It seems much longer than five months since Chancellor Rishi Sunak delivered his Autumn Statement and Spending Review back at the end of October 2021. Since then, we’ve seen yet another Covid variant wave, inflation at levels not seen decades, and an international crisis as Russia invaded Ukraine.
With last year’s much-delayed Spending Review setting the course for the UK’s public spending for the next few years, normally this announcement would be more of a low-key update about the state of the economy and public borrowing. But there’s so much going on in the world right now – and in politics – that the Chancellor could decide to make some substantive policy announcements or changes this time.
The perfect storm of events over recent years has produced a cost-of-living crisis that is affecting people across the country, including millions of people served by all kinds of charities – food banks, advice centres, housing, health and social care, international aid and refugee support – to name just a few. Energy, fuel and food costs are rising dramatically which affects the poorest most, at home and abroad. These issues, and what the government does or doesn’t do about them, will affect the needs of people served by many charities and the demand for many services provide by charities.
What will the Chancellor do about it? Here are some areas we’ll be looking out for:
1. Energy costs
We’ll all feel like fools (or mugs) when the price cap that energy companies can charge rises drastically on 1 April. The price cap regulates what companies can charge per unit of energy and the charges they make to connect households to the energy grid. Some people are on fixed-rate deals which may offer some protection, but there are an estimated 22 million people who will see a sudden and substantial rise in their bills within weeks. Switching to a different company isn’t likely to help much either, because various suppliers have gone bust and the remaining companies have stopped offering good deals at affordable rates.
The Chancellor previously introduced plans for a £150 council tax rebate in England to soften the blow of the bills, which is being replicated in other parts of the UK. He also has introduced a government-backed loan scheme that would offer £200 of relief for households from October, spreading repayment of the money into future bills. However, these initiatives have been criticised as insufficient.
2. Fuel costs
As the economies of many countries began to exit the COVID-induced economic slowdown, oil prices have risen to over $100 a barrel, prices rarely seen in the past 20 years. The war in Ukraine, and subsequent unprecedented sanctions on the Russian economy, may push prices up even further still. This is contributing to overall energy cost inflation but also record prices at the pumps.
Chancellors often get a big cheer and supportive headlines when announcing freezes in fuel duty, which has been frozen for the past 11 years. We should look out for something similar this time – or perhaps even a cut in fuel duty as one of the headline announcements. However, a cut would have to be substantial to be anything more than symbolic, given the high prices now.
To counteract the accusation that cutting fuel duty flies in the face of dealing with climate change, any announcement may also be twinned with some more news about investment in renewables or nuclear energy, but we’ll have to see.
Current benefits were uprated against an inflation rate of 3.1% last September and are expected to do so at the same rate again this April. However, inflation is predicted to hit 8% in the spring, according to the latest Bank of England forecasts. Inflationary pressures will hit the poorest hardest because they have little discretionary spending which they can use to cover essentials like heating, food and housing.
However, so far this Chancellor has seemed reluctant to reverse the benefits cuts brought in largely during the years of austerity. Despite substantial opposition, at the Autumn Statement he opted not to maintain the temporary Universal Credit (UC) uplift of £20 per week, which had boosted income for UC claimants during the pandemic. Will he announce some other relief this time? Perhaps a temporary adjustment to the rate at which they are increased?
4. National Insurance rise and planned ‘health and social care levy’
The Autumn Statement also confirmed government plans to increase National Insurance (NI) contributions by 1.25 percentage points (from 12% to 13.5%) from April, to support the health service’s response to the pandemic and to provide funding for social care in England. This will then become a separate ‘health and social care levy’ from April 2023.
The social care crisis is a serious and long-term problem which needs to be addressed, and a nettle which politicians of all parties have found difficult to grasp. However, the NI rise will reduce take home pay for people in work and add costs for employers, at a time when other costs are rising steeply for both. Although people earning just under £9880 a year will not pay any NI and therefore not be affected by the increase, above that level any decrease in take home pay for people still on very low incomes will be keenly felt.
Opposition parties and some backbench Conservative MPs have been unhappy with the NI rise since it was announced, calling for it to be scrapped or delayed, and recent inflation has added string to their bows. However, it is believed that the Prime Minister and the Chancellor are not for turning, so a reversal seems unlikely, but perhaps it could be delayed.
5. Donations and giving
It’s likely that charities won’t get any direct mention at all in the Spring Statement, but we could see something around supporting donations for the Ukraine crisis. The Disasters Emergency Appeal (DEC) has already raised £175m in donations in a matter of weeks, second so far only to the appeal which supported the Asian tsunami aftermath in 2004. £25m of the amount raised so far is matched donations from the government – could the Chancellor up the level?
The Chancellor will give his statement at noon on Wednesday, 23 March. Stay tuned to our website www.dsc.org.uk and @DSC_Charity for reaction and further analysis.