Many had anticipated that the Chancellor would use today’s Spring Statement to announce a more targeted package of support for lower-income households than he had in February. Instead, the Chancellor used it to reiterate his emphasis on fiscal prudence whilst promising an income tax cut in 2024.
The surprise (1): no targeted support
There was a broad expectation that Sunak would use today’s announcement to announce financial support for lower income households, probably via additional spending on social security. There was certainly a very strong case for him doing so.
Part of the reason why the current spike in inflation is creating a cost of living crisis is that the inflationary rise has happened so suddenly that normal benefit uprating policy is out of touch with reality. Benefits are normally uprated in April each year in line with inflation. But the measure of inflation used is from September the previous year.
In September, inflation was running at 3.1%. By February it was 6.2%. It is forecast to average 7.4% in 2022 (peaking at 8.7%). This means big real terms cuts for benefits in 2022, potentially followed by a big upswing in 2023, as uprating catches up with reality.
Households, particularly low income households, are not well placed to deal with such volatility. But governments are. Addressing this disconnect would have been relatively easy, and fiscally neutral in the medium term.
Surprisingly, the Chancellor offered nothing on social security. The cost of living crisis will affect lower income households much more acutely than those on middle or higher incomes.
Spending on energy and food makes up a higher share of their incomes; they less ability to absorb cost increases via savings; and they have fewer options to make savings by switching to lower priced product lines. There does not appear to be much consideration of the distributional dimension to this crisis.
The only attempt at targeting towards the most financially constrained was an additional £500m for local authorities to distribute to households most in need. The Scottish Government will receive a Barnett consequential as a result (likely to be around £50m). But this is a small amount of support in the context of the scale of the problem.
… but more broad-based support
Instead, Sunak’s support for households was again broad-based. The main element was a 5p cut in fuel duty. This is very weakly progressive as a policy – low income households spend proportionately more of their income on petrol than higher income households – but it provides a larger cash boost to high income households. And, by spreading support so thinly, the £5bn cost of this policy will provide limited relief to households most financially exposed to the rise in the cost of living. (If it provides much relief at all – how much of the 5p cut might be passed on to consumers is unknown).
The Chancellor chose not to postpone the increase in employee and employer NICs that was announced in September. This in itself was sensible – postponing the rise would mainly have benefitted higher earners. Furthermore, there would be a real risk that a one-year postponement could evolve into a permanent postponement as the election gets closer and the memory of the pandemic – used in part as justification for the NICs rise – fades
But what he did do was increase the threshold at which NICs is due, from £9,900 that was pencilled in for 2022 to £12,570 (bringing forward a sensible commitment to align the threshold with the income tax personal allowance). This increase in the threshold is worth just over £300 per year for employees. The effect is to offset the impact of the increase in NICs rate for the majority of earners in 2022. The cost of the measure in 2022 is £6bn.
The surprise (2): Income tax cut in 2024
Chancellors traditionally leave their flagship policy announcement until the end of their speech. Sunak’s flagship today was a promise to cut the basic rate of income tax from 20p to 19p in 2024.
The economic rationale for this is far from clear. The rise in employee and employer NICs (and subsequent health and social care levy) was justified by the need to address long-term fiscal challenges resulting from an ageing population and a smaller economy (thanks to Brexit and Covid).
But the proposed income tax cut will offset most of the impact of the Health and Social Care Levy on revenues. The outcome of the two policies together – the income tax cut and NICs rise – is to transfer the burden of tax from pensioners, landlords and others with unearned income to earners.
The proposed income tax cut will not apply in Scotland (a small caveat to this is that the income tax rate on savings will be cut to 19p UK-wide, since it is not devolved). Instead, the Scottish Government will, in 2024, receive an increase in its block grant which is broadly equivalent to the costs of a 1p reduction in the UK basic rate in Scotland.
The Scottish Government will be free to decide how to allocate this additional resource – whether that be through tax cuts of its own, or higher spending on public services. The politics of this will be interesting.
Summary
This was not the set of measures that many people had expected or hoped for. 2022 is set to see the biggest single-year fall in real household disposable income since records began in the late 1950s, according to the OBR.
The main policy measures announced today for 2022 were the 5p fuel duty cut, which will make little difference to the households most exposed to the crisis; and the rise in the NICs thresholds, which ensures that the government’s tax rise will not add to the cost of living burden this year for most earners.
These policies of course have to be seen alongside February’s £9bn package – which included the £150 grants to households in council tax bands A-D, and a £200 reduction in energy bills in 2022 (repayable in future years).
In combination, the announcements in February and March equate to some £17.6bn of support for household incomes in 2022/23. This includes £3bn on grants via council tax, £2.4bn through fuel duty cuts, £6.3bn through raising the primary NICs threshold, and £6bn of direct support for energy bills which is recouped in the subsequent five years.
On one level this is a generous package of support. But it has to be seen within the context of an substantial and sudden shock to living standards. The government is in a better position to smooth the impacts of this shock that individual households, particularly those on the lowest incomes.
