Britons face worst living standards fall since 1950s despite Rishi vow
Are you REALLY a tax-cutting Chancellor, Rishi? Britons still face worst living standards plunge since the 1950s as OBR watchdog says Sunak is only unwinding a SIXTH of the eye-watering tax hikes since 2020 – with students milked to balance the books
- Rishi Sunak has delivered his latest mini-Budget to the House of Commons today amid the cost-of-living crisis
- The Chancellor is believed to have significant ‘wriggle room’ after UK plc performed stronger than expected
- Mr Sunak is has announced cut to fuel duty by 5p a litre and move to ease the pain of National Insurance hike
- He has warned that the global economic outlook is ‘challenging’ and the government must act ‘responsibly’
Rishi Sunak’s spring statement at a glance:
- Fuel duty cut by 5p per litre for a year from 6pm tonight
- VAT on household green energy equipment like solar panels and heat pumps is scrapped
- Household Support Fund, a grant for councils to give to most vulnerable households, doubled to £1billion
- National Insurance threshold – the salary at which it starts to be paid – increased by £3,000 to £12,570
- Sunak says it is £6billion tax cut for 30 million people
- Pledge to bring in ‘fully costed’ cut to income tax from 20p to 19p before the next election in 2024.
- Office for Budget Responsibility (OBR) has lowered growth forecast to 3.8 per cent this year, falling to 1.8 per cent in 2023 and then 2.1 per cent, 1.8 per cent and 1.7 per cent in 2024-6
- Inflation expected to hit 7.4 per cent this year. Sunak: ‘People should know we will stand by them as we have in the past two years’
- Debt interest payments hit £83billion this year due to inflation
Rishi Sunak is only unwinding a sixth of the eye-watering tax rises he has brought in since 2020 despite trumpeting his cutting credentials today.
The Treasury watchdog cast doubt on the Chancellor’s claim to be bringing in the ‘biggest net cut to personal taxes in over a quarter of a century’.
The OBR pointed out that in fact the changes to the National Insurance thresholds and penny off the basic rate by 2024 offset around a sixth of the planned increases.
Huge amounts of revenue are being generated by making the arrangements for repaying student loans less generous – a policy that was slipped out on the same day Russia invaded Ukraine.
By the end of the forecast period the tax burden will be equivalent to 36.3 per cent of GDP, up from 33 per cent in 2019-20 and the highest level since the late 1940s.
Meanwhile, measures announced since October to tackle the cost-of-living crisis will only trim a third off the fall in living standards the country faces this year.
The OBR still expects real household disposable incomes to tumble by 2.2 per cent per person in 2022-23 – the largest annual fall since ONS records began in 1956.
The OBR’s assessment accompanying the mini-Budget said: ‘Net tax cuts announced in this Spring Statement offset around a sixth of the net tax rises introduced by this Chancellor since he took over the role in February 2020, and just over a quarter of the personal tax rises he announced last year (the freezing of the income tax personal allowance and higher-rate threshold and new health and social care levy).
‘Those net tax rises, plus the more tax-rich composition of economic activity that has been factored into this forecast, raise the tax burden from the 33.0 per cent of GDP recorded in 2019-20 to 36.3 per cent of GDP in 2026-27 – its highest level since the late 1940s.’
Unveiling a mini-Budget for the cost-of-living crisis, the Chancellor declared that fuel duty will be cut by 5p until March next year to help Britons cope with soaring prices as he delivered his Spring Statement to the Commons.
In a bigger-than-anticipated move, he declared that the threshold for paying NICs will soar to £12,500 from July. He said was equivalent to a £6billion tax cut – half the value of the new social care levy that Labour, many Tories and businesses had been demanding he scrapped before it take effect next month.
And he pledged that the basic rate of tax will fall by a penny to 19p by 2024 – the first cut in 16 years and worth £5billion.
Mr Sunak also said he will scrap VAT on energy efficiency measures such as solar panels, heat pumps and insulation installed for five years. The Household Support Fund for struggling families is being doubled to £1billion.
Mr Sunak gave a stark warning about the ‘challenging’ global outlook and said the government must take a ‘responsible and sustainable’ approach to its finances.
He said that Britain was using its might to back Ukraine in the standoff with Russia, and even though sanctions are ‘working’ there was an impact on the UK’s recovery, with growth now only expected to be 3.8 per cent this year and inflation to average 7.4 per cent.
However, Mr Sunak made an extraordinary claim that he was a tax-cutting Chancellor.
