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Chancellor Delivers Spring Statement

24 March 2022 • Sarah Medcraf

Chancellor Delivers Spring Statement

Chancellor Rishi Sunak has unveiled the contents of his Spring Statement in the House of Commons.

He had been under pressure to help households with the cost of living squeeze, with prices rising 6.2% in the 12 months to February - the fastest for 30 years.

The chancellor announced he would cut fuel duty, raise the threshold at which people start paying National Insurance, and pledged to cut the basic rate of income tax before the next general election.

State of the economy and public finances

  • The UK economy is forecast to grow by 3.8% this year, according to the Office for Budget Responsibility, a sharp cut from its previous prediction of 6.0%
  • The economy is then forecast to grow by 1.8% in 2023, 2.1% in 2024, 1.8% in 2025 and 1.7% in 2026
  • The unemployment rate is now predicted to be lower over the next few years than in the OBR's previous forecast in October
  • Debt as a percentage of GDP is expected to fall from 83.5% of GDP in 2022/23 to 79.8% in 2026/27
  • The UK government is forecast to spend £83bn on debt interest in the next financial year, the highest on record

Fuel, energy and living costs

  • Fuel duty will be cut by 5p per litre until March 2023
  • Homeowners installing energy efficiency materials such as solar panels, heat pumps, or insulation will see VAT cut on these items from 5% to zero for five years
  • Local authorities will get another £500m for the Household Support Fund from April, creating a £1bn fund to help vulnerable households with rising living costs

Taxation

  • The income threshold for at which point people start paying National Insurance will rise to £12,570 in July, which Mr Sunak said was tax cut for employees worth over £330 a year
  • Mr Sunak pledged to cut basic rate of income tax from 20p to 19p in the pound before the end of this Parliament
  • The Employment Allowance, which gives relief to smaller businesses' National Insurance payments, will increase from £4,000 to £5,000 from April

Commenting on the Chancellor’s Spring Statement, a spokesperson for the Scottish Chambers of Commerce said:

“With inflation running at a 30-year-high businesses wanted to see the Chancellor take real action to tackle the escalating cost of doing business crisis.

“Whilst there were various measures for businesses to welcome in the spring statement including the 5p cut to fuel duty and the increase in the National Insurance threshold, the Chancellor should have gone further to help Scotland’s businesses recover.

“A delay to the imminent National Insurance rise and the introduction of a temporary or permanent energy price cap for micro, small and medium sized enterprises would have helped businesses to expand and grow as they get back on their feet following the impact of the Covid-19 pandemic.

“The economic environment facing Scotland’s businesses remains challenging and it’s essential that government in Westminster and Holyrood do everything they can to tackle inflation and rising cost pressures to help drive a strong economic recovery.”

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