Atradius summarise the key points from the Spring Budget 2022.
The UK had the highest growth rate in the G7 last year, but the cost of living crisis, combined with global uncertainty, could have a significant impact over the next few years.
- UK growth is now expected to be 3.8% for 2022, 1.8% in 2023 and 2.1% in 2024.
- Unemployment in the UK is now lower than it was pre-pandemic.
- Inflation in February was 6.2% and is likely to rise to 7.4% over the course of the year.
- National debt is falling and expected to continue to fall to 79.8% of GDP by 2026-27.
- Borrowing is now forecast to be lower than expected at 5.4% of GDP in 2022, 3.9% in 2023 and 1.2% in 2024.
- Household support fund will be doubled to £1bn to help most vulnerable households with rising costs.
Today’s statement set out a roadmap for businesses, with more detail to follow in the Autumn Budget.
- Possible reforms to R&D credits from the autumn, to support businesses to increase vocational skills in the workforce.
- Cuts to tax rates on business investment from the autumn.
- Employment allowance increasing from April to £5,000.
Rising energy prices will continue to have a huge impact on cost of living, with some measures announced to soften the blow for lower income families.
- Fuel duty will be decreased by 5p a litre effective from today until March 2023 to support motorists.
- Homeowners will pay 0% VAT on energy saving materials for their homes, such as solar panels or heat pumps, for next five years.
- There will be no change to the energy cost rebate, support stands at £9bn which is expected to help 28m households pay around half of the increase in energy costs.
Tax and Levies
This budget announced several key tax cuts and changes to tax thresholds for lower- and middle-income families.
- The National Insurance threshold will increase to £12,570 from July 2022 in the largest single personal tax cut in a decade.'Draught relief' introduces a lower rate of duty on draft beer and scraps the 'irrational duty premium' of 28% for sparkling wines
- Income tax will be cut before the end of this Parliament in 2024 from 20p to 19p on the pound
The focus of the budget aims to deliver a stronger, more secure UK economy with more resilient public finances by helping families with the cost of living, creating conditions for higher growth and sharing the proceeds of growth fairly. However, the rising cost of living, and ongoing global uncertainty will have a significant impact on individuals and businesses over the coming years.