‘It is only because this government has been prepared to make those difficult but necessary choices to fix our public finances that I can stand here and tell this House that not only are taxes being cut, but that debt is also falling whilst public spending is increasing,’ he said.
‘We can deliver for the British people today and into the future.’
Shadow chancellor Rachel Reeves said Mr Sunak was ‘arguing with himself’ by offsetting the impact of the NI levy, and the Government’s plan did nothing for people on the edge of fuel poverty.
As the nation digests the government’s response to the mounting crisis:
- Fuel prices have hit new record highs, with figures from data firm Experian Catalist suggesting the average cost of a litre of petrol at UK forecourts yesterday was £1.67, with diesel at £1.79;
- The respected IFS think-tank has warned that there is a limit to what the government can do to ease the problems because Britain is fundamentally ‘worse off’ after the pandemic;
- The Treasury Select committee has cautioned that low-income households are particularly vulnerable and while sanctions against Russia were necessary they will also exacerbate the situation;
- The head of the Iceland supermarket chain has said some people are turning down potatoes at food banks because they cannot afford to cook them.
OBR charts summed up the scale of the tax rises the Chancellor has imposed – only a fraction of which have been unwound
The Spring Statement documents show that Mr Sunak has not spent all the windfall from higher growth after Covid
Rishi Sunak delivered his Spring Statement today (right). Boris Johnson (left) limbered up for the big event by taking a rowdy PMQs
How much would a 5p cut in fuel duty save drivers?
What is fuel duty?
Fuel duty is levied at a rate of 57.95p per litre for petrol and diesel.
It has been frozen at that level since March 2011.
What about VAT?
VAT is added on top, at a rate of 20 per cent of the combined product price and duty.
What are the latest average pump prices?
The average cost of a litre of petrol at UK forecourts on Tuesday was 167.3p, while diesel was 179.7p, figures from data firm Experian Catalist show.
This is an increase of 18p per litre for petrol and 27p for diesel over the past month.
Why have prices reached record highs?
Oil prices surged immediately after Russia’s invasion of Ukraine due to supply fears, leading to a rise in wholesale costs.
Prices were already increasing as global economies recover from the coronavirus pandemic.
How much will I save from fuel duty being cut by 5p per litre?
The RAC calculated this would reduce the cost of filling a typical 55-litre family petrol car by around £3.
Paul Johnson, director of the spected Institute for Fiscal Studies (IFS), said the £3,000 increase to the national insurance threshold would ‘more than compensate about 70 per cent of workers’.
But he voiced doubts the 5p off fuel duty would be in place for a year only, adding: ‘It hasn’t managed to increase even in line with inflation for more than a decade.’
‘And 5p not huge in context of prices up 20p+ per litre,’ he tweeted.
The package was announced after the pain for families was underlined with inflation hitting a new 30-year high of 6.2 per cent.
The figure for February is more than three times the Bank of England’s target, and a peak not seen since March 1992. There are fears it will go even higher, possibly to double digits – but the Office for Budget Responsibility watchdog said today that it expected a peak of 8.7 per cent in the fourth quarter.
Concerns have been raised that key goods such as chicken and wheat will see particular pressure due to global turmoil.
In the Commons, Mr Sunak stressed the need to build ‘a stronger, more secure economy’ and keep the public finances on track.
‘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 is expected to say.
‘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.’
Earlier, Boris Johnson took PMQs and conceded there is a ‘real cost of living crisis’.
Pointing to the £9billion package put forward in February to ease energy bills, Mr Johnson said: ‘We want to do more.’
Experts had warned that there is a limit to how much Mr Sunak can do to help Britons because the UK is simply ‘worse off’ after being hammered by the pandemic.
RPI inflation – which is used to calculate interest rates for much of the government’s massive £2.3trillion debt mountain – was 8.2 per cent in February in another sign of the threats Mr Sunak must balance.
The OBR expects the government will be paying £83billion in debt interest during the next financial year, four times this year’s figure.
Although it suggested that inflation will peak short of double-figures, the watchdog admits the picture could yet deteriorate.
‘If … energy prices stay at current levels beyond the middle of next year, the UK would face a larger and more persistent increase in the price level and fall in real household incomes,’ the OBR said.
‘If prices fall more quickly than currently expected the reverse would be true.’
In a grim summary of the state of play on inflation this morning, Office for National Statistics Chief Economist Grant Fitzner said: ‘Inflation rose steeply in February as prices increased for a wide range of goods and services, for products as diverse as food to toys and games.
