Having previously announced financial assistance to help with the growing cost of living crisis by way of, £150 reduction in council tax (for eligible households) and £200 towards energy bills (albeit repayable over 4 years), totalling £350 for households up and down the country. The Chancellor of the Exchequer announced further measures in his spring statement to help households which are already struggling.
Is what he has set out enough?
Firstly, we have to take out the announced reduction in the Basic Rate of Income Tax, from 20% to 19%, as this is to take effect from 2024, and who knows what the situation will be by then. It may be taken off the table or some other rise takes effect to compensate.
Rishi Sunak has increased the threshold of National Insurance from £9,568 to £12,570 from July. This according to the government will save a typical employee over £330 a year and will effect almost 30 million working people.
The 1.25 percentage point rise in National Insurance contributions to take effect from April 2022 means that the average worker will pay an extra £255 per year.
Fuel Duty has also been reduced by 5p per litre, a saving of £100 for the average car driver over the next 12 months.
So from July, the Exchequer has given the average worker a tax cut of only £75 per year and a Fuel Duty reduction of £100 in addition to the £350 towards the cost of living through Council Tax and Energy Bills.
With energy prices rising sharply and the cost of fuel having gone up exponentially, one has to ask whether the Chancellor has done enough.
The rise in the cost of living is much steeper;
- Average household energy bills are due to go up by about at least £600 per year
- Filling a tank with fuel for the average car going up by £520 (£20 x 26 occasions per year)
- Inflation set to rise to at least 7.4% (with food cost inflation being much higher)
The average UK household spends just over £5,000 per year on food, even a rise of 7.4% would mean an increase of nearly £400 per year
Just taking those basic factors alone would mean a rise in living costs, of over £1,500 per year. Which somewhat dwarfs todays tax and duty cuts.