What to expect from the spring budget
05:00 22 March 2022
Chancellor Rishi Sunak is set to present his annual spring budget, but unlike previous years, little has been revealed about what will be announced on Wednesday.
In recent days, pressure has intensified on Mr Sunak to provide more aid to those battling the sudden steep rise in the cost of living, but the Chancellor has remained mum on the additional aid that ‘he will provide, if necessary.
Some financial experts believe the current cost-of-living crisis will be short-lived, with inflation falling towards the end of the year after peaking in the coming months.
If Mr Sunak is of that view, he may not offer much to ease the financial pressure on households tomorrow and could instead wait until later in the year to get a clearer picture of the economic landscape before he dives. introduce policies to support those in difficulty.
The current economic uncertainty may well dampen any large-scale announcement.
There are many unknowns right now, with disagreements over exactly when inflation will peak, how long it will stay high, and whether the cost of oil will start to fall. Add to that the war in Ukraine which has already sent shock waves through the global economy.
Russia’s invasion of Ukraine came as inflation around the world was still high after countries collectively began to reopen from pandemic lockdowns and hiked prices accordingly. The ensuing war pushed prices up even further, especially since Russia is one of the main exporters of gas and oil.
Putin’s unpredictability, coupled with unanswered questions of whether or how China will get involved in the conflict, makes it difficult to predict what the global economy will look like a year from now.
If a peace agreement is reached between Ukraine and Russia, the economy could stabilize, but if the conflict escalates and spreads to other countries, our finances could suffer even more.
The chancellor and her advisers will have to take all these uncertainties into account, while keeping an eye on the nation’s deficit.
Historically, the Conservatives have favored lower taxes over most other political parties, but Mr Sunak stuck to his planned increase in National Insurance contributions by 1.25 percentage points in April. As such, it is likely to continue on Wednesday.
He has already announced an energy bill rebate scheme which will see eligible homes get £350 of help with fuel costs, which will result in a £150 council tax rebate for those who live in homes in AD council tax brackets and electricity users will get £200 off their bill. from October, which they will have to repay in equal installments of £40 over the next five years.
This alone is unlikely to be enough to help those battling the rising cost of living and prominent voices in personal finance have called on the government to provide more help.
Money-saving expert Martin Lewis revealed on the BBC’s Sunday Morning program that he had “no tools left” to help people.
He added: “It’s not something that money management can solve, it’s not something that for those on the lowest incomes telling them to cut their belts will work, we we need political intervention.”
Meanwhile, research by debt charity StepChange has found that one in five people think external financial pressures will drive them into debt this year, three in 10 expect to struggle to pay for essentials such as healthy food or weather-appropriate clothing, and nearly half of people expect to use their savings this year.
Mr Sunak is also coming under pressure from his own party, with Tory MPs calling for a reduction in fuel duty, an increase in mileage rates from 45p to 60p and a 15 per cent reduction in ‘vital fuel users’ such as transport companies.
With this growing pressure on the Chancellor, there may be more in the budget to help those struggling than he originally anticipated.
The nation is still reeling from the pandemic, during which the government has spent up to £410billion on Covid measures. Those expenses will have to be reimbursed and could factor into Mr. Sunak’s caution about extra spending to help people through the current cost-of-living crisis.
Rising inflation, freezing the personal allowance and raising the rate threshold, however, means the Treasury will earn more taxes, which could give Mr Sunak a bit more wiggle room in his budget .
But, with little information released by the government, we don’t know at this time what will be said in the spring budget.
The reality is that those, whether individuals or families, who have very low disposable income and a high amount of debt are likely to face an extremely difficult time over the next few months.
Meanwhile, those with more disposable income and savings to fall back on may find that with spending cuts and careful budgeting, they will be able to get by.
How will the spring budget impact businesses?
The Chancellor will focus on encouraging economic growth so that businesses can benefit from a more generous spring budget.
Businesses are facing higher fuel and energy costs, while many businesses are finding that raw materials and importing goods have become more expensive over the past 12 months.
On top of that, employers will also be hit by the 1.25 percentage point hike in National Insurance, as well as a rise in the minimum wage, both of which come into effect in April.
Businesses that depend on fuel, for example transport companies, could see a higher reduction in fuel taxes than individual drivers.
The hospitality and leisure sector is set to be hit by the end of the VAT cut from April, but Mr Sunak could decide to extend the cut or introduce further tax cuts for businesses .