Reflecting on the Spring Statement 2022

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Following on from Chancellor Rishi Sunak’s Spring Statement 2022, Richard Hallsworth shares his thoughts on some of the announcements included.

What exciting news was there in the spring statement?

That was the question I was asking myself as I read the detail behind the announcements by Rishi Sunak. Remembering the beauty of changes to Universal Credit announced in the Autumn Statement I was expecting something creative, something different.

What I did spot was interesting economics.

First, there was virtually nothing said about spending. With inflation where it is now, the headline grabbing extra funding for “this and that” announced six months ago is not valued the same today.

Second, the freezing of the personal allowance and other thresholds means that fiscal drag will increase revenue for the Treasury. In other words inflation and earnings growth push more people into higher tax brackets increasing the overall tax take.

Then there was something missing.

In the 2021 autumn statement the Chancellor used levers in the Universal Credit formula to help those on benefits. That was creative. Today there was nothing more. Despite all the talk of the biggest hit to household income since the mid 1950’s benefits will rise by just 3.1%. With inflation at around 6% that’s a big real income cut for the very poorest in our society. As Ian Mulheirn from the Tony Blair Institute said “the government flunked an opportunity to protect households on the lowest incomes”.

What about business?

Nothing much to see here, move along. I think that would be a fair conclusion to draw.

The increase in Employment Allowance will help the smallest employers and there are some gains for larger businesses with targeted support. The annual investment allowance limit remaining at £1m will also be popular amongst some business owners as will targeted rates relief.

There were promises of amendments to R&D and other capital taxes but no more detail at this point, maybe we wait until the autumn to hear more on this.

So my conclusion is that we should all move on quickly and look forward to paying slightly less for fuel thanks to the cut in fuel duty, five pence per litre for twelve months.

If you would like to discuss how the Spring Statement will impact you, please contact our team today.

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