But across the two announcements, there has been no targeted support to the lowest income households. As a result, benefits are set to rise 3.1% in April, against a forecast inflation rate in 2022 of 7.4% – a real terms cut in benefits of 4% (or more, when we factor in low income households higher proportionate spending on energy and food).
This outcome could have been avoided relatively costlessly by adapting standard benefit uprating rules. There is certainly no sense in which such a measure could not have been ‘afforded’, even within the Chancellor’s own fiscal rules.
There was also no extra spending on public services. This means that the cash allocations set out in last year’s Spending Review are now worth less in real terms. Public departments face rising costs of energy too, and meeting these costs within existing budgets will mean less for other things.
Rishi Sunak is rapidly repainting the image he carved for himself during the pandemic. Gone is the priority to ‘do whatever it takes’. It is replaced by a reiteration of his desire to meet his own fiscal rules, whilst pencilling in a flagship cut to income tax.
The political calculation is that the promise of tax cuts and fiscal prudence will appeal to the core elements of the electoral base.
But this may yet prove a risky strategy. In the meantime, 2022 is set to be an extremely tough year for many households.
In his Spring Statement, the Chancellor promised to support families through the cost of living crisis today, and to cut their taxes in the future. But his failure to deliver on both of these means that absolute poverty is expected to rise by 1.3 million people next year, while only one-in-eight workers will see actually see their tax bills fall by the end of the parliament, according to the Resolution Foundation’s overnight analysis of Spring Statement 2022 today.
Inflation Nation shows that faced with an unprecedented squeeze on family’s household finances and a significant boost to the public finances, the Chancellor opted for a big but poorly targeted policy package focused on partially offsetting some of the big tax rises he’d previously announced, rather than on supporting those families hit hardest by the cost of living crisis.
Key findings from the overnight analysis include:
Families face £1,100 income losses. The scale of the cost of living squeeze is such that typical working-age household incomes are to set to fall by 4 per cent in real-terms next year (2022-23), a loss of £1,100, while the largest falls will be among the poorest quarter of households where incomes are set to fall by 6 per cent.
Absolute poverty rises by 1.3 million. The scale and distribution of the cost of living squeeze, coupled with the lack of support for low-income families, means that a further 1.3 million people are set to fall into absolute poverty next year, including 500,000 children – the first time Britain has seen such a rise outside of recessions.
Tax rises for seven-in-eight workers. Considering all income tax changes to thresholds and rates announced by Rishi Sunak, only those earning between £49,100 and £50,300 will actually pay less income tax in 2024-25, and only those earning between £11,000 and £13,500 will pay less tax and National Insurance (NI). Of the 31 million people in work, around 27 million (seven-in-eight workers) will pay more in income tax and NI in 2024-25.
A £11,500 wage loss. With real wages in the midst of a third major fall in a little over a decade, average weekly earnings are on course to rise by just £18 a week between 2008 and 2027, compared to £240 a week had they continued on their pre-financial crisis path. This lost growth is equivalent to a £11,500 annual wage loss for the average worker.
A parliament of pain. Typical household incomes are forecast to fall by 2 per cent across the parliament as a whole (2019-20 to 2024-25), making this parliament the worst on record for living standards, beating the 1 per cent income fall over the course of the 2005-05 to 2010-11 parliament.
Rapid fiscal consolidation. The decision to bank much of the borrowing windfall set out by the OBR sees borrowing set to fall rapidly from 14.8 per cent of GDP in 2020-21 to 1.3 per cent of GDP in 2024-25 – lower than it was expected to reach pre-pandemic. This increases the Chancellor’s fiscal headroom at the end of the parliament from £18 billion to £28 billion, the equivalent of a further 4 to 5p cut in the basic rate of income tax.
Torsten Bell, Chief Executive of the Resolution Foundation, said:“In the face of a cost of living crisis that looks set to make this Parliament the worst on record for household incomes, the Chancellor came to the dispatch box yesterday promising support with the cost of living today, and tax cuts tomorrow. Significant measures were announced on both counts, but the policies do not measure up to the rhetoric.
“The decision not to target support at those hardest hit by rising prices will leave low-and-middle income households painfully exposed, with 1.3 million people, including half a million children, set to fall below the poverty line this coming year.
“And despite the eye-catching 1p cut to income tax, the reality is that the Chancellor’s tax changes mean that seven-in-eight workers will see their tax bills rise. Those tax rises mean the Chancellor is able to point to a swift fiscal consolidation and significant headroom against his fiscal rules.
“The big picture is that Rishi Sunak has prioritised rebuilding his tax-cutting credentials over supporting the low-to-middle income households who will be hardest hit from the surging cost of living, while also leaving himself fiscal flexibility in the years ahead. Whether that will be sustainable in the face of huge income falls to come remains to be seen.”
‘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.
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.
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.”
Chancellor expected to unveil Spring Statement that builds a stronger, more secure economy for the United Kingdom.
