The Chancellor presented two Budgets in 2021 in which he set out a great many details of the tax rates and rules that will apply until April 2026. The 2022 Spring Statement was expected to review the economic situation and adjust forecasts. It was not supposed to include anything significant about tax. Of course, things have changed dramatically since October: there is a war in Ukraine, energy prices are rising at a frightening pace and inflation has returned to levels last seen in the early 1990s. An announcement had already been made in February of measures to help people with fuel bills later in the year, and commentators were speculating how much more Mr Sunak might do now, with tax receipts running higher than forecast and the effect of inflation set to increase those receipts in the future. Most predicted he would do something, but many believed he would be cautious and leave significant changes for the next Budget.
In the event, his speech contained more on tax than was expected. He started with a temporary cut in fuel duty, expected to save the average motorist about £100 in the next year. Given the rate of increase in fuel prices, however, this will not even touch the sides. He went on to remove VAT from the installation of energy-saving materials in houses, which will save money for a very small number of people. Then he declared that he intended to implement a ‘tax plan’ going forward, with the overall aim of bringing taxes down year on year over the life of the Parliament, and started with a surprise: a rise in the National Insurance Contribution thresholds to apply in July 2022 which will mean that 70% of people will pay less NIC in spite of the introduction of the 1.25% increase that will apply from April. He went on to increase Employment Allowance, which is a relief from Employers’ NIC for small businesses, and to promise a cut in the basic rate of income tax from 20% to 19% in April 2024.
Press reaction to the statement which seems to reflect the mood of the majority is that the measures announced do not go far enough to help with the current and anticipated increase in the cost of living. A promised income tax cut of 1% to apply from 2024 does absolutely nothing to alleviate problems that many people are currently suffering. It is political posturing which goes down very badly at a time when serious action is needed immediately.
Download the full Spring Statement 2022 report