The Spring Statement is due this week with the Chancellor, Rishi Sunak, facing mounting pressure to slow down the rising costs of living.
As is customary we’ll be being drip-fed the details until Wednesday when the Statment is read to the House of Commons by Sunak at around lunchtime.
So far we’ve already seen reports that the Spring Statement could include a cut to fuel duty of 5p a litre.
Additionally, there have been reports that the Chancellor could raise the National Insurance threshold more than planned (it’s currently set to rise from £9,568 to £9.880).
Here’s the reaction so far to the upcoming statement.
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown:
“A fuel duty cut isn’t enough to ease the horrible squeeze on incomes this spring. Over the weekend, there were reports that the government’s line on easing the cost-of-living crisis softened. However, the Chancellor isn’t set to shower us with good news – it’s a drop in the ocean.
“There were reports of a 5p cut in fuel duty, which while a welcome change, would still leave the government making 80p a litre at the pumps. With the cost of unleaded at eye-watering highs, this isn’t going to be enough to stop people from having to make very difficult decisions about how and where they travel in future.
“The Chancellor has also refused to shelve the National Insurance hike, which is coming at the worst possible time for cash-strapped households.
“However, there’s the chance the government could raise the income level at which it becomes payable, lifting some lower earners out of paying the tax entirely. How many people this helps depends on just how far the threshold moves.
“Rishi Sunak has also hinted that there may be more help for those on lower incomes. This could mean changes to Universal Credit, which is set to rise just 3.1% at a time when inflation is forecast to be as high as 8%. However, it may simply include a fuel payment for some households rather than an across-the-board rise.
“We’re also likely to hear about the expansion of the Warm Home Discount to more people on low incomes and increased payments of £150. However, if there’s no change to the way this is funded, it will mean increasing energy bills for everyone else.
“At this stage, people will welcome any help at all in the desperate struggle to make ends meet. Unfortunately, the changes reported so far won’t be enough to make a profound difference to the challenge millions of people are set to face.”
Graham Cox, founder of the Bristol-based Self-Employed Mortgage Hub:
“There are three things the Chancellor should do. First, implement a windfall tax on the North Sea oil and gas companies.
“They are making enormous profits off the back of soaring energy prices, which could cost the average consumer £3,000 a year by late 2022. In these extraordinary times, when people are having to choose between heating or eating, a windfall tax is the obvious and right thing to do.
“Unsurprisingly, Rishi Sunak seems ideologically averse to the idea, but ideology isn’t going to keep people warm and fed next winter.
“Second, ban the purchase of UK properties by foreign investors unless they plan to reside in the UK full-time. And third, make it prohibitively expensive through higher stamp duty and/or capital gains tax to buy a second property or holiday home. It needs to be discouraged as it prices out local residents from having the chance to buy.”
Ed Rimmer, CEO of Bath-based SME finance provider, Time Finance:
“Fuel duty freezes and policies to tackle labour shortages and help mobilise global supply chains are a must for this week’s Spring Statement. A decision to reverse or delay the planned increase to National Insurance would give businesses some scope to increase wages to accommodate the cost of living crisis.
“But this alone would barely scratch the surface. Inflation is at a 30-year high, interest rates are rising and fuel and energy prices are soaring.
“This is enough to force some businesses to shut up shop, particularly those in manufacturing, construction, food and beverages, automotive, and farming and agriculture, who are suffering terribly from supply chain disruption. A long-term strategy to tackle labour shortages has been severely lacking from the Government.
“One of the largest pressure points for the Government is the rising cost of fuel and energy. This will have a widespread impact throughout 2022 but the consequences will be far greater than increased bills. Without financial aid, the economy will suffer as businesses find themselves unable to invest in new markets, new equipment and new skills.”
Lewis Shaw, founder of Mansfield-based independent mortgage broker, Shaw Financial Services:
“As Churchill remarked, never let a crisis go to waste. Rishi Sunak has a once-in-a-lifetime opportunity to alter the direction of our economy for the better.
“We need to cancel the National Insurance tax hike, impose a windfall tax on energy producers’ bumper profits and use quantitative easing (our tax revenues are above where we expected so we can afford to) to begin a green New Deal. This would mean new jobs and better pay.
“The jobs would be installing insulation to cut energy costs as more than 30% of UK houses are uninsulated at present. We also need more double glazing and heat pumps rather than gas boilers.
“On top of that, solar, wind, tidal and other new energy sources are required. The time for radical thinking is now. If Rishi doesn’t act, and dramatically so, then we’ve got a recession coming that will make the one that followed the Global Financial Crisis look like a walk in the park.”
Julia Kermode, founder at Nantwich-based IWork:
“Right now, it’s so bad that many people need a second job so that they can afford their first job. With petrol prices at a record high, reducing fuel duty is a must for the Chancellor, and a big win on many levels.
“Already overstretched families are struggling to survive spiralling cost of living increases and fuel prices mean that some can’t afford to commute to earn the money they need. Businesses are also suffering at the hands of rising costs, and reducing fuel duty will also help them at this critical time post-pandemic.
“Plus, delaying the proposed National Insurance increase would be another quick fix. Not only does it breach the Conservative party election manifesto, but it also unfairly increases costs for both workers and businesses at a time when neither can afford it.”