Rishi Sunak will set out further plans to support people with the rising cost of living and pledge to continue to “stand by” hard-working families during the challenging times ahead.
He will say that freedom and democracy remain the best route to peace, prosperity, and happiness and that a strong economy is fundamental in enabling us to counter the threat Russia poses to our values.
The Chancellor will today deliver a Spring Statement that ‘builds a stronger, more secure economy for the United Kingdom’.
With people across the UK facing growing pressures exacerbated by the war in Ukraine, Rishi Sunak will pledge to continue to “stand by” hard-working families and outline further plans to help with the rising cost of living.
Alongside Britain continuing its “unwavering” support to Ukraine, he will add that a stronger economy is vital in responding to the threat of President Putin and that freedom and democracy remain the best route to peace, prosperity, and happiness.
Delivering the Spring Statement, Chancellor Rishi Sunak is expected to say:“We will confront this challenge to our values not just in the arms and resources we send to Ukraine but in strengthening our economy here at home.
“So when I talk about security, yes – I mean responding to the war in Ukraine. But I also mean the security of a faster growing economy.
“The security of more resilient public finances. And security for working families as we help with the cost of living.”
The Chancellor’s statement is also expected to set out how the government plans to create a new culture of enterprise, with the private sector training more, investing more, and innovating more.
The Spring Statement will build on UK government support worth around £21 billion this year and next to help families with the cost of living.
That includes the £9.1 billion Energy Bills Rebate, putting an average of £1,000 more per year into the pockets of working families via changes to Universal Credit and freezing fuel and alcohol duties to keep costs down.
The Government is also raising the National Living Wage to £9.50 per hour from April, meaning people working full time on the National Living Wage will see a £1,000 increase in their annual earnings.
And the Government’s Plan for Jobs is also helping people into work and giving them the skills they need to progress – the best approach to managing the cost of living in the long term.
Bold action needed to tackle cost of living
The UK Government must take bold and decisive action to help protect people from soaring living costs, according to Holyrood Finance Secretary Kate Forbes.
Speaking ahead of the Spring Statement, Ms Forbes said the Chancellor of the Exchequer must use every tool available to provide support through what is expected to be a turbulent period of economic uncertainty.
Finance Secretary Kate Forbes said: “This is not a time to be ducking the considerable challenges we face, and I expect the Chancellor to use the Spring Statement to outline significant actions to support households and businesses, considering that most of the relevant powers are reserved to the UK Government.
“The Scottish Government is doing all it can to help those most in need. We are uprating eight Scottish benefits by 6% from 1 April as well as doubling our Scottish Child Payment to £20 per week per eligible child. I call again on the UK Government to follow our lead and uprate social security benefits by 6%.”
The Scottish Government has called on the Chancellor to:
increase benefits at a higher rate, closer to inflation
implement business relief on National Insurance contributions
provide immediate funding to sectors directly impacted by the Russia/Ukraine conflict
remove/reduce VAT on household energy bills
take VAT off energy efficient and zero emissions heat equipment and products
provide powers to implement flexible working, to get more people into jobs
deliver two extra Cold Weather Payments – one immediately and another in winter 2022-23 when energy bills will have risen again.
Commenting on today’s (Wednesday) inflation figures, which show CPI inflation rising to a 30-year high of 6.2% in February, TUC General Secretary Frances O’Grady said: “The Chancellor must respond to high inflation today with much greater help for families with soaring bills and a plan to get wages rising.
“Families need grants, not loans to help with soaring energy bills. These should be funded by a windfall tax on excess profits from gas and oil. Universal credit should get a boost to help families keep up with the rising cost of living.
“And we need a comprehensive plan to get wages rising, including new pay bargaining rights for workers and their unions.”
UP TO £660 PER YEAR COULD BE SLASHED FROM HOUSEHOLD INCOME
In a letter to the chancellor last week, the Bank of England stated that it expected inflation to be “around 8 per cent” this spring. With Universal Credit set to rise by just 3.1 per cent in April, families with children on universal credit now face a real-terms cut of around £660 per year, on average.
This is an increase on Child Poverty Action Group’s original analysis which showed a cut of £570, when inflation was expected to be 7.25 per cent.
The £20 cut to universal credit last October plunged out-of-work benefits to their lowest level in 30 years. Latest analysis shows that the picture for families is going from bad to worse.
Without government action, families will be pulled deeper into poverty. Increasing benefits by anything less than 8 per cent risks pushing those with already stretched budgets past breaking point.
Anti-poverty charities wrote to the Chancellor last weekcalling for a minimum 7% benefits rise:
Prices are rising at the fastest rate in 30 years, and energy bills alone are going to rise by 54% in April. We are all feeling the pinch but the soaring costs of essentials will hurt low-income families, whose budgets are already at breaking point, most.
There has long been a profound mismatch between what those with a low income have, and what they need to get by. Policies such as the benefit cap, the benefit freeze and deductions have left many struggling.
And although benefits will increase by 3.1% in April, inflation is projected to be 7.25% by then. This means a real-terms income cut just six months after the £20 per week cut to universal credit.
