Spring Statement – what can we expect?
Our Tax Partner, Ian Kelly, shares his thoughts…
The Chancellor of the Exchequer, Rishi Sunak, will deliver his Spring Statement to Parliament tomorrow (Wednesday 23 March 2022) – arguably the most difficult Budget or Spending Review he has so far had to present in his time as Chancellor.
We have had Budgets and Spending Reviews flit between March and October/November before settling on the Spending Review in March and the annual Budget in October/November.
It is worth very quickly looking back at where Sunak stood at the time of last year’s Budget on 27 October.
The controversial Health and Social Care Levy had been announced by Prime Minister Boris Johnson on 7 September, the Covid Omicron variant was yet to surface on 24 November, and the inflation rate was 3.1% (a rate expected to rise to 4% in 2022).
The Government’s Coronavirus financial assistance was being wound up and the Russian invasion of Ukraine was some distance away.
Fast forward to today and Sunak is under pressure with inflation for January being 8.5% and rocketing household and fuel costs impacting on living standards.
The backdrop for Sunak, therefore, is not a pleasant one and, whilst not earmarked as a Budget, he might have to partially treat it as one.
Sunak has already frozen income tax rates and allowances through to April 2026 and might be tempted into changing tack although he is already on record as saying there will be no relaxation on the Health and Social Care Levy.
That might drive Sunak, if you excuse the pun, to look at the fuel duty on petrol and diesel, and at the VAT rate on home energy. The Council Tax rebate announced in February ahead of the new fiscal year, and the £200 discount on household energy bills this Autumn for domestic electricity customers, albeit which will be paid back automatically over the next five years, are already in place but which are being left behind as prices spiral upwards with no sign of a slowing down or reversal.
After receiving plaudits for the Covid assistance programme, Sunak has it all to do again.
Please look out for our Spring Statement commentary, online here soon.