Spring Statement 2022 – what could be in it and why does it matter?

What exactly is the Spring Statement and why should we care about it?

Spring Statement 2022 is when the Chancellor provides an economic update for the nation.

Beforehand the OBR (Office for Budget Responsibility) will publish its latest predictions on economic growth, inflation, debt and borrowing, which the Chancellor will respond to.

It’s not quite the same as the Budget, which has been shifted to October and is when the Chancellor is supposed to make all his big major tax and spending changes.

Instead, it’s more helpful to see this as a mini-Budget, in which he tells us how the economy is getting on and what we can expect in the coming months.

He might announce consultations into various issues, and he may also tweak or extend policies that have already been announced. This is also the time when smaller spending packages may be announced. That’s not to say the Spring Statement isn’t important, or that we shouldn’t pay attention to it – the last two Spring Statements contained important information and updates about the economic rescue deals we saw during the pandemic like furlough.

So it’s not out of the question that he might use this statement to announce some new emergency measures to help address the cost of living crisis. These could include the following…

💡Tweaks to the energy aid package?

The Chancellor is under enormous pressure to address the cost of living crisis. He has already announced a council tax rebate and energy loan scheme to help most households cope with rising energy bills.

But critics say this won’t really make that much of a difference if the energy rate cap really does go up to £3000 in the Autumn.

The energy loan scheme is particularly controversial because it’s based on the assumption that people will be able to pay the money back next year when bills are falling, but the conflict in Ukraine means this is far from guaranteed.

Could we see the chancellor tweak the scheme in some way, either increasing the sums or pushing back the repayment date? It’s extremely unlikely at this stage that the Chancellor will scrap the scheme altogether in favour of something different, but we could see additional sums being pledged to ensure the various schemes are automated (something National Energy Action wants). Alternatively, the Chancellor may take a wait-and-see attitude – by October, the Ukrainian situation might have calmed down, if so, the rate rise won’t be as high as people expect.

⛽Cuts to fuel duty?

Fuel duty could be temporarily scrapped to help households manage rising prices at the pumps. Rishi Sunak refused to rule this out when appearing on the Sunday political shows, with newspapers speculating that fuel duty could be cut by 5p.

🧾A u-turn on National Insurance?

The Chancellor also being pushed to delay the national insurance rise that comes in for most employed and self-employed workers from April onwards.

This is partly because recent stats show much higher tax revenues than expected from freezing the income tax threshold, rather than letting it rise with inflation, which is soaring at the moment.

That’s raising £12.5bn for the exchequer so it could give him wiggle room to postpone the NI increase until next year, when household budgets may be less squeezed.

In my opinion, if the Chancellor was to try and ease the tax burden, it is much more likely that he’d postpone the NI increase rather than address stealth tax rises, which aren’t noticed in the same way and are a huge revenue raiser.

Or perhaps the weekend papers are right, and the Chancellor will raise the threshold at which people will start paying higher NI to avoid this new tax falling on the lowest-income workers. One to look out for.

🪙A boost to benefits and the state pension?

Several charities and organisations are calling for the chancellor to raise benefit levels and the state pension by more than 3.1% in April, if inflation really will hit 7% or more, to avoid a steep rise in poverty this year. The Resolution Foundation says this would make far more of a difference than scrapping the NI hike.

The chancellor could announce some more money for vulnerable groups while inflation remains high, perhaps by extending and boosting the Household Support Fund, a national pot of money provided for local councils to dish out to those who need it most.

👩‍⚕️Public-sector pay rises?

Will the Chancellor announce a further boost to public sector pay? The IFS (Institute for Fiscal Studies) says nurses, teachers and other PS workers will see a pay cut in real terms if pay rises don’t at least match inflation. But the chancellor has said he would have to rein in spending elsewhere if he were to make that commitment, something the IFS also agrees with.

👵Help for the OVER-50S?

Unemployment among the over-50s is becoming a real problem post-furlough – the Chancellor may announce some new get-to-work scheme to help older workers find jobs again.

Day-to-day, how is all this going to affect me?

The key thing to look out for is that all-important inflation figure – how high will it be? What goods are most likely to be affected by it? And will your pay and benefits keep up with it? Do an inflation audit now if you haven’t already.

Also, note the national insurance rise as well as the stealth taxes. How much of your real take-home pay will be cut if these are maintained? Do the maths and budget accordingly.

Finally, make sure that you’re not missing out on universal credit or pension credit because if the government is going to announce more targeted measures, they will be concentrated on these groups. Check out Turn 2 Us. 

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