On 23 March, the Chancellor delivered his Spring Statement against a backdrop of increasingly rising living costs. The statement focussed on two key areas: foreign policy security and economic security.
Chancellor’s Spring Statement & OBR Forecasts March 2022
The Office for Budget Responsibility also published its Economic and Fiscal Outlook.
The Chancellor gave a stark warning to the public, saying that the economy and public finances will likely worsen “significantly” and that the OBR outlook has not accounted for the full impacts of the war in Ukraine.
Chancellor's Economic Announcements
- Funding for councils to support vulnerable households will be doubled to £1 billion from April;
- Fuel duty will be cut by 5p per litre for the next 12 months;
- VAT will be scrapped for green energy homeowners (installation of heat pumps, insulation & solar panels) for the next 5 years;
- The National Insurance threshold will be rased by £3,000 to £12,570 meaning from July, people will not have to pay National Insurance or income tax before earning £12,570.
- Details of the Government’s new tax plan will be set out later this year at the Autumn budget;
- The Employment Allowance has been increased to £5,000 for small businesses;
- Employment training in private sector businesses will be reviewed including the impact of the apprenticeship levy;
- Government has pledged to reform tax gredits for private sector investment on research adn development;
- Government will set our potential policy changes to cut tax rates on business investment which will be set out later this year for when the super-deduction ends in 2023;
- Government is bringing forward an exemption on business rates for green technology.
“Whilst the widespread support that the Government has provided to the retail and hospitality industries over the last two years has been vital for their survival, rising operating costs and inflation could hamper progress and threaten business recovery. We will continue to campaign Government to ensure that the potential policy changes to cut tax rates include critical investment for city centre businesses, such as public realm developments, ahead of the Autumn budget.”
Office for Budget Responsibility Forecasts:
- The OBR forecasts the economy will grow by 3.8% in 2022 – compared to 6% predicted at time of the Budget last October;
- The economy is then forecast to grow by 1.8% in 2023 and 2.1% in 2024;
- The annual inflation rate was 6.2% in February, and is likely to average 7.4% for the rest of this year;
- The unemployment rate, which is currently at 3.9%, is now predicted to be lower, in every year of the forecast;
- Borrowing as a percentage of GDP is expected to fall from 83.5% of GDP in 2022/23 to 79.8% in 2026/27;
- The government is forecast to spend £83bn on debt interest in the next financial year, the highest on record.
“In the meantime, to support the recovery and growth of city centre businesses, we are continuing to urge Government to reconsider the removal of tax-free shopping, relax Sunday Trading laws, and make it easier for tourists to visit our shores by streamlining the visa process. The return of high-spending international visitors to the high street, who have been absent for far too long, is also one of the most important changes that can be made to tackle rising costs. Only with the removal of these unnecessary hurdles can viable retail and hospitality businesses across the country thrive once again.”