In his Spring Statement speech, Chancellor Rishi Sunak responded to the latest forecasts as published by the Office for Budget Responsibility (OBR).

The OBR forecasts UK economic growth to be 3.8% in 2022, a significant cut from its previous prediction of 6.0%. The OBR then predicts the economy to grow by 1.8% in 2023 and 2.1% in 2024.

Meanwhile, borrowing is set to more than halve from its post-World War II high of £322 billion (15.0% of GDP) in 2020/21 to £128 billion (5.4% of GDP) in 2021/22.

Borrowing is then predicted to be £16 billion higher in 2022/23 than previously forecast in October.

In its latest forecast, the OBR said that Russia’s invasion of Ukraine has had ‘major repercussions for the global economy‘, which has already been severely impacted by the coronavirus (COVID-19) pandemic and rising inflation.

The significant rise in gas and oil prices since the start of the conflict will ‘weigh heavily on a UK economy that has only just recovered its pre-pandemic level‘, the OBR said.

In regard to rising levels of inflation, the public body said that real living standards are set to fall by 2.2% in 2022/23 and not recover to their pre-pandemic level until 2024/25.

Internet link: OBR website

Chancellor Rishi Sunak announced a 5p per litre cut in fuel duty for petrol and diesel in the 2022 Spring Statement.

The government says it is the largest ever cut on all fuel duty rates, which applies from 6pm on 23 March 2022.

The Chancellor also announced that the starting thresholds for national insurance contributions (NICs) will rise to £12,570.

From 6 July 2022 employees earning between £242 (£190 from 6 April to 5 July 2022) and £967 per week will pay NICs at 13.25%. Earnings over £967 will attract a 3.25% charge. Employers will pay 15.05% on their employees’ earnings over £175 per week.

Although employees’ NICs only become payable once earnings exceed £242 per week, any earnings between £123 and £242 per week protect an entitlement to basic state retirement benefits without incurring a liability to NICs.

For the self-employed, where their profits exceed £11,908 per annum, they will pay 10.25% on the profits up to £50,270 and 3.25% on profits over that upper profits limit.

However, from April 2022, there will be a temporary increase in the rates of NICs payable for employees, employers and the self-employed as a transitional provision in readiness for the introduction of the Health and Social Care Levy from April 2023.

Mr Sunak also pledged that the basic rate of income tax will be cut by 1p in the pound in April 2024. By then the Chancellor said that the Office for Budget Responsibility (OBR) expects inflation to be back under control, with debt falling sustainably.

From April 2022, a £1,000 increase to the Employment Allowance will benefit SMEs, while there will be no business rates due on a range of green technology used to decarbonise buildings.

In addition, the Chancellor announced 50% business rates relief for eligible retail, hospitality, and leisure properties.

In his Spring Statement speech, the Chancellor said:

‘This statement puts billions back into the pockets of people across the UK and delivers the biggest net cut to personal taxes in over a quarter of a century.

‘Cutting taxes means people have immediate help with the rising cost of living, businesses have better conditions to invest and grow tomorrow, and people keep more of what they earn for years to come.’

Internet links: GOV.UK

The UK’s business groups gave a mixed response to Chancellor Rishi Sunak’s Spring Statement speech.

Shevaun Haviland, Director General of the British Chambers of Commerce (BCC), said:

‘The Spring Statement falls short of the action businesses needed to see. While there are some positive announcements that firms will welcome, it did not fundamentally address the huge cost pressures they are facing.’

The Confederation of British Industry (CBI) warned that the measures announced by the Chancellor ‘don’t do enough to tackle the current challenges facing firms’.

Tony Danker, Director General of the CBI, said:

‘The Chancellor is right that the government can’t solve every challenge. However, the only enduring response to inflation, energy prices and cost of living challenges is a relentless campaign for economic growth.’

Meanwhile, the Federation of Small Businesses (FSB) said that it was pleased to see the Chancellor adopt its recommendation of uprating the Employment Allowance to help small employers with national insurance costs.

Martin McTague, National Chair of the FSB, said:

‘We originally put forward the Employment Allowance as a targeted measure to help small firms, and it has now been expanded three times since its creation.

‘Together with a cut to fuel duty, these measures will provide crucial breathing space for our embattled small employers.’

Internet links: BCC website CBI website FSB website

Against a backdrop of rising inflation, Chancellor Rishi Sunak presented his first Spring Statement on Wednesday 23 March 2022.

In his Spring Statement, the Chancellor announced a cut in fuel duty for petrol and diesel as he sought to ease the impact of rising prices for households and businesses.

The Chancellor will lift the starting thresholds for National Insurance contributions (NICs). He also pledged a cut to income tax in 2024. However, the Health and Social Care Levy will still be implemented in April 2022.

For businesses, there is an increase to the Employment Allowance, as well as relief from business rates on a range of green technologies and help with training and the adoption of digital technology.

Click here to read our summary of the Spring Statement 2022.

The Chancellor must act at the Spring Statement or risk the UK economy drifting backwards to low growth, warns the Confederation of British Industry (CBI).

The Spring Statement will take place on 23 March 2022. The CBI has set out a range of policies it says are aimed at sparking growth via business investment.

These include a permanent investment incentive to replace the super-deduction. The business group says this will boost business investment by £40 billion a year by 2026.

It also wants to see the Apprenticeship Levy turned into a Skills Challenge Fund. In addition, the government should tackle high energy prices by improving home energy efficiency through new grants for decarbonised heating systems.

CBI Director General Tony Danker said:

‘Business backs the Chancellor’s desire to foster a renewed culture of enterprise and deliver a more ambitious growth rate. His vision set out only last week to leverage the tax and regulatory system to promote business investment, upskill Britain’s workforce and stimulate innovation is the right recipe for future success.

‘Faced with a record tax burden, a cost-of-living crisis, wage pressures and the end of the super-deduction, firms will be looking to the Spring Statement for a clear signal that the government’s ambition will be matched by action.

‘That is the time to act if we want to push the economy onto a higher growth trajectory. It takes time for policies to kick in and deliver results, so there’s no point in waiting until an Autumn Budget.’

Internet links: CBI website  GOV.UK