‘Clothing and footwear saw a return to traditional February price rises after last year’s falls when many shops were closed. Furniture and flooring also contributed to the rise in inflation as prices started to recover following new year sales.
The headline CPI rate came in above expectations, underlining the pain being inflicted on families ahead of the Chancellor’s Spring Statement
‘The price of goods leaving UK factories has also been rising substantially and is now at its highest rate for 14 years.’
Despite alarm at the economic slowdown and rising interest payments on government debt, Mr Sunak is promising more support for millions of people who are set to be hit hardest by increasing prices.
Rishi offsets half the £12billion NI hike… with an NI cut
Rishi Sunak moved to alleviate the pain of a planned National Insurance rise for millions of workers today as he unveiled a massive increase in the threshold at which the tax is paid.
The Chancellor was thought to have been mulling an increase in the salary at which people begin making national insurance contributions (Nics) by a few hundred pounds from £9,568.
But he stunned MPs by increasing it by £3,000 to £12,570, an increase of more than 31 per cent.
But he rejected pressure from Labour and his own Tory backbenchers to scrap the 1.25 percent rise in Nics due to come in from next month in the face of rising living costs.
Analysis from This is Money shows that the move means that people earning more than £50,000 a year will still pay more in contributions. But all those paying less will see their Nics cut.
Mr Sunak told the Commons that the money was needed to help the NHS recover from the ravages of the Covid pandemic.
The NI rise has been branded ‘the worst-timed tax rise in history’.
But official figures yesterday revealed tax revenues are pouring into the Treasury again as the economy recovers from Covid. VAT revenues hit an all-time high, as did takings for other taxes including stamp duty and inheritance tax.
That has helped slash government borrowing – which is likely to come in around £30billion less than forecast this year.
The wave of inflation is also estimated to have given Mr Sunak a £12billion windfall after his decision to freeze tax thresholds for the coming years. Millions of people will be dragged deeper into the tax system as a result.
Briefing Cabinet earlier, Mr Sunak said the economic outlook is ‘challenging given the global shocks we are facing as a result of the conflict in Ukraine and rising inflation’.
According to a Downing Street readout, he said that ‘throughout the pandemic, the government has shown the British people we are on their side and we will continue to stand by them through the uncertainty that we now face’.
But he also pointed to the previous £9billion package of support for energy bills that was announced in February.
He said ‘this government would continue to take a responsible and sustainable approach in order to be able to grow a stronger, more secure economy for the future’.
The latest figures from the ONS revealed that inflation rose across 10 out of the 12 categories that feed into the index, with only communication and education not seeing increases.
Food prices have picked up as the global supply chain disruption and inflation pressures have begun to feed down to the supermarket shelves, with prices rising on a range of staple goods.
This is adding to already steep rises in petrol and energy prices, which have been hitting household finances hard.
But the ONS said the UK is ‘not alone’ in suffering surging costs, with Britain’s measure of CPI broadly in line with that seen in Europe, while it has been rising even faster in America – reaching 8.1 per cent in December.
The ONS said: ‘Many of the current drivers of this inflation are common across countries, with energy and fuel prices being subject to global market conditions and both the US and the UK seeing strong upward price pressure from used cars.’
A detailed look at the ONS data shows that among food prices rising the most, lamb continues to be high on the list, with annual Retail Prices Index (RPI) inflation of 12.4 per cent last month.
Fresh milk prices have also raced higher, up 10.1 per cent, with a 7.4 per cent rise for eggs, while processed vegetables and jams and sugar saw rises of 13 per cent and 12.4 per cent respectively.
Clothing and footwear was another category that suffered soaring inflation, with a record rise of 8.9 per cent on the CPI measure, and some of the biggest rises seen across womenswear, particularly trousers, dresses, short-sleeved tops and blouses, skirts, jeans and jumpers.
Families were also hit with price hikes for toys and games, including both computer games and more traditional toys, with CPI prices overall in the category rising by 4.2 per cent.
Helen Dickinson, Chief Executive of the British Retail Consortium, said shops were so far ‘successfully managing to limit cost increases for many essential groceries’.
‘Many supermarkets have expanded their value ranges to support individuals and households on lower incomes. Nonetheless, with retailers struggling to absorb these higher costs, shop prices look set to rise in the coming months,’ she said.
