Spring Budget: What we know so far about today's spending review
The Chancellor will try to stem the effects of rising costs
Last updated 29th May 2022
As the cost of living crisis continues to worsen, Chancellor Rishi Sunak is due to give an update on the state of the UK economy in his Spring Statement.
The statement is due to be issued on Wednesday (March 23rd) and will be the Chancellor's first budget since October 2021, which saw a host of spending cuts, including a rise in pensions and a cut in VAT on certain alcoholic drinks.
But with the rising cost of energy including gas and oil - and the price cap, which controls the amount energy companies can pass costs onto customers - set to increase drastically, the Chancellor is under pressure to keep the economy going whilst not passing the bill onto the taxpayer.
It comes as interest rates and inflation continue to shoot up, with the rate of inflation - which controls prices - expected to rise to nearly 8%, the highest rate since March 1992.
Speaking ahead of the address, Mr Sunak said that security was a key focus for the statement and for the UK economy and society in the aftermath of the invasion of Ukraine.
“We will confront this challenge to our values not just in the arms and resources we send to Ukraine but in strengthening our economy here at home," he said.
“So when I talk about security, yes – I mean responding to the war in Ukraine. But I also mean the security of a faster growing economy. The security of more resilient public finances.
“And security for working families as we help with the cost of living.”
What is the difference between a budget and a spending review?
Typically, the UK Government outlines its annual economic plans in the Autumn budget, usually held in October.
Until 2017, the budget was published in March, ahead of the new fiscal year, but from 2017 the Government moved the Budget to the autumn, introducing a 'Spring Statement' at the halfway point of the budgeted year.
However, alongside the budget, which looks at the yearly plan for the economy, 'spending reviews' help to lay out a more long-term plan of where the country is heading.
These 'spending reviews' are typically held every two to four years and can be amended and adjusted depending on the state of the economy at the time.
As a result, the 'spending review' can help to change the priorities of a budget. Similarly, a budget could require the 'spending review' to be checked and changed where necessary.
So, what is expected to be announced during the Chancellor's speech and how could the changes affect you?
Fuel prices
A major announcement from the Chancellor will relate to the price we pay at the pumps, as petrol and diesel continue to soar.
Mr Sunak is expected to cut fuel duty by as much as 5p a litre in order to keep businesses afloat and support workers and families through the cost of living crisis.
The reasoning is to try and balance the rising cost of energy - including gas, oil and electricity, as supplies become more unpredictable.
Currently, the average price of a litre of diesel stands at 177.3p per litre, while unleaded petrol is selling for 165.9p a litre - both unprecedented highs.
Increases in National Insurance
In the previous spending review in October, the Chancellor announced there would be an increase in National Insurance - a key element of the welfare state that also acts as social security - of 1.25%.
Mr Sunak explained that the increase was to help fund social care services, which had funding cut gradually. However, business leaders and politicians have called on the Treasury to delay or stop the rise.
Despite calls to reconsider the move temporarily as a result of price rises, the Treasury has hinted that a delay to the increase is unlikely.
As a result, more money earned from work will be taken and used to fund social care and other projects across the UK.
Council tax rebates
To counteract the rising costs in the home, the Government announced in February that homes would receive a boost to their council tax payments.
It is expected that the Chancellor will announce a £150 rebate on council tax - which is due to come into effect from April.
People living in council tax bands A to D will be eligible for the discount, and will not need to pay the £150 back.
Boost in benefits
As well as the help the Government is offering households for council tax, it is possible that people claiming other benefits could be helped.
There is growing speculation that child benefits could be bolstered, as free school meals are extended into the Easter holiday season.
In addition to this, there could be a simplification for those claiming Universal Credit, with further changes to the taper rate expected, meaning that those claiming the benefit whilst working will not be penalised.
As a result, those claiming benefits in the UK will not be as worse off as before, but with rising prices, the effect of the changes might not be felt as strongly as hoped.
Other areas the Chancellor could touch on in his statement:
- As a result of the Russian invasion of Ukraine which began last month, there is also the possibility of further spending in defence to protect the UK's border. The UK, as a NATO member, is one of the main contributors to military defence. Currently, Westminster provides the second largest defence budget for the alliance, second only to the United States.
- Income Tax could also freeze the Income Tax thresholds at £12,570 and £50,270 - which could mean other so-called 'stealth taxes' on savings and pensions could be implemented.
- Labour have also called for the scrapping of VAT on fuel bills at home, as well as a windfall tax on gas companies extracting resources from the North Sea, with the money saved to be given to low-income families.
The Spring Spending Review will be delivered to the House of Common following Prime Minister's Questions on Wednesday at about 12:30pm.