Spring Statement: Top takeaways from Rishi Sunak's speech

Rishi Sunak delivered his Spring Statement on Wednesday, announcing the government’s support for UK households and businesses across the country as they tackle the rising cost of living.

Separately during the day, the Office for National Statistics revealed that UK inflation hit a fresh 30-year high of 6.2% in February amid soaring energy, fuel and food prices.

UK households are now set to see the biggest drop in their spending power since records began in 1956, according to the Office for Budget Responsibility, thanks to the combination of rising prices and tax increases.

The OBR predicted UK inflation is set to average 7.4% this year, the highest since August 1991, as the Ukraine war continues to disrupt supply chains and boost energy bills.

To counteract runaway inflation, the chancellor announced a raft of measures to the House of Commons. Here is an outline of the key takeaways from the speech:

Growth

The UK economy is forecast to grow by 3.8% this year, according to the OBR, a sharp fall from its previous prediction of 6.0%. It is then forecast to grow by 1.8% in 2023, and 2.1% in 2024, 1.8% in 2025 and 1.7% in 2026, the chancellor revealed.

The unemployment rate, which currently stands at 3.9%, is now predicted to be lower in every year of the OBR's forecast. The number of people employed between now and 2027 is expected to be 400,000 lower than before the pandemic

The UK's underlying debt is also expected to decline from 83.5% of GDP in the next financial year to 79.8% in 2026-27. However, the OBR has said the UK's fiscal headroom could be “wiped out by relatively small changes to the economic outlook”.

Watch: Spring Statement: Key takeaways from Rishi Sunak's speech

Fuel duty

Fuel duty will be cut by 5p a litre from 6pm on Wednesday until March 2023, in what Sunak described as the “biggest cut to all fuel duty rates ever" to tackle soaring prices at petrol pumps.

The RAC, said cutting fuel duty by 5p will take £3.30 off the cost of filling a typical 55-litre family car.

Howard Cox, founder of the FairFuelUK Campaign welcomed the news: "It would be churlish not to be thankful to the chancellor in cutting fuel duty by 5p for 12 months. Well done Rishi. Our relentless campaigning has been fruitful. It will give some respite to millions of motorists that have had and continue to have no choice but to drive."

Read more: Spring Statement: Rishi Sunak cuts income tax and fuel duty

National Insurance and tax

Although the planned 1.25 percentage point rise in national insurance contributions will remain in place, the threshold will be raised by £3,000. This means that people must earn £12,570 per year before paying income tax or NI.

Watch: National insurance threshold raised and fuel duty cut by Rishi Sunak in spring statement

"From this July, people will be able to earn £12,570 a year without paying a single penny of income tax or National Insurance," Sunak said. "That’s a £6bn personal tax cut for 30 million people across the United Kingdom.

"A tax cut for employees worth over £330 a year. The largest increase in a basic rate threshold ever, and the largest single personal tax cut in a decade."

However shadow chancellor Rachel Reeves criticised the move, saying that the NI rise should have been "properly scrapped" instead of the rates being tweaked.

Read more: Can Rishi Sunak rescue the UK from a cost of living crisis?

Meanwhile, Sunak announced the first cut to the basic rate of income tax in 16 years, from 20% to 19%, by the end of Parliament in 2024, benefiting around 30 million Brits.

“Tax cuts must be paid for, they must be prioritised and they must fit the economic circumstances of the time,” he said.

Cost of living

The Household Support Fund for local councils to help the most vulnerable will be doubled to £1bn from April

VAT will be also scrapped on home energy-saving measures such as insulation, solar panels and heat pumps.

For the next five years, homeowners will pay 0% VAT on energy saving materials, a change that can be made thanks to Brexit, the chancellor said.

Read more: Pound falls after Rishi Sunak's tax cut announcement

Business

Retail hospitality and leisure sectors will have a 50% discount in business rates up to £110,000, while the Employment Allowance will increase to £5,000. The latter is a tax cut worth up to £1,000 for half a million small businesses, Sunak said on Wednesday.

In addition to this, he announced reforms to research and development tax credits, and said the government will cut tax rates on business investment in the autumn budget.

Prof Adrian Pabst, NIESR deputy director for public policy, said: “The Spring Statement is a missed opportunity to turn the ambitious ideas of the ‘Levelling Up’ White Paper into reality.

"There were no new announcements on investment or moves to devolve taxing and spending powers to local levels.

"Quick wins to promote higher productivity and living standards would have included an extra £500m in funding for mixed HE/FE colleges in ‘left behind’ communities and a £500 million in loans for SMEs outside London and the South-East.”

Watch: How does inflation affect interest rates?