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The Spring Statement. KEY POINTS

Key Points

Spring Statement 2022 takes place following the unprovoked, premeditated attack Vladimir Putin launched on Ukraine. The invasion has created significant uncertainty in the global economy, particularly in energy markets. The sanctions and strong response by the UK and its allies are vital in supporting the Ukrainian people, but these decisions will inevitably have an adverse effect on the UK economy and other economies too.

Higher than expected global energy and goods prices have already led up to an unavoidable increase in the cost of living in the UK.

The government has already taken significant steps to help with the cost of living. This includes a cut to the Universal Taper rate and increases to work allowances to make sure work pays the £9 billion packages announced in February to help households with rising energy bills this year and freezing alcohol duties and fuel duty to keep costs down.

State of the economy and public finances

  • The UK economy is forecast to grow by 3.8% this year, according to the Office for Budget Responsibility, a sharp cut from its previous prediction of 6.0%

  • The economy is then forecast to grow by 1.8% in 2023, 2.1% in 2024, 1.8%in 2025 and 1.7% in 2026.

  • The annual inflation rate was 6.2%om February and is likely to average 7.4% for the rest of this year, but with peak of 8.7% in the final quarter of 2022

  • The unemployment rate is now predicted to be lower over the next few years than in the OBR’s previous forecast in October

  • Debt as a percentage of GDP is expected to fall from 83.5% of GDP in 2022/23 to 79.8 in 2026/27

  • The government is forecast to spend £83bn on debt interest in the next financial year. The highest on record.

Fuel, energy and living costs

  • Fuel duty will be cut by 5p per litre until March 2023

  • Homeowners installing energy-efficient materials such as solar panels, heat pumps, or insulation will see VAT cut on these items from 5% to zero for five years.

  • Local authorities will get another £500m for the household support fund from April, creating a £1bn fund to help vulnerable households with rising living costs.

  • However, the OBR on Wednesday forecast that energy bills will rise by 40% again in October, if wholesale gas prices remain at the same level they are now.

Taxation

  • The income threshold for at which point people start paying National Insurance will rise to £12,570 in July, which Mr Sunak said was a tax cut for employees worth over £330 a year.

  • Mr Sunak pledged to cut the basic rate of income tax from 20p to 19p in the pound before the end of this parliament.

  • The Employment Allowance, which gives relief to smaller businesses National Insurance payments, will increase from £4,000 to £5,000 from April.

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