In today’s Spring Statement, Chancellor Rishi Sunak blew us all away with a pledge of some of the largest tax cuts seen in decades. These were cuts to personal taxes, the taxes that normal working people notice and need the most. Sunak’s announcements were welcome promises, and I want to stress just how important it is to both our principles and our post-pandemic growth that this is the path we are choosing to take.
So, what exactly is changing? Well, let’s start with one of the biggest changes and that is the increase in the National Insurance Allowance. The chancellor has put this up by £3000, meaning all earnings up to £12,570 are completely tax-free. This is a welcome change that will not only allow people to keep more money in their pockets but also ensures that the lowest earners are under less pressure from the cost-of-living crisis.
Another fantastic announcement was the pledge to cut income tax by one percent by the end of the current Parliament, in 2024. This marks the first time income tax has been cut in fifteen years since 2007. This again will mean that more people keep more money in their pockets which we know is the best way to ensure money is spent properly and we can ensure a stable economy.
Business rates have also been cut in hospitality and leisure sectors, with a fifty percent discount up to £110,000. The hospitality and leisure sectors have been hit the hardest over the pandemic; these are areas of our economy that need the most support and this is the best way we can do it. Some would want us to use interventionist policies that would increase public spending by giving more money to these businesses, but surely it is better to simply let them keep more money so they don’t need that extra cash injection?
A question on everyone’s minds was how the treasury would support people with the high costs of fuel that are making travel a nightmare for the average person as prices at the pump skyrocket due to the crisis in Ukraine. Expectations were brilliantly met as Sunak announced a 5p cut to fuel duty, a tax cut that will save the average motorist £100 over the next year. While many had had called for the chancellor to let this run for six months, the chancellor has said that this would run for twelve months, as well as taking effect immediately at six o’clock tonight. This is a fantastic win for the treasury and even bigger win for drivers who will be able to get from A to B at a more reasonable price.
A particularly exciting change for me as someone keen on free-market environmental solutions is the scrapping of VAT on energy efficiency measures such as heat pumps, solar panels, and insulation. These measures have been hot on everyone’s lips in recent years as we try to bring down our energy prices and lower our carbon footprint but a common criticism of these has been their extraordinary price that has meant that a lot of homeowners simply could not afford them. This removes that roadblock and makes it even easier to move towards our Net-Zero targets.
I must now move to some slightly less happy points as I talk about some policies I wish we had seen and some of the downsides highlighted by the statement. One significant thing is the chancellor going ahead with the increase in National Insurance. Understandably, there is a need to pay for the backlog left in the NHS due to the pandemic. However, it is simply not very conservative to be raising taxes, particularly at a time when people are already pinching pennies. A better solution would be to cut the ridiculous number of administrative staff and diversity officers from the NHS that are already costing the taxpayer far too much money and use those funds in the places people want them, getting operations completed and cutting down the waiting times.
Another thing that was highlighted by the statement was the negative effect that the Northern Ireland protocol is having on the Northern Ireland economy and the rollout of the fantastic measures laid out. The protocol is stopping many of these measures taking effect for people in Northern Ireland and, while Barnett Consequentials are going to be used to make up for that, it would be much more preferable if it simply wasn’t getting in the way. We know the problems already being faced by those who make their money by trading from NI into the rest of the UK and as many Northern Irish MPs said in the Chamber, we need to this out now so the United Kingdom can truly act as one.
These two points aside there are a lot of things to be praised in the Spring Statement and I believe that the chancellor has done the right thing by starting us and the government down a road of real fiscally conservative principles that we know provide a strong and stable economy and an all road better nation. I hope that this is not a one off and that we do see more of these measures coming further down the road, particularly in the Autumn Budget.