Chancellor Rishi Sunak stood before Parliament today to outline the financial plans to keep the UK’s economy steady and help households with the rising cost of living.
Sunak opened his speech by acknowledging the devastating events in the Ukraine and paying tribute to the soldiers defending their country. The UK is providing Ukraine with significant military, humanitarian, and economic aid in their fight against Russia’s invasion but Sunak stated out ability to help is rooted in the strength of the UK economy, with the conflict presenting real “risks to our recovery” so soon following the heavy impact of COVID-19.
With inflation at its highest in 30 years, the OBR predicts it will continue to rise to 7.4% by the end of 2022. Many people watching were apprehensive of the measure Sunak would implement to ease households’ struggles with the rising costs of living.
The introduced measures are summarised as:
- 5p cut to fuel duty: the RAC state this equates to a saving of £3.30 on a tank for the standard 55-litres family vehicle. This will be action from 6:00pm tonight.
- In response to the energy and fuel crisis, homeowners will now pay 0% VAT on energy saving materials, such as solar panels and insulation.
- The government’s support fund for councils to support vulnerable households will be doubled to £1bn in April.
One of the most notable features of the Chancellor’s statement is the decision to raise the income threshold for how people can earn before they pay National Insurance. The £3000 rise allows people to earn £12,570 per annum before paying income tax or NI.
Sunak outlined intentions to review and assess private sector employment training, the apprenticeship levy, R&D tax credits, and tax rates on business investment to ensure they are fit for purpose. The government will be increasing the Employment Allowance to £5,000 in a fortnight as a relief for small businesses. There will also be a 50% discount in business rates for the retail, hospitality, and leisure sectors in an effort to combat the losses of multiple lockdowns and reduced tourism.
“For small businesses, the increase in the employment allowance is a helpful gesture but doesn’t tackle the bigger issues they currently face. Ultimately, the lifeline that was hoped for did not materialise. Late payments from suppliers are forcing small businesses to wait to receive and reinvest money that’s already earned and invoiced. The Small Business Index found the average payment to small businesses in January was 8.3 days later than the agreed terms – 2.3 days higher than in December. This is set to get worse and the government can do more to reduce the devastating effect of ‘unapproved debt’ on small business owners. The government must raise awareness of poor practices and hold businesses to account by making unapproved debt a compulsory part of a company’s annual reports. Small businesses have proven their resilience, but tackling late payments is more crucial than ever.” Alex von Schirmeister, UK MD of Xero