Jenny Blyth, owner of Storm In A Teacup Gifts:
“The current cost of living crisis and energy hikes are draining the life out of my business. On an almost daily basis I now have customers telling me they can no longer afford my products and it’s heartbreaking.
“I find myself working longer hours under increasing pressure for far less benefit and my mental health has taken a battering.
“This puts even more pressure on NHS services for mental health, which are already stretched to breaking point.
“The Government needs to invest more in small business or they will lose us for good. It’s no longer acceptable to put the costs of everything at our door.
“I can no longer have to keep choosing whether to heat my house or keep my business afloat. There need to be radical changes or the small business will be a thing of the past.”
Keisha Shah, founder of the Milton Keynes-based educational resources provider,Teddo Play:
“It is extremely disappointing how the entire inflation and economic situation has been handled post-Covid.
“During the pandemic, the Government was quick to act, after, it has been almost glacial in its policymaking.
“It feels like no one wants to take responsibility and take action today. Inflation has been knocking at our door for a long time now and we should have raised interest rates much sooner rather than leaving it until the very end and then raising them by only small amounts.
“On Wednesday, the Chancellor will be taking the next steps to help the economy and to steer it away from a probable recession, but will it be enough? There is a huge difference between simply ‘taking steps’ and ‘taking steps in the right direction’.”
Helen Skripek, founder of the Derby-based caterer, The Butlers Pantry:
“Rishi Sunak needs to urgently step in to stop the energy vultures crippling businesses further.
“Our electricity bill has now tripled at our commercial unit and if the Chancellor doesn’t step in, bills are set to rise again in October.
“We didn’t want to jump on the bandwagon and increase our prices, but faced with increasing costs in food, fuel, wages and energy, it has left us with no choice. Recent increases in bookings for our catering business are being eaten up in the wrong way.”
Keith Budden, MD at Hampshire-based IT security firm, Ensurety:
“Ideally, I would like the Chancellor to postpone the National Insurance rise but, given that’s unlikely to happen, to increase the threshold at which National Insurance begins to be paid, to truly help the lower paid.
“There is also an opportunity for the Chancellor to be really radical and lower VAT to 15% across the board for a limited period of time, say six months, to give the economy a boost and lower fuel prices in one hit.”
Lee Chambers, a psychologist at Essentialise Workplace Wellbeing:
“It’s a complete shambles. The Government are saying they are out to help small businesses and are doing everything they can, and then in the next breath, adding, “Oh well, somebody has to pay for the costs of the pandemic”.
“The small business owners I know, myself included, are being squeezed in business and squeezed personally, and when you realise how much small businesses contribute economically and socially to communities, you wonder why they are so easy to ignore.”
Maddy Alexander-Grout, CEO of the Southampton-based money-saving app,My VIP Rewards:
“The rising cost of living is dismantling many families and small businesses before our eyes. I would like to see Rishi Sunak announce more grants for the small businesses who have struggled all the way through the pandemic only to be met with this.
“Small businesses only have so much fight left in them. We are seeing businesses close every day and more needs to be done by the Government to stop this.”
Ashley Thomas, director of London-based mortgage broker, Magni Finance:
“With mortgage rates increasing, a great way to keep the housing market strong would be a reform on stamp duty. When this was amended during Covid, it kept demand strong and helped a lot of people to move.
“I would personally like the Government to scrap the 3% surcharge for additional properties and potentially reduce it for larger purchases.
“Anything above £1.5m is charged at 12%, which is very significant when you consider a lot more properties are now valued above this level. It’s no longer just mansions but many areas of London where normal families are purchasing a terraced house.”
Alastair Hoyne, managing director at Finanze:
“The Chancellor has a near impossible job to do, namely cover the cost of the Government’s spending in light of the pandemic and ongoing crisis internationally and at home. Perhaps the government can show its support by reducing fuel duty and VAT on fuel, to make it cheaper. It could also increase the nil-rate band on inheritance so many wouldn’t need to incur those extra death duties.
“Another area of potential benefit would be to allow for the purchase of residential properties within SSAS and SIPP pensions, instead of needing to use convoluted expensive structures to get around this.
“Being able to buy residential investment properties within our pensions, which are generally cheaper and more profitable, would allow people to build a larger pot to support themselves in retirement.
“And that’s what the Government needs, people supporting themselves. The Government also needs to look at tax brackets. Right now there is not much motivation to push upwards in income for many people, for fear of the 40% and 45% rates, so they stay in jobs up to £50,270 to stay on that 20% bracket. It’s not particularly motivating for entrepreneurs either. Perhaps instead of punishing those who want to grow, we reward them with a progressive-regressive tax scale, e.g. over £300,000 it drops to 40%, over £500,000 to 30% and over £1,000,000 it drops to 20%, etc.
“Now it’s certainly not amounts most of us will make in our lifetime, but it may just push more people to aim for the sky, and it would also mean those that are earning such high amounts won’t need to go to the effort of concealing it, moving it offshore, or moving overseas.
“That additional income flowing into No. 11 might just help provide for those at the bottom of the earnings scale.”
