Rishi Sunak was always going to have to tackle the cost of living crisis in his Spring Statement and the big questions were how and who would benefit.
Faced with a choice between measures that would benefit the well-off, those on middle incomes and the least well-off, the chancellor did a bit for the first and second groups but more or less ignored the third.
He chose to increase the threshold for National Insurance at a cost of around £25bn over the next five years and followed that up with a 1p cut in the standard rate of income tax at a cost of more than £17bn over the three years from just before the next election in 2024 – though his previous decisions to freeze the tax thresholds and increase NI rates mean these tax ‘cuts’ were really tax rises.
Of the three new measures that he billed as ‘helping families with the cost of living’, the temporary 5p cut in fuel duty (£2.4bn next year) and cut in VAT on energy efficiency materials (£280m over the next five years) are good news if you can afford a car or improvements to your home but not much use otherwise.
The £500m increase in the Household Support Fund in 2022/23 will enable local authorities to help the most vulnerable households with the cost of essentials but it is a drop in the ocean compared to his action (or lack of it) on benefits in general.
To put this in perspective, the Office for Budget Responsibility (OBR) forecasts that average real disposable incomes will fall by 2.2 per cent next year, the most since records began.
However, the squeeze on benefits will be much greater than that.Read the rest of this entry »
Originally published as a column for Inside Housing on July 8.
This was a Summer Statement that was all about protecting jobs and getting money into the economy as quickly as possible.
Judged in those terms, while it does not go as far as some had advocated, the two big housing measures in chancellor Rishi Sunak’s Plan for Jobs look carefully calibrated to achieve both.
The £3.8 billion cut in stamp duty (increasing the nil rate from £125,000 to £500,000) is calculated to boost transactions, generate jobs and drive additional spending estimated at around 5 per cent of the house value.
And the Treasury reckons that the £2 billion Green Homes Grant (funding two thirds of the cost of energy efficiency work up to £5,000 for owners and landlords and all of the cost up to £10,000 to low income owners) could support over 100,000 green jobs as well as cutting carbon emissions and fuel bills.
But it’s not hard to find holes in the Summer Statement where other housing responses could and should have been: the statement does nothing more for affordable housing, it fails to fill holes in the safety net and, as Generation Rent points out, vouchers to eat out are not much use if you cannot afford to stay in.
And though the two measures that are there should boost the economy in the short term the longer-term benefits of both look uncertain at best even when you judge them in isolation and in their own terms.