March 23, 2022 5.54 pm

James Pinchbeck on the Spring Statement: Will it really bring sunnier days ahead?

Breaking down what’s relevant in the Spring Statement

By Partner, Streets Chartered Accountants

At a time of rising inflation and living costs, for many younger workers and households, it is something they will not have experienced in their lifetime and many will have listened to the Chancellor with baited breath for measures and support to ease the burden.

Whilst many were urging the Chancellor to use the Spring Statement to axe the health and care national insurance increase due to come in this April, few probably really thought he would and he didn’t. 

In terms of support for all households facing increased costs of living, he announced a 5p reduction per litre in the fuel duty levy from 6pm.

This will no doubt be welcomed by those reliant on their car for work, particularly those living and working in rural areas where alternative lower cost travel options are not always available.

Whilst we head towards the warmer months, few though will take their minds off increasing energy costs with the price cap hike due to come in from April.

The number of people who can benefit from the news of the removal of 5% VAT levied on the installation of renewable energy including heat pumps, solar and wind etc, will probably be limited and lagged in their benefit for most.

The Chancellor also announced an increase in the Household Support Scheme with a further £500m of support being available to local authorities to target assistance to those affected by energy price increases.

When it comes to managing rising energy costs for businesses, again the measures announced were limited in that they failed to address the issues currently faced.

Supply chain issues, labour shortages increasingly giving rise to price rises for consumers and energy price rises are all key contributors to overall price rises faced on goods, especially food and other key household items.

His help with energy costs for businesses was limited to removing business rates due on a range of green technology used to decarbonise buildings, including solar panels and batteries, whilst eligible heat networks will also receive 100% relief.

So looking at how the Chancellor sought to balance managing the economy, public debt and borrowing whilst seeking to promote growth and to help those, if not all, affected by rising living costs, what were the key announcements?

In the here and now, or at least to have a more immediate benefit was the announcement that the threshold at which National Insurance Contributions are levied will rise by £3,000 to £12,570 in line with the Income Tax Threshold.

The Chancellor declared that this represents a £300 tax cut for those who will benefit from the change from July 22.

This threshold increase is believed to benefit some 70% of the workforce and should help to mitigate the increase due to come with the new National Insurance health and care levy.

When it comes to help for businesses, the Chancellor served up a lukewarm helping of reheated announcements made previously with support around reductions in business rates, stating he would introduce reliefs a year earlier in April 22, through his Help to Grow initiatives and a continued focus around innovation through research and development tax reliefs.

He did however offer support to employers, from the 6th of April, through an increase in the Employment Allowance from £4,000 to £5,000. This allows smaller businesses to reduce their employers National Insurance contributions bills each year.

As his Statement came to an end, the Chancellor’s final announcement was on the proposed reduction in the basic rate of income tax from 20% to 19% before the end of this Parliament.

Perhaps with a sense that this Statement was one based either on government seemingly becoming a little jaded, running out of steam, or facing the challenges of dealing more and more with issues in the here and now as opposed taking a more longer-term perspective.

With recent media coverage we might be forgiven for thinking that it was a statement that marks the start of a government laying the foundation and making preparations for a general election, perhaps even as early as next year.  

James Pinchbeck is Partner at Streets Chartered Accountants, a top 40 UK accountancy practice. James, as a specialist in marketing professional services, is responsible for the development and implementation of the firm's strategic marketing as well as its engagement in the community it which it works and serves. His role allows him to capitalise on his broad interest in the national and local economy as well as his passion for enterprise. As part of his wider interest in enterprise, marketing and education, James is a board member of NBV – the East Midlands Enterprise Agency, an FE College Governor and a board member of the University of Lincoln’s Business School. He is also an Institute of Director’s past Branch Chairman.