Child Poverty Action Group’s analysis shows families’ universal credit will fall in value by £570 per year, on average. The Joseph Rowntree Foundation has calculated that 400,000 people could be pulled into poverty by this real-terms cut to benefits.
The government must respond to the scale of the challenge. Prices are rising across the board. Families with children in poverty will face £35 per month in extra energy costs through spring and summer, even after the government’s council tax rebate scheme is factored in. These families also face £26 per month in additional food costs. The pressure isn’t going to ease: energy costs will rise again in October.
A second cut to benefits in six months is unthinkable. The government should increase benefits by at least 7% in April to match inflation, and ensure support for housing costs increases in line with rents. All those struggling, including families affected by the benefit cap, must feel the impact.
Much more is needed for levels of support to reflect what people need to get by, but we urge the government to use the spring statement on 23 March to stop this large gap widening even further. The people we support and represent are struggling, and budgets can’t stretch anymore.
Alison Garnham, Chief Executive, Child Poverty Action Group
Emma Revie, Chief Executive, The Trussell Trust
Graeme Cooke, Director of Evidence and Policy, Joseph Rowntree Foundation
Morgan Wild, Head of Policy, Citizens Advice
Dan Paskins, Director of UK Impact, Save the Children UK
Imran Hussain, Director of Policy and Campaigns, Action for Children
Thomas Lawson, Chief Executive, Turn2us
Sophie Corlett, Director of External Relations, Mind
Dr Dhananjayan Sriskandarajah, Chief Executive, Oxfam GB
Caroline Abrahams, Charity Director, Age UK
Eve Byrne, Director of Advocacy, Macmillan Cancer Support
Kamran Mallick, CEO, Disability Rights UK
Katherine Hill, Strategic Project Manager, 4in10 London’s Child Poverty Network
Karen Sweeney, Director of the Women’s Support Network, on behalf of the Women’s Regional Consortium, Northern Ireland
Satwat Rehman, CEO, One Parent Families Scotland
Mark Winstanley, Chief Executive, Rethink Mental Illness
James Taylor, Executive Director of Strategy, Impact and Social Change, Scope
Irene Audain MBE, Chief Executive Scottish, Out of School Care Network
Steve Douglas CBE, CEO, St Mungo’s
Richard Lane, Director of External Affairs, StepChange Debt Charity
Robert Palmer, Executive Director, Tax Justice
Claire Burns, Director, The Centre for Excellence for Children’s Care and Protection (CELCIS)
The Disability Benefits Consortium
Dr. Nick Owen MBE, CEO, The Mighty Creatives
Peter Kelly, Director, The Poverty Alliance
Elaine Downie, Co-ordinator, The Poverty Truth Community
Tim Morfin, Founder and Chief Executive, Transforming Lives for Good (TLG)
UCL Institute of Health Equity
Dr Mary-Ann Stephenson, Director, Women’s Budget Group
Natasha Finlayson OBE, Chief Executive, Working Chance
Claire Reindorp, CEO, Young Women’s Trust
Businesses in Scotland are also calling for the Chancellor to announce new measures to help with rising costs ahead of his Spring Statement tomorrow, according to a recent survey from Bank of Scotland.
As inflation hits the highest levels seen since 1992, over half (55%) of Scottish businesses said that direct help with energy bills and rising costs tops their wish list for the Chancellor. This was followed closely by calls for a reduction in VAT, cited by two-fifths (40%), while almost a quarter of firms (23%) want increased funding to help create new jobs and develop skills.
Rising prices remain a key challenge for business. Almost half (46%) of respondents said they are concerned about having to increase the costs of goods and services and over one in ten (14%) stated that inflation is reducing profitability. Almost one in ten (9%) said rising prices had caused them to worry about having to make staff redundant and a further one in ten (9%) were concerned about not being able to pay their bills.
To help specifically with rising prices Scottish businesses are asking the Chancellor for a VAT reduction (46%), while a third (35%) have called for grants to cover rising energy costs. A further quarter (23%) called for grants to support investment in energy saving measures.
The data comes as businesses face continuing supply chain challenges, which are reducing the availability of stock (40%), causing hikes in freight costs (39%) and disruption through Rules of Origin and VAT requirements from EU suppliers (33%).
Fraser Sime, regional director for Scotland at Bank of Scotland Commercial Banking, said:“Rising prices are causing multiple challenges for businesses across Scotland and the pressure from inflation shows no sign of abating in the near-term.
“As we wait for the Chancellor’s Spring Statement, we’ll continue to remain by the side of business in Scotland and support the country’s ongoing economic recovery from the pandemic.”
Responding to the ONS public sector finances statistics for FebruaryChancellor of the Exchequer, Rishi Sunak said:“The ongoing uncertainty caused by global shocks means it’s more important than ever to take a responsible approach to the public finances.
“With inflation and interest rates still on the rise, it’s crucial that we don’t allow debt to spiral and burden future generations with further debt.”
