Rishi Sunak has warned the invasion of Ukraine “presents a risk to our recovery” as he promised to provide “security for working families” with a new “Tax Plan” at the Spring Statement.
The Chancellor promised to reduce income tax before the next election, announced a 5p cut to fuel duty and unveiled an increase in the National Insurance threshold to help households cope with the living costs crisis. The National Insurance threshold will rise by £ 3,000, meaning workers can earn £ 12,570 without paying the tax.
Here are all the key points the Chancellor announced in Parliament today:
Cost of living
- The Chancellor vowed to cut the basic rate of income tax from 20p to 19p in the pound before the next election. He said the tax cut would cost £ 5bn and benefit 30m people.
- Mr Sunak announced that fuel duty will be cut by 5p per liter from 57.95p with the reduction lasting for 12 months.
- He also raised the National Insurance threshold by £ 3,000, meaning workers can earn £ 12,570 without paying the tax. The Chancellor said it was a £ 6bn tax cut, worth over £ 330 per year for employees.
- Mr Sunak unveiled a new “Tax Plan” that will aim to help families with living costs, create the conditions for higher growth and share the benefits of growth fairly.
- The household support fund was doubled to £ 1bn with local authorities delivering the extra £ 500m from April.
- The Chancellor has already announced a £ 9bn package to help families with their energy bills. Around 80pc of households will receive a £ 150 council tax rebate while Britons will also get £ 200 off their energy bills in October. However, the latter will be paid back over time.
- The Office for Budget Responsibility has delivered a mixed set of forecasts for the Chancellor.
- The OBR downgraded its growth forecasts for the UK economy as soaring living costs and the Ukraine crisis dampen the outlook. Growth is set to slow to 3.8pc in 2022 and 1.8pc next year, sharply down from previous predictions of 6pc and 2.1pc, respectively.
- Inflation is expected to average 7.4pc this year, much higher than previous estimates. However, unemployment will be lower and has already fallen to 3.9pc.
- While government borrowing for 2021/22 was better than expected at £ 127bn compared to its previous prediction of £ 183bn, it lifted its deficit forecast for next year. Borrowing is expected to fall to £ 99bn in 2022/23 but this is higher than the £ 83bn predicted at October’s Budget.
- Borrowing as a percentage of GDP will be 5.4pc this year and 3.9pc next year with the Chancellor still on course to hit his fiscal rules. Debt interest costs will be the highest on record at £ 83bn in 2022/23.
- Underlying debt as a share of GDP will fall from 83.5pc in 2022/23 to 79.8pc in 2026/27.
- The Chancellor pledged to cut taxes on business investment when the “Super Deduction” ends next year while research and development tax credits will be reformed.
- The Employment Allowance will increase by £ 1,000 to £ 5,000, making it cheaper for firms to hire workers.
- Homeowners installing energy saving materials, such as heat pumps and solar panels, will no longer pay 5pc VAT.