by taking freeports contracts off DP World, the parent company of P&O.
Yet once again the Chancellor failed to mention the issues that matter to working people.
The government’s response to those fleeing conflict and war is inadequate
The Spring statement document outlines the £400m in humanitarian support the government has given to Ukraine, and says it has committed “to provide local authorities with £10,500 per person for support services, and between £3,000 and £8,755 per pupil for education services depending on phase of education, as well as £350 per month for sponsors for up to 12 months”.
But it’s clear that the government’s support for the people fleeing war and conflict is worse than inadequate. The Ukraine for Homes scheme is no substitute for a properly funded system that provides universal refugee protection. And yesterday, the Government’s nationality and borders bill, passed a vital stage in the House of Commons, meaning that those fleeing conflict may find themselves treated as criminals and deported, instead of finding sanctuary.
The Chancellor let families down today.
Families are facing soaring bills at a time when their incomes have been squeezed by years of wage cuts and attacks on the social security system. The wages and bills crisis is a consequence of decisions taken by successive governments. Today the Chancellor chose to make the pain last for longer.
THERE WAS SOME PRAISE FOR SUNAK’S MINI-BUDGET, HOWEVER:
Simon Roberts, Chief Executive Officer, Sainsbury’s said: “We know our customers and colleagues are concerned about increases to the cost of living and at Sainsbury’s we are doing everything we can to support them.
“We really welcome today’s changes to fuel duty and national insurance. We are passing a 6 pence per litre cut in fuel across our forecourts from 6pm tonight as we know fuel costs are one of the biggest pressures everyone is facing right now.
“We were pleased to welcome the Chancellor to one of our stores today to discuss what we are doing to offer customers great value and to invest over £100 million in increasing pay for our colleagues with a new hourly rate of £10 per hour nationally and £11.05 in inner London.”
Michelle Ovens CBE, Founder, Small Business Saturday said: “Moves in today’s Spring Statement to increase the employment allowance, reduce fuel duty and raise the National Insurance threshold are welcome, and will go some way to help businesses deal with rising costs.
“In particular, It is good to see the immediacy of this rise in employment allowance.”
Martin McTague, Chair, Federation of Small Businesses, said: “We are very pleased to see the Chancellor adopting our top ask for this Spring Statement: uprating the Employment Allowance to help small employers with national insurance costs.
“We originally put forward the Employment Allowance as a targeted measure to help small firms, and it has now been expanded three times since its creation.
“Together with a cut to fuel duty, these measures will provide crucial breathing space for our embattled small employers.
“This Spring Statement marks a good starting point, with welcome measures on business rates, net zero and energy investment taking effect next month.
“With steep inflation, energy bills increasing fast, without the same support in place as enjoyed by consumers, and hiring pressures landing hard on small firms, more of the right stuff will be needed in the autumn given this challenging backdrop.
“We’ve seen a VAT cut on net zero investments for households today, which is good for small firms involved in their installation.
“However, a high street shop or local bar cannot access the same support that consumers do when dealing with the same energy supplier, and they should have access to the same assistance to reduce energy use and support the move to net zero.
“We look forward to working with the Chancellor on his new tax plan. Achieving the new culture of enterprise vision he rightly aspires to, alongside levelling up aspirations, will mean putting community small firms and sole traders front and centre of reforms.
“That means taking more of them out of the business rates system, protecting SME R&D investment incentives and delivering on commitments to end an endemic late payment culture that destroys thousands of firms a year.”
Alex Towers, Director of Policy and Public Affairs, BT Group said: “We welcome the Chancellor’s focus on tax reforms for business investment, given how central this is to UK infrastructure and growth.
“This is particularly important for BT Group as we make once in a generation investments to build the UK’s full fibre broadband and 5G networks. The existing super-deduction has already helped us to significantly increase and accelerate that investment.
“We agree that longer-term incentives are now needed, to support this country’s growth and competitiveness, and we will be keen to contribute evidence to aid the Government’s decision-making.”
Dr Clive Hickman OBE, Chief Executive, the Manufacturing Technology Centre said: “We welcome the Spring Statement, which outlines concrete steps to ensure that the manufacturing sector remains competitive, sustainable, and resilient.
“The Government’s commitment to cut tax rates on business investment is important if the UK is to boost manufacturing productivity and create high-quality jobs. In addition, the reform to R&D tax credits is a very positive step that will enable the scheme to be more effective, better value for money, and more generous.
“These measures will be crucial to spur innovation and encourage investment across the country.”
Julian David, Chief Executive, TechUK said: “Rightly the majority of the Spring Statement focused on addressing the cost of living concerns resulting from the war in Ukraine and rising inflation. Along with this vital action, the Chancellor also outlined a welcome package of consultations and policy programmes aimed at boosting businesses investment.
