As the Chancellor stood to deliver his Spring Statement, the House of Commons, like the rest of the UK, waited patiently to see if he would deliver a lifeline to help businesses and families through the cost of living crisis.
The commitment to reduce income tax by April 2024 and to increase the National Insurance threshold by £3,000 from July will be likely to dominate front pages, but what does it mean to businesses and families?
With the planned increases in National Insurance contributions still proceeding next month, will the increasing of the National Insurance threshold to £12,570 really save taxpayers over £300 per year? If so, it will be a very welcome move for households all across Northern Ireland. Working on the basis that more disposable income for people works well for local businesses, this too could be very positive for local companies and retailers. But what is the real impact of the 2 measures together? We await publication of the full detail but it appears that from April, all taxpayers will suffer the Health and Social Care Levy of 1.25% for a few months. However, the increased threshold from July will mean that taxpayers earning around £35,000 will be in a break-even position as a result of the 2 measures, with those earning less being better off.
The planned 1% cut in income tax, whilst a welcome announcement, will seem a very long way off to many.
Looking to the more immediate need, NI and the rest of the UK continues to grapple with a cost of living crisis that also means a cost of business crisis. Has the Chancellor announced anything to help?
Low paid workers and households on fixed incomes, those choosing between heating and eating, are unlikely to benefit from the removal of all VAT on energy efficiency improvements to homes - further compounded by the fact this can’t be introduced locally due to the NI Protocol. Although the NI Executive will receive the Barnett Consequential until the matter is resolved, there was no clarity about how this money would be distributed - and will this even be possible in the absence of a local Executive?
Responding to a question from a local MP during the parliamentary debate which followed his Statement, Rishi Sunak stated that the 5p cut in fuel duty can be introduced here immediately. This is a very welcome move to help those businesses that have been badly hit by the spiralling increases, notably taxi drivers, hauliers and those in the transport sector, as well as individual drivers. However, for many households and commuters it may not be the silver bullet many had hoped for to help tackle the increased cost of living.
The Chancellor also announced that further measures would be introduced to help business – but not immediately. In the autumn Budget we will be expecting to see movement on Investment and Innovation with reform of R&D to help boost productivity. We will have to wait to see how this will impact and benefit local businesses.
As ever with Treasury announcements, we have the headlines today, the fine print tomorrow and the real impact later. Are the Chancellor’s announcements the boost that the economy is currently in need of?
Time will tell.
Spring Statement Microsite