Usually, the Spring Statement quietly passes under the radar. The Chancellor gives an update on the public purse, churns out statistics from the Office for Budget Responsibility, announces some small interim measures, and everyone gets back to business as normal. However, this was not a usual statement.
The increase in the cost of living shows no signs of slowing down anytime soon, with predictions that the current 30-year record rate of inflation (6.2%) is likely to rise further to an average of 7.4% this year. Energy bills have rocketed, with many suppliers going bust. The price of food is also increasing at a rate of 3.5% according to data from Kantar.
This led to plenty of calls for Rishi Sunak to introduce immediate measures to alleviate the financial pressure many are currently under as part of this statement, rather than waiting for the budget in the autumn to announce a full package.
Most, if not all, of the measures that were announced on Wednesday 23rd March had already been leaked out to the press. Those which will have the most impact on students are likely to be the changes made to fuel duty and the National Insurance (NI) threshold.
Motorists will have noticed the cost of fuel has increased dramatically since the start of the year. Petrol prices have gone up from 145p/litre at the start of January to 167p/litre this week. This sharp rise isn’t a recent phenomenon, as fuel was a comparatively meagre 115p/litre at the start of 2021.
To combat this 20p/litre rise in three months, Sunak announced, as expected, he was cutting fuel duty (a tax which contributes to the price of petrol and diesel) by 5p/litre until March 2023. While this came into effect the same day as the announcement, it may take a week or so for it to make a difference on forecourts. It could be that the measure doesn’t make as much of an impact on prices as hoped, with the AA suggesting that less than half of the fuel duty cut is being passed on to drivers.
Another expectation was that the National Insurance threshold would be altered in the statement, as an increase of 1.25% in National Insurance Contributions is about to come into effect this April (as part of efforts to clear the backlog in the NHS).
As part of the statement, Sunak announced the threshold at which NI will start being paid has been increased from £9,880 to £12,570, bringing it in line with the point at which income tax starts to be paid as well.
There is already a sense the measures announced aren’t enough, and despite the statement only being a ‘mini-budget,’ the Chancellor could have and should have done more. At least we have a 1% reduction in income tax to look forward to…in 2024!