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Chancellor Rishi Sunak delivered his Spring mini-budget yesterday afternoon

   News / 24 Mar 2022

Published: 24 March 2022
Location: London, UK

By Suzanne Evans, Director, Political Insight

Chancellor Rishi Sunak delivered his Spring mini-budget yesterday afternoon, against a backdrop of sharply rising inflation which he said the Office for Budget Responsibility (OBR) expects to peak at 9% by the end of the year, averaging 7.4% over the 12-month period. Saying that households consequently face an “unprecedented fall in living standards,” his response to help them was to announce:

  • A 5p fuel duty cut
  • A rise in the National Insurance (NI) threshold of £3,000 £12,570 from July, which he said was “a £6 billion personal tax cut for 30 million people across the United Kingdom, a tax cut for employees worth over £330 a year”
  • An increase in the employment allowance for small businesses, meaning they can reduce their NI bills by up to £5,000 per year
  • VAT will be removed from energy saving materials such as solar panels, heat pumps and insulation for the next five years
  • Green technology will be exempted from business rates from April, saving firms £35 million in 2022/23
  • The Household Support Fund will be doubled to £1 billion “to do more to help our most vulnerable households with rising costs,” with local authorities receiving the funding from April
  • The level at which student loans are paid back is to be frozen, generating an additional £33bn for the Treasury
  • A pledge to drop the basic rate of income tax to 19p by 2024.

MPs and financial analysts said the latter announcement was an overt political move to appear as a tax-cutting Chancellor before the next election, and that in any case this cut will be dwarfed by the amount of tax that the Chancellor raised through the freeze on income tax thresholds that takes effect next month, and the 1.25% hike in National Insurance that the Chancellor is pressing ahead with to fund social care despite sustained opposition. “Overall, his spring statement means an increase in the tax burden,” the Independentsaid. The Resolution Foundation think tank warned only one-third of the £6bn cost of the rise in the NI threshold will go to the poorest half of earners. The Chancellor has already made changes to Universal Credit to help 1.7 million households keep an extra £1,000. However, payments of state pension, universal credit and other benefits will rise by just 3.1% next month, far below inflation.
A 12.5% rate of VAT for hospitality businesses, introduced to help post-pandemic recovery,  was not extended, to the dismay of the hospitality and brewing sectors. Energy intensive industries were also left disappointed by Sunak’s failure to take any further action to reduce gas and electricity bills.
London stocks turned negative after the Spring Statement, Investment house Hargreaves Landsdowne said it “left many market watchers disappointed.” The FTSE 100 ended the session down 0.22% at 7,460.63, and the FTSE 250was off 0.52% at 21,001.62.
A quicker than expected uptake of electric vehicles means the Treasury will receive £2.1 billion less in tax receipts per year by 2026 than was previously calculated. As well as not requiring petrol or diesel, electric cars are exempt from many taxes including vehicle excise duty, and vehicle tax in cars where the electricity comes from an electric storage battery or external source. The Treasury will lose £600 million in tax next year compared to the estimate by the Office for Budget Responsibility at Rishi Sunak’s Budget in October 2021. The public purse will then lose £1.4 billion, £1.8 billion, £1.7 billion and £2.1 billion more than expected in the four years afterwards. There could be as many as 7.5 million electric vehicles on the roads in six years’ time, according to the same forecast.
The chief executive of P&O Ferries is to be quizzed by MPs on Thursday over the controversial sacking of nearly 800 workers without notice. Peter Hebblethwaite will appear before a joint hearing of the transport and business committees and is expected to face questions over the legality of the dismissals. Jesper Kristensen, of P&O owner DP World, will also be questioned. The Prime Minister said yesterday it appears to him that P&O Ferries has “broken the law”, telling the Commons that the Government will be “taking action”, and encouraging workers to do the same. Hebblethwaite meanwhile issued an apology for the decision to sack staff without notice, saying: “I want to say sorry to the people affected and their families for the impact it’s had on them, and also to the 2,200 people who still work for P&O and will have been asked a lot of difficult questions about this. Over the last week, I’ve been speaking face-to-face to seafarers and their partners. They’ve lost their jobs and there is anger and shock and I completely understand.” He insisted however that the firm “needed fundamental change” to stay “viable.” “All other routes led to the closure of P&O Ferries,” he added. “I wish there was another way and I’m sorry.”
Lloyds Banking Group has announced another 60 branch closures, blaming a lack of customers visiting in person for the move. The FTSE 100 firm said the closures would affect 24 Lloyds Bank branches, as well as 19 Bank of Scotland and 17 Halifax locations. The closures will take place between June and September and 124 jobs will be axed as a result.

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