“Look at our record, we have supported people – and our fiscal rules mean we have helped households while also investing in the economy for the longer term.”
All will be revealed when the Chancellor delivers his Spring Statement (Budget) at Westminster tomorrow.
The Prime Minister and the Chancellor order new crackdown on cross-Whitehall waste to drive efficiency, effectiveness, and economy across government.
The drive will be spearheaded by a new Chancellor-chaired “Efficiency and Value for Money Committee” that will cut £5.5 billion worth of waste – with savings used to fund vital public services.
As part of the crackdown, the annual NHS efficiency target will be doubled to 2.2% and “quangos” will be expected to find at least £800m which will be pumped back into public services.
A CROSS-WHITEHALL efficiency crackdown to cut £5.5 billion of wasteful spending was announced by the Chancellor today (Sunday 20 March).
At the request of the Prime Minister, the Chancellor, Rishi Sunak will spearhead a new drive on efficiency, effectiveness and economy in government spending to ensure departments are delivering the highest quality services at the best value.
The crackdown will be driven by a new Chancellor-chaired Efficiency and Value for Money Committee that will ensure the 5% efficiency target set at the 2021 Spending Review is met across Whitehall and scrutinise strategies to prevent fraud and error. The move will save a total of £5.5 billion with the money being pumped directly back into vital public services.
As part of the renewed drive, the Chancellor said the NHS efficiency commitment will double to 2.2% a year – freeing up £4.75 billion to fund NHS priority areas over the next three years
These savings will be made through a range of programmes including the digitisation of diagnostic and front-line services, which has been shown to reduce cost per admission by up to 13%, improving the efficiency of surgical hubs and developing digital tools to cut time spend by NHS staff on admin tasks.
Surgical hubs improve efficiency by separating emergency and elective care, so more patients can be seen in a given amount of time, improving value for money without impacting patient safety.
This increased efficiency target will ensure that the record funding settlement of £188.9 billion a year by 2024-25 for the Department for Health and Social Care is delivering the best possible value for money for the taxpayer, the money saved will be used to fund front line NHS priorities.
Chancellor of the Exchequer, Rishi Sunak said: “During these challenging times it’s vital that every single penny of taxpayers hard-earned cash is being spent well.
“The current level of waste across government is simply not acceptable – which is why we’re doubling down on wasteful spending and launching an efficiency drive to make £5.5 billion worth of savings.
“That money will then be pumped directly into the world class public services that the British people deserve “
The crackdown will also see a review of Government Arm’s Length Bodies or “Quangos” who will be expected to save at least £800m from their budgets.
The Arm’s Length Body Review will see savings come from better use of property, reduced reliance on consultants, increased digitisation and greater use of shared services, as well as the use of benchmarking to drive efficiencies.
The Treasury will also launch a new Innovation Challenge to crowdsource ideas from civil servants on how government can reduce waste and improve public services, with winners selected this Summer and best ideas becoming Government policy
This new Committee comes ahead of the Chancellor’s Spring Statement on Wednesday (23rd March) where the Chancellor will update Parliament on his plan for the economy in response to the OBR’s latest economic forecasts.
The Covid Corporate Financing Facility, which provided a quick and cost-effective way to raise working capital for large firms, comes to an end with every penny repaid.
The Bank of England facility provided almost £38 billion of support to more than 100 of the UK’s biggest firms, and made a profit for the taxpayer whilst protecting millions of jobs.
Firms that employ almost 2.5 million people were directly supported including those in the car industry, travel, hospitality, and high street stores.
The Chancellor has hailed the success of a Covid scheme that provided almost £38 billion of support to some of the UK’s biggest employers during the pandemic, protecting millions of jobs whilst making a return for the taxpayer, as it comes to an end today.
Household names, such as Gatwick Airport, the Football Association and the National Trust, were among more than 100 of the UK’s biggest employers that benefitted from the Covid Corporate Financing Facility (CCFF). The scheme has recouped every penny that was lent – plus a profit of over £60 million.
Rishi Sunak said the Bank of England administered scheme, which was launched in March 2020 at the start of the pandemic, was another example of the government offering support at unprecedented speed to protect millions of jobs and taxpayer’s money simultaneously.
Chancellor Rishi Sunak said: “We not only took unprecedented action but did so at unprecedented speed to protect jobs and businesses throughout the pandemic.
“The CCFF scheme ensured that many of the UK’s biggest employers could continue to pay wages and suppliers, protecting millions of jobs – and on top of that every penny has been repaid.”
The final CCFF repayments were made today, with all companies paying back what they owed. The scheme has made a profit of over £60 million for the taxpayer because the rate of interest applied to the cash provided by the Bank of England was priced at rates comparable to the market before Covid. Companies therefore paid back a slightly larger amount at maturity compared to the finance they borrowed initially.
Peter Vermeulen, Chief Financial Officer at the National Trust, said: “The HM Treasury team did an amazing job during the height of the pandemic. The National Trust, like many other large organisations, experienced an unprecedented liquidity squeeze, accompanied by enormous levels of uncertainty around the future.
