Tax, fuel duty and NI cuts in Rishi Sunak’s mini-budget amid cost of living crisis.
Rushi Sunak announced a 5p cut for fuel tax, raised the national insurance threshold by £3,000 and promised to cut the basic rate of income tax from 20p to 19p per pound by the end of this Parliament – 2024.
Many believe that these revisions are a drop in the ocean for families who are already struggling to survive amid a cost of living rises crisis.
Dr Gordon Fletcher, retail and business expert at the University of Salford Business School, said the challenges being faced in the UK economy now were being felt before the war in Ukraine began.
He said: “Reductions in the fuel duty and possibly in income tax as well as an increase in the NIC threshold appear to give some relief to workers. But with the prospect of inflation climbing beyond 7% this year and volatility in the fuel supply chain these advantages may quickly evaporate.
“These are changes that have little impact for pensioners or low income families in the lead up to next Winter. And reducing contributions in reduces government’s ability to service debt or support social services.
“A slight reduction in the VAT for heat pumps also offers no hope for these groups – although it might be bring enough appeal for making the second home a bit greener. Placing the blame on the impact of Russian sanctions may ring the government’s bell in showing international leadership but the many economic challenges we are now facing were evident long before tanks started rolling towards Kyiv.”
Kevin Brown, savings specialist at Scottish Friendly, comments: “The chancellor had no choice but to act and the measures he has announced, such as the fuel duty cut and the increase to the national insurance threshold, will go some way to helping households with the escalating cost-of-living crisis.
“But for those families who are unable to tighten their budgets any further and don’t have savings to fall back on, it’s not enough. They risk being dragged into debt and having to carry the burden of inflation for longer than is necessary.
“It’s 30 years since inflation last topped 6% and that means unless you’re over 50, you have no experience of living costs rising as sharply as they are currently.
“If inflation reaches double digits it’s going to mean more and more families will have to curb spending to make sure they can cover their essentials costs and household bills. The damage falling consumer spending could do to the UK economy could be far worse than the cost of helping more households to get by.”
