Spring Statement 2022 analysis: Rishi Sunak delivers mini-budget that falls woefully short of the mark

Families up and down the country, who have no idea how to pay their rising bills, would have listened out for news of today’s Spring Statement anxiously.

The cost of living crisis has brought increasing costs of food, energy and other expenses at a time when many households are particularly financially vulnerable.

In the north of England there are approximately 3.5 million people in in-work poverty, representing an increase of 100,000 over the past decade. People are facing decisions between heating their homes and feeding their families. Choices that nobody should have to make in 2022.

But among all of the talk of levelling up, the long-awaited white paper released last month offered no new funding promises to address this and today’s Spring Statement has failed to do so too.

The Chancellor had the opportunity to support people in our communities who need it most, and to commit to substantial investment to back up some of the otherwise empty pledges in the levelling up white paper.

Sunak chose not to pull the more progressive policy levers

But what we needed to see and what we actually got were poles apart. In fact, the poorest 20% of households will get an average of just £120 in help from the Chancellor today, while the richest 20% will gain an average of £480.

Indeed, our analysis of the Spring Statement shows the true extent of the shortfall families now face to their finances.

On average a low-income couple with one child will see a hole in their budget of £670, while a low-income single person with one child will see a gap of £341, and a low-income couple with no child will see a shortfall of £611.

This was a political choice – the Chancellor had fairer, more progressive policy levers at his disposal, and he chose not to pull them.

He began his speech by announcing a cut in fuel duty for motorists; this is not a targeted measure to get money to those most in need, inevitably benefitting wealthier individuals. And of course, it is restricted in its benefits to those who own a vehicle.

The Chancellor also announced a VAT relief for homeowners purchasing energy saving materials. But again, any non-homeowners miss out, and the support offered is unlikely to shift the dial on encouraging people to retrofit their homes at any kind of scale that would be effective in addressing our over-reliance on fossil fuels.

Furthermore, Sunak set an increase in National Insurance Contributions (NICs) threshold from £9,500 to £12,570 in line with the threshold for the basic rate of income tax.

This will bring greatest benefit for middle-earners, who will see their incomes rise as the increase in the NICs threshold offsets the increase in NICs announced in the autumn to cover the costs of rising health and social care. By contrast though, those already on the lowest incomes, or indeed those who aren’t in work at all, will see no benefit whatsoever.

The ‘rabbit out of the hat’ moment came in the announcement that the basic rate of income tax will decrease from 20% to 19% by the end of this parliament. When millions are facing huge challenges, a tax break in two years’ time will be of cold comfort.

The winners weren’t the poorest, but home and car owners

In all, the announcements made today will be of most benefit to middle-income home and vehicle owners.

The promise of tax breaks will do nothing to support the millions of people who are already in poverty, either despite working or because they are sick, disabled or unable to work for any other reason.

The government pledged to help people with the cost of living, but that help is only forthcoming if you meet certain, privileged, criteria.

What the country needed was targeted support, using the social security system to deliver a real safety net for people, allowing them to live a good quality of life and not become trapped in poverty.

An increase in Universal Credit and other benefits in line with the real rate of inflation would have gone some way to delivering on this.

After a Spring Statement that seriously missed the mark, the Chancellor should return to Parliament with more ambition, because families across the country, and particularly in places like the North, cannot wait. They need targeted support and investment today.

Erica Roscoe is a senior research fellow at IPPR North

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