Spring Statement 2022: BASW update
Last week the Chancellor of the Exchequer published his 2022 Spring Statement and presented it to the House of Commons.
Now that the dust has settled and number crunchers have considered the announcements made by the Chancellor, the impact that they will have on people can be properly considered.
This update should be read alongside BASW’s initial statement. These are changes that impact on all nations of the UK. In Scotland, income tax rates are devolved.
Fuel Duty has been cut by 5p
While 5p a litre adds up, the cut has been eaten by the accelerating cost of fuel. When people go to fill their car, they will find that they still are paying more for a tank than they were a month ago.
Universal Credit and legacy benefits
The Chancellor opted against increasing Universal Credit and legacy benefits in line with inflation, despite significant lobbying from organisations that campaign against poverty. The cost of living is going up quickly, and a below inflation rise on benefits for those who do not or cannot work means a real-terms cut.
The Chancellor has addressed the negative response to him not uprating benefits in line with the cost of living by saying that “he gave support to those who needed it most”. We thoroughly reject any suggestion that those on severely low incomes are not most in need of support.
National Insurance and the Health and Care Levy
The income threshold that someone will need to meet to pay National Insurance is going up, but the Health and Care Levy announced last year will mean that these changes are not straight-forward. Although people will pay less national insurance due to the threshold going up, those savings will not be felt as people will also be paying more through the health and care levy. It is estimated that considering both the NI threshold rise and the levy, an employee on £20,000 a year will pay £178 less National Insurance in 2022-23 than they did the previous year. A person on £50,000 will pay £197 more.
Changes to income tax
By 2024 – delayed for two years - the basic rate of income tax will be cut from 20p to 19p. This will benefit people who earn more than the £12,750 personal allowance you’re allowed to earn before you pay income tax. This is also expected to benefit higher earns, who still pay the basic rate of tax on their earnings up to £50,270. The Chancellor giving a tax cut to higher earners while refusing to uprate benefits reflects the Chancellor’s priorities.
In Scotland, other income tax rates are devolved, but the announcement by the Chancellor means that the UK Government will provide the Scottish Government with £45m due to the Barnett formula which means that spending in England must also be given to the devolved nations, proportionate to the population. The UK Government reserves responsibility for income taxes in England, Wales and Northern Ireland.
Levelling up
The UK Government continues to talk about ‘levelling-up’, and the Chancellor announced that there will be infrastructure projects funded from the Levelling Up Fund. Discussions around levelling up, and how to achieve it, have become part of the national conversation, and we will be looking to make sure that Government policy genuinely benefits communities and individuals.
Other than moving some Government offices to Northern towns, and a plea from the Secretary of State for Levelling Up for people to litter pick their areas to level their communities up, there has been few meaningful announcements that will truly 'level up' the left-behind areas of the country.
Moving forward
In the Autumn, the Chancellor will do another budget where we will hear a fresh round of spending announcements and tax-raising measures. We will continue to campaign against poverty and be the voice of thousands of social workers across the UK who will see the impact that poverty is having on people.