“The CCFF was set up swiftly and in a highly transparent manner. The team at HM Treasury issued clear guidance and worked tirelessly to support us with the application and the associated legalities.
“We cannot commend the team highly enough for the excellent work they have done. It was an essential lifeline for the National Trust and has safeguarded some of the essential work we do on cultural and natural heritage, for the Nation. Thank you.”
Mark Burrows, Chief Operating Officer at The Football Association, said: “The pandemic was a serious challenge for The FA. We were faced with huge losses from cancelled events and competition disruptions affecting our broadcasting rights.
“As a not-for-profit organisation that reinvests its surplus into grassroots football, being able to rely on the security of CCFF as a quick and cost-effective way to raise working capital meant we were able not only to continue to support our business, but grassroots football across the country.”
Through the purchasing of short-term corporate debt – known as commercial paper – the CCFF provided a quick and cost-effective way to raise working capital for companies who were fundamentally strong but were at risk of experiencing severe disruption to cashflows.
Because it lent directly to large companies, the scheme also provided banks with the space to lend to a wider population of firms who could have otherwise gone bust during the pandemic.
The scheme helped companies across a range of sectors including the car industry, travel, hospitality, and high street stores. It kept cash flowing and delivered on the government’s commitment to do everything it could to support the economy and protect jobs.
– Housebuilder supports 1,652 jobs, completes 732 new homes and 13.1ha of green space –
Barratt Developments Scotland, which includes Barratt Homes and David Wilson Homes, has made a substantial contribution of £256.3m to the Scottish economy, with the housebuilder’s East Scotland division supplying £106.9m in GVA itself.
In the year ending 30 June 2021, Barratt East Scotland has also completed 732 new homes of which 144 were affordable and supported 1,652 direct, indirect and induced jobs across the region.
2021 also saw the largest UK housebuilder reinforce its commitment to creating homes for nature as well as people. The business created 13.1ha of public green spaces and private gardens around the region, the equivalent of 19 football pitches, to help support wildlife on and around its sites.
Barratt is working towards reducing its direct carbon emissions by 29% by 2025 and indirect emissions by 24% per square metre by 2030. In the past year, CO2e emissions per 100m.sq. of completed build area fell to 2.25t. across the East Scotland business.
98% of construction waste was also saved from landfill and 26% of new homes were built on previously developed land, up 54% on the previous year.
Alison Condie, managing director for Barratt East Scotland, said:“As the UK’s largest housebuilder, and one of the most sustainable, we place considerable emphasis on supporting people, the environment and generating strong economic growth for the region.
“To have contributed over £106m to the economy and supported over 1,652 jobs is a fantastic achievement and we’re determined to do even better this year.”
As part of its housebuilding activity, Barratt East Scotland has made £5.4m in local contributions to help build new facilities and community infrastructure. This contribution includes the provision of 320 new school places.
More than £19.3m has also been spent on physical works within communities, such as highways, environmental improvements and community facilities.
Other key findings from the Barratt East Scotland 2021 socio-economic report include:
· Increased support for public services with £23.9m in generated tax revenues
· Over £36,400 donated to local charitable and community causes
· 284 supplier and 335 sub-contractor companies supported
· Increased support for the UK supply chain with 90% of all components centrally procured, assembled or manufactured in-country
· More than £10.7m in retail spending by new residents, helping support 114 retail and service-related jobs
The development of new and future talent remains a key priority for Barratt Developments Scotland and 53 graduates, apprentices and trainees launched their careers with the company in 2021, 15 from the East Scotland Division.
The assessment of Barratt Developments’ performance was carried out by independent consultants Lichfields, who analysed socio-economic impacts through the delivery chain for new housing based on Barratt datasets, published research and national statistics.
Mental Health Foundation calls for Scottish Government commitment to cost-effective prevention of poor mental health
Cost to UK economy is at least £117.9 billion, around 5 per cent of GDP
Mental health problems cost the Scottish economy at least £8.8 billion annually according to a new report published today by the Mental Health Foundation and London School of Economics and Political Science with support from the University of Strathclyde.
Almost three-quarters of the cost (72%) is due to the lost productivity of people living with mental health conditions and costs incurred by unpaid informal carers who take on a great deal of responsibility in providing mental health support in our communities.
To put the economic cost of mental ill-health in Scotland into context, the NHS Scotland operating budget for 2020/21 was around £15.3 billion.
The UK cost is at least £117.9 billion – equivalent to around 5 per cent of the GDP. Across the UK there were 10.3 million recorded instances of mental ill-health over a one-year period, and the third most common cause of disability was depression.
The report, ‘The economic case for investing in the prevention of mental health conditions in the UK’, makes the case for a prevention-based approach to mental health which would both improve mental wellbeing while reducing the economic costs of poor mental health.
Lee Knifton, Director of Mental Health Foundation in Scotland,said: “Our report reveals the opportunity we have to revolutionise our approach to mental health in Scotland.
