CSA reaction to Chancellor’s Spring Statement

CSA Chief Executive Chris Leslie gives his reaction to Rishi Sunak’s announcements: 

Rishi Sunak’s time as Chancellor has been more eventful than for most of his predecessors. These ‘Spring Statement’ policy announcements come as the Treasury shifts from pandemic mode and into cost-of-living mode, driven chiefly by the geopolitical disruption of Russia’s invasion of Ukraine. 

With CPI inflation hitting 6.2% and still heading quickly upwards, this was never going to be a run-of-the-mill Treasury statistical reporting update. So here we have another ‘mini Budget’, with some strong hints about what will come in the November Budget-proper and ahead of a 2024 general election. 

Sunak has stuck to his guns retaining the 1% ‘health and social care’ National Insurance rise due to come in April, but dampened its impact for the majority of the workforce with a fairly punchy increase in the NICs threshold to £12,570 – now fully aligned with the income tax starting threshold. The symbolic pointer of a 1p cut in the income tax basic rate may not help anyone in the short term before 2024, but it is a clear signal that the Chancellor wanted everyone to see and will no doubt be the focus of speculation in subsequent Budgets: will he go further? Will he bring it forward?

The timing of policy changes is a running theme in today’s Statement. Will it really be viable for the Chancellor to reinstitute the 5p fuel duty cut in twelve months’ time? Or is that likely to be extended again and again? As with the £20 pandemic uplift to Universal Credit, once a ‘giveaway’ has been received it is exceptionally hard to take it away again. 

For those on low incomes or struggling to make ends meet, there were few direct policy measures to counteract the potential 10% increase in the cost of living this coming year. Yes, the Chancellor gave more to local authorities to target support through the ‘household support fund’. But that is not the same as direct help via the means-tested benefit system. Benefits are due to rise by 3.1% in a few months’ time, which is significantly less than inflation. We can therefore expect many more income & expenditure assessments heading more towards deficit household budgets and further pressures for debt forbearance as a result. The Office for Budget Responsibility says that 2022/23 will see the “biggest fall in living standards in any financial year since the ONS records began in 1956/57”. That single fact will frame most policy debates over the coming twelve months. 

There were other relevant announcements too. The CSA is naturally eager for the Government to support our member firms with their learning and development needs, to raise skills and professional standards and help our sector comply with regulatory requirements. So the announcement by the Chancellor that they will review the existing incentives and tax system for skills investment – including the operation of the Apprenticeship Levy – suggests that further incentives for businesses to invest in training may be on the horizon. We expect further news of this in the November Budget and will be urging Ministers to enhance the existing apprenticeship system. 

There were also useful changes for business, including the increase in Employment Allowance and the 50% discount on approved software for firms in the ‘Help To Grow Digital’ scheme. Many of the Chancellor’s tax giveaways were funded by a significant accounting change that will hit student loan changes to the fee cap and loan terms – expect more coverage of this as the details are digested. Public service budgets will also come under significant pressure again as inflation bites – and expect pay rise pressures to become more vocal. 

Overall the Chancellor managed to respond to current events, framing his decisions as a response to the Ukraine crisis and subsequent global energy crunch. There are clearly limits to his ability to act. And in many ways the Spring Statement was a foretaste of more political choices to come as we near an election. But there are measures that will make a real difference for consumers – especially middle-income earners – and the turbulence the Chancellor is attempting to weather is not likely to subside any time soon. 

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