Chancellor Rishi Sunak delivered the spring budget statement today at 12:30 pm.
He began by addressing the current war in Ukraine, praising the bravery of the Ukrainian public. The Chancellor followed this by saying it is the “strength of our economy” that underpins UK security.
Mr Sunak admitted it is “too early to know the full impact” of the Russian invasion of Ukraine on the UK economy. But still believes the economy is still set to increase by 3.8% this year. With the further forecasted growth:
- 1.8% in 2023
- 2.1% in 2024
- 1.8% in 2025
- 1.7& in 2026
Although an announcement with an immediate effect on the British public is that the fuel duty will be cut by 5p per litre from 6 pm this evening, 23rd of March 2022, and will remain for the next 12 months, until March 2023.
VAT on Energy-Efficient Products
The following major announcement from the Chancellor is to cut the VAT on energy-efficient products. The EU previously set the VAT rulings.
The Chancellor has announced he will be cutting VAT on energy-efficient products to zero, saying “energy efficiency will make a big difference to bills.”
Sunak says the typical family with energy-efficient products could save £1,000 on installation and £300 on annual energy bills.
Household Support Fund
Sunak’s third announcement is a cash boost for the Government’s existing Household Support Fund.
The Chancellor says an additional £500million will be pumped into the fund, taking its overall value to £1billion.
It will be up to local authorities to distribute the extra money handed over from next month.
Sunak then revealed that the underlying debt is on course to fall steadily from 83.5 per cent of GDP in 2022/23 to 79.8 per cent in 2026/27.
Sunak says borrowing will fall from 5.4 per cent as a percentage of GDP this year to 3.9 per cent next year and 1.9 per cent in the year after that.
Although the Chancellor did warn, “We should be prepared for the economy and public finances to worsen, potentially significantly.”
National Insurance Threshold
For the following announcement, the Chancellor changed from what he previously stated in 2020. In 2020 Sunak increased the threshold at which people start paying NICs to £9,500.
The Government had planned to increase it by £300 this year, but Sunak announced he is going much further. Saying he is raising the threshold by £3,000 to deliver “our promise to fully equalise the NICs and income tax thresholds”.
Meaning that people will not pay a “single penny of income tax or National Insurance” on the first £12,570 they earn from July this year.
The Chancellors Conclusion
The Chancellor concluded his address by saying:
“Last year I told the House I would cut taxes for hardworking families but I would do so in a responsible and sustainable way.
‘Today I am delivering on that promise. So let me say this: cutting taxes is not easy, it requires hard work, prioritisation and the willingness to make difficult and often unpopular arguments elsewhere.
“It is only because this Government has been prepared to make those difficult but responsible choices to fix our public finances that I can stand here and tell this House that not only are taxes being cut but that debt is also falling while public spending is increasing. This doesn’t happen by accident.”