“It’s time to increase investment in population-level prevention of mental health problems. We can’t only treat our way out of the mental health crisis, which is worsening due to the pandemic, and we cannot afford the spiralling costs to both people’s wellbeing and our economy.
“We urge the Scottish Government to pay attention to what the evidence is telling us and commit to prioritising prevention in mental health. A prevention-first approach will not only help break down the barriers to good mental health but empower people to thrive at every stage of their lives and boost our economy in the long run.”
Research gathered from the UK and internationally shows the potential public health and economic benefit of programmes that target and prevent mental health problems and empower more people to live well, for example, by addressing issues such as perinatal depression, bullying, and social isolation in older people.
Other well-evidenced initiatives include promoting positive parenting, rapid access to psychological and psychosocial supports for people with identified needs and building supportive and inclusive workplaces.
A growing number of studies report on the significant return on investment from parenting programmes. Methods and costs vary, but those assessed in this way cover a long-time frame and report positive returns of up to £15.80 in long-term savings for every £1 spent on delivering the programme.
Similarly, a review of workplace interventions found savings of £5 for every £1 invested in supporting mental health.
Lead author of the report, David McDaid, Associate Professional Research Fellow in Health Policy and Health Economics at London School of Economics, said: “Our estimate of the economic impacts of mental health conditions, much of which is felt well beyond the health and social care sector, is a conservative estimate.
“What is clear is that there is a sound economic case for investing in effective preventive measures, particularly at a time when population mental health may be especially vulnerable because of the COVID-19 pandemic.
“This requires further sustained and coordinated actions not only within the health and social care sector, but across the whole of government.”
The £8.8 billion costs to the Scottish economy is likely to be a significant underestimate of the true costs – based on the lack of data available around some key areas.
For example, health service costs are based on the number of people receiving treatment and do not consider the many people who would benefit from treatment but either does not receive it because of pressure on services or do not seek help.
Additionally, no costs are included for reduced performance at work due to mental health problems, costs to criminal justice and housing systems linked to poor mental health, costs associated with addiction issues, or the costs associated with self-harm and suicide.
A new National Strategy for Economic Transformation, underpinned by detailed analysis of Scotland’s economic strengths and weaknesses, has been published by the Scottish government.
The strategy contains over 70 actions across five key priority programmes that have been identified as having the greatest potential to deliver economic growth that significantly outperforms the last decade within the current constitutional arrangements.
Investment will be prioritised in entrepreneurialism, skills and retraining and the development of new markets and opportunities, particularly in the Just Transition to net zero.
Economy Secretary Kate Forbes says it provides renewed clarity on Scotland’s economic vision and a relentless focus on delivery in order to improve economic productivity, accelerate growth and ensure work provides a genuine route out of poverty through better quality jobs and higher wages.
A sixth programme marks a step-change in the way the Scottish Government and business listen to, support and work with each other in this national endeavour to transform the economy. Shaped by the Advisory Council and extensive engagement with stakeholders, this will enable government, business and key partners to work together to create a more prosperous, more productive and more internationally competitive economy.
The Economy Secretary launched the Strategy at the Michelin Scotland Innovation Parc in Dundee, a location which embodies the potential transformation that can be realised by bringing the six key programmes of action together.
Ms Forbes said: “This strategy intentionally focuses on five key priorities, within Scotland’s current powers, that we believe will deliver most impact. These are based on extensive data analysis which does not ignore the short or long term challenges and seeks to meet them head on.
“It does so by identifying our key strengths as a nation and the economic opportunities with the greatest potential for Scotland. Through our detailed analytical work we have identified significant and targeted action that can shift the dial in these areas, by doubling down on the work that is producing results and by working together to maximise our success.
“We must now be bold, ruthless and laser-focused to maximise the impact of the actions we have identified. We all know the challenges of our day – the short term and the long term – but through the tumultuous times of the past, Scotland has pioneered solutions, created jobs and established highly successful businesses. The opportunities of decarbonisation, new technologies and successful industries are far greater than the challenges.
“This is a unique moment and we are ready, willing and able to lead the way and ensure Scotland capitalises on the opportunity.”
Chief Executive Officer of Entrepreneurial Scotland Sean McGrath said: “This strategy is recognition of not just the importance of starting new businesses, but of building an entrepreneurial mindset across all types of organisations and at all levels.
“It shows a huge belief in the ability of our immensely talented workforce in Scotland. It also calls on everyone who wants to see Scotland succeed to take part. This only works if we all want it to.”
Chief Executive of Energy Transition Zone Ltd Maggie McGinlay said: “I believe energy transition has a key role to play in realising this ambition.
“Scotland has an immediate competitive advantage in that we are blessed with a vast array of natural assets that, if harnessed the right way, means we can become globally recognised for high-value manufacturing, research, development and deployment of offshore wind, green hydrogen and carbon capture and storage.
“The scale of the energy transition opportunity before us is huge and has the potential to contribute significantly to achieving true economic transformation for Scotland.”
