LONDON (Parliament Politics Magazine) – In an effort to alleviate the strain of the cost of living problem, Rishi Sunak has lifted the national insurance threshold by Ā£3,000 and announced a 5p per litre reduction in fuel duty tax.
However, it occurs in the context of the worst reduction in living standards in generations.
Inflation and increased taxes, according to the Office for Budget Responsibility, will cause “real household disposable incomes per person (to) fall by 2.2 percent in 2022-23,” the largest fall in a single year since the beginning of record highs in 1956.
The chancellor said in his spring statement in the Commons that the threshold for workers to begin paying national insurance will be raised to Ā£12,570, alleviating the burden on the low-paid.
The chancellor had been pressed to remove the health and social care levy, which is basically a rise in national insurance contributions and will result in significant tax hikes for most families next month.
Despite rising inflation rates, Mr Sunak persisted on keeping the charge, telling MPs that “a long-term funding solution for the NHS and social care is not incompatible with reducing taxes on working families.”
He also stated that a 5-pence-per-litre reduction in fuel duty will be in force for a year as prices of petrol continue to increase.
The move is being undertaken “for only the second time in 20 years,” the chancellor told MPs.
However, the OBR cut its growth projection from 6% to 3.8 percent and warned that inflation is on track to hit its highest level in 40 years.
Meanwhile, a poll conducted shortly following Opinium’s announcement indicated that only 27% of UK citizens believe the changes will benefit their personal finances.
Fuel duty has been reduced by 5p per litre until March 2023
According to the latest estimates from data firm Experian Catalist, the average cost of a litre of petrol at UK forecourts was 167.3p on Tuesday, another record high after many days of new highs.
The average cost of diesel was 179.9p.
Asda announced immediately after the chancellor’s statement that fuel prices will be slashed by 6p per litre this evening.
By 2024, the basic income tax rate will be reduced by 1p in the pound.
Mr Sunak also revealed to MPs that by the conclusion of this Parliament, in 2024, the basic income tax rate will be reduced from 20p to 19p in the pound.
According to him, this translates to a Ā£5 billion tax savings for 30 million people.
It comes as the chancellor announced a new tax plan that will take a principled approach to tax reduction.
Mr Sunak claims that the new tax plan will assist households cope with rising living costs, create circumstances for more growth, and ensure that the benefits of growth are distributed fairly.
The chancellor’s mini budget also includes the following announcements:
- For a period of five years, VAT will be waived on energy efficiency measures such as insulation, heat pumps, and solar panels.
- The Household Support Fund will be doubled to Ā£1 billion to aid vulnerable families, with local authorities receiving the funds starting in April.
- From April, the Employment Allowance will rise to Ā£5,000, a new tax relief of up to Ā£1,000 for half a million small businesses, he said.
- A desire to restructure R&D tax credits.
Ā His tax plan provides the largest net reduction in personal taxes in more than a quarter-century, the chancellor remarked as he wrapped up his remarks.
According to the Treasury, the changes will result in 70 percent of workers paying less tax starting in July.