“In our recent Digital Economy Monitor Survey UK tech companies said increasing support to invest in R&D would be their top ask of Government, with 76% saying R&D is important to their business operations in the UK.
“The proposals unveiled today to further expand R&D tax credits and consult on ways to maintain the tax deduction for capital expenditure have the potential to unlock more investment into UK innovation.
“However, to get this right the Government must ensure that the software and intangible assets that power modern business investment are kept in scope. Otherwise, the Government risks missing an opportunity to unleash the potential of tech led growth.”
Dom Hallas, Executive Director, COADEC said: “Better R&D tax credits would mean more innovation from startups and innovative companies.
“We’re delighted the Chancellor recommitted to expanding it to cover cloud and data costs – and look forward to discussing the many ways to improve the credit further.”
Irene Graham OBE, Chief Executive, ScaleUp Institute said: “In the face of increasing pressures of inflation and wider international uncertainties, it is very good to see the Spring Statement continues to recognise the importance of business growth and innovation.
“It reaffirms policies targeted towards R&D, people and skills, investment, and innovation including the new Innovation Challenge across central government departments. We will continue to work closely with the Government on the evolution and development of these policies which are so vital to our scaleup economy.”
Michael Moore, BVCA Director General, said: “Increased business investment is key to the future of the UK economy and we welcome the measures announced by the Chancellor today which support this objective.
“Private capital’s focus on sectors like AI, robotics and fintech has helped the UK to become a world leader in these areas – further reform of R&D tax credits will help businesses to drive further innovation and strengthen the UK’s position in this new economy.”
Fuel Duty
Edmund King, President, the AA said: “The AA welcomes the cut in fuel duty. However, we are concerned that the benefit will be lost unless retailers pass it on and reflect a fair price at the pumps. Average pump prices yesterday hit new records- despite the fall in wholesale costs.
“The Chancellor has ridden to the rescue of UK families and businesses who use their vehicles, not for pleasure, but to function in their daily lives. Since the start of the year, the 20p-a-litre surge in pump prices has been the shock that rocked the finances of families, and particularly young drivers, pensioners and lower-income workers who need to commute each day.
“AA research showed that even in November, when petrol pump prices set new records at around 148p a litre, 43% of drivers were cutting back on car use, other spending to compensate or both. That rose to 59% among young drivers and 53% among the lower-paid. Petrol started this week averaging 167p a litre.
“On top of the duty cut, there has been a substantial reduction in wholesale road fuel costs feeding through to the forecourts since 9 March. That needs to drive lower pump prices also. The road fuel trade shouldn’t leave the Treasury to do the heavy lifting when cutting motoring costs.”
Elizabeth de Jong, Director of Policy, Logistics UK said: “With average fuel prices reaching the highest level on record and rising inflation, there has been an unstainable burden on logistics businesses which operate on very narrow margins of around 1%; the Chancellor’s decision today will help to ensure operators can continue to afford supplying the nation with all the goods it needs, including food, medicine and other essential items.
“Fuel is the single biggest expense incurred by logistics operators, accounting for a third of the annual operating cost of an HGV. The cut in fuel duty of 5ppl will result in an average saving of £2,356 per year per 44-tonne truck; this move will help to strengthen the UK’s supply chain during a time of ongoing financial and operational challenges.”
Zero rating VAT in energy efficiency measures
David Cowdrey, Director of External Affairs, MCS said: “The Chancellor has used the Spring Statement as an opportunity to kick-start the home heating revolution by zero rating VAT on home energy efficiency and renewable technologies for five years.
“This announcement allows people to insulate their homes and save on our fuel bills, making houses cheaper to run, especially when gas prices are at a record high.
“The government’s bold move to zero rate VAT can help the UK meet its net zero targets by using proven, off the shelf, zero carbon domestic energy solutions, such as solar and heat pumps, which are ready to be upscaled now.“
Professor Robert Gross, Director, U.K. Energy Research Centre, Professor of Energy Policy, Imperial College said: “The VAT cut on energy efficiency products is a great first step in helping households adopt simple measures to help cut fuel bills for the coming winter.
“Better insulated houses need less energy to keep warm and this is good for our bills, energy security and the environment.”
Amy MacConnachie, Director of External Affairs, Association for Renewable Energy and Clean Technology (REA), said: “The REA warmly welcomes today’s announcement to remove VAT on domestic renewables for five years. We have long campaigned for this change because we know these installations will help protect people from volatile gas prices and reduce their energy bills, while also supporting the transition to Net Zero and providing a catalyst for new jobs and investment across the country.
“The move to bring forward business rate exemptions for green technologies from April 2022, including solar panels and heat pumps, will help to further drive down costs and support the decarbonisation of buildings.
“We now want to see the Government clarify and go further on the range of technologies included as Energy Saving Materials, particularly energy storage, but this is a positive package of measures for our sector.
“We stand ready to deliver an energy future which is independent, secure, and stable.”
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