Tracy Black, CBI Scotland Director, said:“Business will welcome the ambitions set out in the new ‘Economic Transformation Strategy’ as the right path for Scotland’s future economy.
“The Finance Secretary is also right to recognise the importance of delivery in turning high-level ambition into action – with business playing a vital role as a trusted partner.
“As firms across the country navigate rising living costs, ongoing shortages and spiralling business costs, they will want to see any new initiatives or investments bear fruit sooner rather than later.”
Environmentalists are calling for an urgent and inclusive national debate on economic transformation after the Scottish Government’s new strategy failed to show how it will achieve its own vision of wellbeing and ensuring a just transition to a zero-carbon economy.
The National Strategy for Economic Transformation ‘Delivering Economic Prosperity’ was launched today by the Cabinet Secretary Kate Forbes. She was supported by her Advisory Council which has previously been criticised for its lack of environmental and social justice expertise.
It comes the day after the latest UN IPCC report gave a stark reminder of the urgency of the climate crisis and the need to transform economies away from fossil fuels to avert its worst impacts.
Commenting on the Strategy, Matthew Crighton, Sustainable Economy Adviser at Friends of the Earth Scotland said: “This economic strategy has environmental sustainability and wellbeing in its vision, which is welcome, but there is a lack of concrete ideas as to how its good intentions will be delivered.
“Everyone recognises the need to be greener and fairer but without any realistic plan to achieve these changes they will remain aspirational daydreams.
“To deliver a just transition to zero carbon, the government has to assess and secure the investments needed in each part of our economy. It then needs to set out expectations for job creation and social benefits, how to measure them and who will deliver them.
“Instead, it seems happy just to point the boat forwards and hope that the fickle winds of the market economy will blow it in the right direction.
“The focus on economic growth and entrepreneurship fails to show how this approach can deliver on these wider social and environmental benefits. Instead we have a repeat of lots of the tired old ideas that have helped bring us the current state of inequality, environmental breakdown and economic insecurity.
“The Scottish Government clearly hasn’t understood the roots of these problems nor recognised the mistakes of previous plans. Perhaps this is because it hasn’t spoken to either environmental experts nor to people at the sharp end of our current economic system.”
Ahead of the strategy launch, the ‘Transform Our Economy’ alliance produced Ten Points for a Transformative Economic Strategy against which to judge the Government’s plans. These ideas were backed by 40 academics and outline a new purpose at the heart of our economy: providing wellbeing for all within environmental limits.
Crighton continued: “With our allies in the Transform Our Economy alliance, we prepared Ten Points to judge the new strategy, endorsed by 40 leading academics.
“Sadly the Scottish Government’s document gets poor marks against these, starting well with its overall vision but then failing, in particular on practical things like generating enough of the right investment streams, having clear tests for all finance and integrating new performance measures for decarbonisation and biodiversity into economic decisions.”
The document has also been criticised by the country’s leading trade unionist. Roz Foyer, STUC General Secretary who sat on the advisory group said: “Sadly, this is more a strategy for economic status quo than economic transformation.
“The National Strategy for Economic Transformation has a sprinkling of good ideas and we have successfully argued for some strong lines on the importance of Fair Work, decent pay and the role of trade unions, but overall, it is a missed opportunity to address the challenges before us and make real, transformational change.
“The main engine of the Scottish economy is the foundational economy. Unsurprisingly it is also the biggest employer. It encompasses transport, retail, energy generation, distribution and importantly education and public services.
“So, at the heart of the NSET should have been a strategy to increase pay and improve terms and conditions in these sectors. Investing in public services offers huge opportunity to support sustainable growth while tackling poverty and inequality.
“Over the coming years we face enormous challenges, none greater than the journey to net zero, a journey that must be carefully planned to ensure we create good, secure jobs that do not leave communities abandoned. Whilst the NSET talks about the potential for future development in the renewables and low carbon economy it fails to acknowledge previous failures or, more importantly, how we can learn from them and build a new industrial strategy.
“Scotland is not immune from global economic shocks, or the UK Government’s self-inflicted economic damage. Financialised capitalism embeds structural inequalities as evidenced by the escalating cost-of-living crisis.
“Addressing these structural inequalities is fundamental and it will certainly not be solved by prioritising becoming a ‘magnet for global private capital’ nor through the appointment of a ‘Chief Entrepreneurship Officer.’ Genuinely building new business start-ups is a good idea, flooding the economy with new start-ups, too many of which then fail, is not.
“The public sector has an enormous role to play in our economic transformation yet it is barely mentioned in the Scottish Government’s strategy. Neither is there any mention of tax – which is crucial to tackling inequality and raising revenue.
“Paying lip-service to community wealth building and the desire for a well-being economy will not deliver the change needed. If we are serious about economic transformation the Scottish Government must develop a green industrial strategy and invest in our public sector and the local authorities that make our vital services a reality.
“We will continue to engage with Scottish Government both on taking forward the more positive elements and aspirations of this strategy and to ensure the foundational economy is not left behind in Scotland’s economic future.”
