What Can We Expect From the Spring ‘Budget’ 2022?
Tuesday 22nd March 2022
As we approach another Spring Statement, or ‘mini-budget’ as it is sometimes called, the Chancellor will be trying to balance a complex set of short-term priorities with longer term strategic plans. This time, as he addresses the House of Commons on 23 March, he will also be mindful of the impeding local elections taking place on 5 May.
The cost of living
High up the agenda will be the spiralling cost of living, as rising fuel costs and higher food bills are soon to be exacerbated by the 1.25% hike in National Insurance contributions; a rise that affects both businesses and employees alike.
Many commentators feel that delaying the rise is unlikely, partly because a last-minute U-turn would do nothing for the government’s fiscal credibility. This means that an employee on a £50K per annum salary will face a £500 rise in their annual tax bill. Whereas company directors, many of whom were not able to get any support during the pandemic, face a double whammy of employee and employer rises. Some businesses may look to offset the rise by using more salary sacrifice arrangements, but they will need to be sure this doesn’t result in lower wage earners falling below the minimum wage.
Recent comments by the Chancellor have concentrated on the fact that he is “putting in place policies to help families meet the rising cost of living, for example, freezing duties, cutting the tax rate in universal credit and increasing the national living wage”.
There have also been suggestions that child benefit could increase and there may even be a fresh look at the energy bill rebate announced in February.
Businesses and Fleets
Prices at the pump have sky-rocketed over recent weeks and so business fleet operators and individual drivers will be keen to see an anticipated fuel duty cut, to help ease the cost of living crisis.
The trouble is that, during the COVID-19 pandemic, the government borrowed record amounts to facilitate unprecedented levels of financial support for businesses and individuals. The rate of public sector borrowing is at last going down, but all loans incur interest that needs to be paid. Not to mention that, as the conflict in Ukraine escalates, there may need to be an increase in defence spending.
Rishi Sunak has already warned that the Russia-Ukraine conflict is likely to create a period of “significant economic uncertainty” that could counteract recent economic wins, such as the 0.8% rise in GDP seen this January.
This is worrying news, especially for hospitality and retail businesses that are expecting business rates to rise from 31 March, with the former also taking a hit with VAT set to rise to 20% as part of the stepped return to pre-pandemic levels.
Ahead of the 'mini-budget' update, our CEO Robert Gordon said:
Wednesday’s Spring Statement is an opportunity for the Government to take decisive, meaningful action to help consumers and businesses avoid the worst impact of surging inflation.
The expected fuel duty cut in light of record fuel prices hitting an historic high is likely to do little to ease the eye-watering cost burden on motorists. The cut should be complemented by the Government shining a light on the benefits of electric vehicles (EVs). Wednesday presents a chance for the Government to reinforce its commitment to install public access charge points across the UK, a lack of which are continuing to inhibit EV take-up despite increasing registrations, in order for motorists to make the leap to an EV with confidence.
With the retail sector hit particularly hard over the past two years, and inflation expected to reach over 7% this Spring, there is a risk the sector will only feel the pinch further. A targeted extension of the Business Rates Relief Scheme would provide a welcome buffer to support the sector while it remains unable to consistently hit pre-pandemic levels of growth.
Robert Gordon
Chief Executive Officer
Novuna
Under normal circumstances, the Spring Statement focuses on economic updates, previews and consultation launches. But these are far from normal circumstances. We will have to wait and see what the Chancellor has in store, but rest assured that we will keep you up to date on all the key announcements with, of course, a particular focus on issues affecting drivers and fleet operators.