Rishi's spending review: What the Chancellor said and how it will affect you
He had been under pressure to help soften the cost of living crisis
Last updated 29th May 2022
Chancellor Rishi Sunak has revealed his Spring Statement today and announced a host of new measures regarding fuel, energy and tax.
As the cost of living crisis continues to hit families hard, Mr Sunak had been under pressure to help people across the UK make ends meet.
Using the backdrop of the Russian invasion of Ukraine, Mr Sunak gave the themes of security and peace, but admitted the moves were not "cost-free".
Here's everything you need to know about what the Chancellor said in the Commons today (March 23rd) and what it means for you:
5p off a litre of fuel
To help offset the effects of a fuel shortage in the wake of the Russian invasion of Ukraine, the Chancellor announced a relief on fuel duty by 5p a litre until March 2023.
This is only the second time that fuel duty has been cut, and will take effect from 6pm tonight.
It comes as prices at the pumps reach unprecedented rates - with the cost of diesel currently standing at 177.3p a litre, while unleaded petrol is priced at 165.9p per litre.
That means a tank of unleaded fuel in an average car - such as a Volkswagen Golf, with a 50 litre tank - would be £2.50 cheaper each time you fill up.
Energy bills
With the energy price cap going up on April 1st the Chancellor said he would try to reduce the impact on households.
Mr Sunak said that “thanks to Brexit” he was able to remove VAT on materials such as solar panels, heat pumps or insulation to help bring down energy costs, as well as on wind and water turbines.
He told the Commons: “We will abolish all the red tape imposed on us by the EU."
The Chancellor used the example that a family with solar panels would save almost £1,000 on installation costs as well as £300 on energy bills. However, this regulation does not apply to Northern Ireland as a result of the Northern Ireland Protocol in the wake of Brexit.
In addition to this, low-income households will get extra support from the Low-Income Support Fund, which has been doubled to £1 billion.
National Insurance increase going ahead but threshold raised
It was announced during the Autumn budget in October that National Insurance would be going up in July to fund social care.
The Chancellor confirmed today that the increase in contributions would be happening, but that the threshold would be raised by £3,000 so those in poorer households would not need to pay the tax.
From July, people will be able to earn £12,570 without paying income tax or National Insurance. Mr Sunak called the move "the best reward to work".
Martin Lewis the founder of Money Saving Expert spoke to our Westminster correspondent Georgie Prodromou to explain more:
In addition to this, the Employment Allowance, which helps to reduce the amount that people would need to pay for National Insurance, was raised to £5,000 for small businesses.
Boosting the private sector
In addition to the confirmation that business tax rates would be cut in the Autumn budget, the government said it would also help small and medium businesses now.
From April, smaller businesses will be able to avail of the Business Rates discount, where rates that are paid on buildings used for businesses - can be halved up to £110,000.
As a result, a typical pub availing of the discount offered by the government will save £5,000 a year, according to Mr Sunak.
Income tax cut for the second time in 20 years
A major point of the Chancellor's statement was that the basic rate of income tax would be cut from 20p to 19p per pound by the end of Parliament in 2024.
Those that earn between £12,571 and £50,270 will get to keep more of their money, as the amount of tax being taken goes down.
This is only the second time in 20 years that income tax has been cut, and according to the Chancellor, the move is "fully costed and paid for" in his plan.
In addition to this, the Chancellor announced that the Health and Care Levy - charged on those who do pay National Insurance to go towards the funding of the NHS - will stay, as the service continues to emerge from the COVID-19 pandemic.
Inflation
The spring statement came on the same day that official figures showed inflation soaring to a 30-year high.
Rising energy, goods and food prices helped push inflation to increase 6.2% in the 12 months to February, Office for National Statistics (ONS) figures revealed on Wednesday morning, hours before Mr Sunak’s speech to the Commons.
In his closing statements, the Chancellor said the announcements made today "will help people and businesses deal with rising costs" and provide a "powerful incentive for people to work hard because people spend their money better than governments do".
Labour's response
The Chancellor’s choices are making the cost-of-living crisis worse, not better, shadow chancellor Rachel Reeves has said.
Responding to Rishi Sunak’s spring statement, Ms Reeves told the Commons: “Today was the day that the Chancellor could have put a windfall tax on oil and gas companies to provide real help to families, but he didn’t.
“Today was the day the Chancellor could have set out a proper plan to support businesses and create good jobs. But he didn’t.
“Today was the day he could have properly scrapped his national insurance hike, he didn’t.
“We said it was the wrong tax at the wrong time, the wrong choice. Today, the Chancellor has finally admitted he got that one wrong.
“Inflation is at its highest level for 30 years and rising. Energy prices at record highs. People are worried sick.
“For all his words, it is clear that the Chancellor does not understand the scale of the challenge. He talks about providing security for working families, but his choices are making the cost-of-living crisis worse, not better.”