Key announcements from Rishi Sunak’s spring statement and their implications for Scotland

While some of the measures announced in his spring statement were welcomed, opposition politicians and financial experts warned they were not going far enough to deal with the worsening cost-of-living crisis.

Here are some of the key announcements and what they mean for the people of Scotland.

Sunak was cheered by Conservative supporters after he announced that the base income tax rate would be cut from 20p to 19p from 2024. He said the first base rate cut in 16 years amounted to a £5bn tax cut for more than 30m people.

In Scotland, where the starting income tax rate is already 19p for those earning between £12,570 and £14,732, a harmonized fiscal system will automatically increase the Scottish government’s funding. This means Mr Sunak’s share will initially be £350m for the 2024/25 season.

But while the measure will be seen as a boon to Conservatives’ electoral prospects, it will do nothing to help families struggling to cope with the current cost-of-living crisis, which is predicted to become even more acute in the coming months.

The Office of Budget Responsibility forecasts that inflation will average 7.4% through the end of the year, with a peak close to 9% by the fourth quarter. It says this year will see the biggest drop in living standards in any fiscal year since registration began in 1956.

Chancellor Rishi Sunak presents MPs with the Spring Budget Statement. Photo: PRU/AFP/Getty

The chancellor has raised the National Insurance income threshold to £3,000, meaning that from July anyone earning less than £12,570 will not pay a dime of income tax or NI.

Mr Sunak called the move “the biggest one-off personal tax cut in a decade” and said it resulted in more than £330 a year in tax cuts for 30 million people.



Spring 2022 Statement: Rishi Sunak cuts fuel tax for 12 months and raises…

However, Labor Shadow Chancellor Rachel Reeves said the government should have abandoned its planned 1.25% rise in net income in April instead of playing with the threshold and said it was “still taking money out of people’s wallets”. » with an increase.

Her SNP colleague, Alison Thewliss, called Mr. Sunak’s statement a “job tax” and accused him of being “completely out of touch” with the reality of people’s lives.

The Resolution Foundation said that raising the NI threshold would mainly benefit middle-income people, while Paul Johnston, director of the Institute for Financial Research, questioned the validity of lowering the income tax rate while raising the NI rate, warning that it would lead to a further wedge. between taxation of unearned income and earned income.

Mr Sunak announced the doubling of the Household Support Fund, an England-only initiative, to £1bn. Since the Barnett formula will apply in the usual way to additional funding in England, Scotland, other devolved administrations can expect to receive their share to distribute it as they see fit.

The amount is unclear, but when the initial £500m fund was introduced last year, the Treasury announced that the Scottish Government would receive £41m. Subsequently, he introduced the Winter Support Fund, targeted at low-income households.

Kate Forbes, the Scottish finance minister, was among those who criticized the announcement, noting that Mr Sunak said nothing about increased benefits, reduced electricity bills or additional cold weather payments. She said the intervention announced by Mr. Sunak was “regrettable”.

Mr Johnson said the “big omission” in Mr Sunak’s statement was any help for those living on average verified benefits, who are facing a rise in the cost of living of about 10 percent and their benefits will only rise by 3.1%. percent.

On the same day that the average cost of a liter of gasoline at British gas stations jumped to a new record high of 167.3 pence, the duty on fuel was reduced by 5 pence per litre. Mr. Sunak called it “the largest reduction in fuel duty rates ever” and said the measure, which will last for a year, will benefit “hard-working” families and businesses.

But there is an argument that the cut could – and should have – been deeper, not least in light of the fact that the average price of a liter of gasoline rose by more than 40p last year, meaning the government is getting an extra 7p. pence per liter VAT. According to the RAC, the duty reduction will reduce the cost of refueling a typical family car by around £3.30.

The measure has also drawn criticism from those who point out that car ownership is the lowest among the poorest households.

Mr. Sunak removed the 5% VAT rate on a number of energy-efficient home improvements such as solar panels and heat pumps.

The renewable energy industry has long called for such measures as a way to reduce gas demand and reduce household electricity bills.

It is not clear whether the tax incentives apply only to the purchase of materials and products themselves or also to their installation, which is a significant cost for households seeking to improve energy efficiency.

Ms Reeves called the announcement “completely inadequate” and following “12 years of energy efficiency failures.”

Message from the editor:

Thank you for reading this article. More than ever, we count on your support as the changing consumer habits caused by the coronavirus affect our advertisers. If you haven’t already, consider supporting our tried and tested journalism by subscribing digitally.

Leave a Comment