Spring Budget 2022
Spring Budget 2022 Outline
Living Standards Heading For Historic Fall
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The Office for Budget Responsibility’s verdict is in. It warns that living standards will fall at the fastest pace on record.
With inflation surging to the highest in decades, the fiscal watchdog says the unprecedented squeeze means real living standards won’t reach pre-pandemic levels for two years.
The public finances have emerged from the pandemic in better shape than expected. But Russia’s invasion of Ukraine will push inflation to a 40-year high of almost 9%, and living standards are set for a historic fall over the next 12 months.
Higher inflation will erode real incomes and consumption, dragging growth this year down to just 3.8%, from 6% forecast before.
With inflation outpacing growth in nominal earnings and net taxes due to rise in April, real livings standards are set to fall by 2.2% in 2022-23 – their largest financial year fall on record – and not recover their pre-pandemic level until 2024-25.
Spring Budget 2022 Tax Changes
- The Chancellor vowed to cut the basic rate of income tax from 20p to 19p in the pound before the next election. He said the tax cut would cost £5bn and benefit 30m people
- Mr Sunak announced that fuel duty will be cut by 5p from 57.95p per litre following the surge in petrol prices with the reduction lasting for 12 months
- He also raised the National Insurance threshold by £3,000 to cushion the blow of his planned tax hike in April. It will mean workers can earn £12,570 without paying the tax, a £6bn tax cut worth over £330 per year for employees
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