‘The situation in Ukraine is undoubtedly exacerbating existing cost pressures in the supply chain – from increased energy costs to higher global commodity prices.
‘Many households will also face far higher energy bills and NI contributions from next Friday.’
Mr Sunak had hoped to move beyond huge one-off measures after he ramped up spending to soften the blow to Britain’s economy from the COVID-19 pandemic.
But the Bank of England’s prediction that inflation will soon surpass 8 per cent as energy costs spike has prompted calls for more action.
Sir Charlie Bean, who was in charge of economic forecasts at the Office for Budget Responsibility until December, said the improving picture left the Chancellor with substantial ‘wiggle room’ to help families struggling with soaring bills.
Because it is a Spring Statement rather than a full Budget, the Chancellor did not do the traditional pose with his team and Red Box in Downing Street
Political artist Kaya Mar with his latest painting of Rishi Sunak near the Houses of Parliament today
Education Secretary Nadhim Zahawi (left), universities minister Michelle Donelan (centre) and Lord Leader Baroness Evans were among the ministers at Cabinet this morning
Foreign Secretary Liz Truss (left) and Environment Secretary George Eustice (right) were at the Cabinet meeting to hear details of the Chancellor’s package
Chancellor Rishi Sunak runs through his Spring Statement speech in his offices in 11 Downing Street yesterday
Public finances figures yesterday showed that the Chancellor has some wriggle room as borrowing has come in lower than expected
He suggested Mr Sunak had somewhere between £25billion and £50billion ‘to play with’.
Mr Sunak is on course to become one of the biggest tax-raising chancellors in history, with official forecasts predicting the tax burden will rise to 36.2 per cent of GDP over the next five years.
Speaking at the weekend, he bridled at the figures, pointing out that the massive cost of the pandemic had left him with no choice but to raise taxes. Mr Sunak said he was on a ‘mission’ to cut taxes.
Conservative mayor of the West Midlands Andy Street said this morning that Mr Sunak should be increasing tax thresholds to account for inflation.
‘I hope he will actually reconsider that because one of the ways we can put money directly into the hands of those who need it is move those thresholds forward,’ he told Today.
He also urged him to come back with another package of support for October.
Rishi Sunak is preparing to deliver his Spring Statement in the Commons later
‘I would hope that he will actually say for October, when the next price cap comes, there will be a further move and I hope it will be targeted, particularly through the Warm Homes Discount, so we really can think about those people who we have tended to call the ‘just about managings’, of whom there are many more in places like this than the affluent areas,’ he said.
He added: ‘One other thing I hope he will do is this is really about that group who want to manage, want to look after their own finances, the decision not to increase the thresholds around income tax and national insurance.
‘I hope he will actually reconsider that because one of the ways we can put money directly into the hands of those who need it is move those thresholds forward.’
Mr Johnson cautioned that Mr Sunak’s problems had got a ‘lot bigger’ over the past month and he cannot protect Britons from the cost-of-living indefinitely because the country is fundamentally ‘worse off’.
He told BBC Radio 4’s Today programme: ‘He’s got more cash than he expected…
‘The downside is that extra cash can buy less stuff because of all the inflation that we have got around.
‘The plans he set out for spending last year are much less generous than they were intended to be.
‘He thought inflation would be 4 per cent, it’s going to be 8 per cent. So he is going to be buying less schools and hospitals and all those sorts of things.
‘So his big choice is about in some senses whether he tells us, I’ve got all this cash I’m going to use it on other things like sorting out the cost of living crisis, or I’ve got all this cash and I’m going to use it to do wat I said I was going to do last October.
‘I think he is more likely to just spend in cash terms what he said last October, which means actually in real terms we will get less teachers, nurses and all those sorts of things.’
Mr Johnson said Mr Sunak had money to spend on the cost-of-living crisis in the short term.
‘What he can’t do if this is – and it increasingly looks like – a long-term increase in the cost-of-living and a long-term reduction in growth – what he can’t do economically is support us through that forever.
‘We are just worse off than we were. Energy prices are higher, our imports are more expensive, our exports are not any more expensive on the whole. We are worse off. Economically he cannot protect us forever.
‘But he can spend quite a lot of money in this coming year in order to smooth that impact on our living standards.’
Richard Walker, head of supermarket chain Iceland, said they were trying to keep costs down for customers but it is ‘coming at us from all angles’ on price pressures.
He told Today: ‘Some of these things are a short-term blip hopefully… (but) systemically if you look at it food has been too cheap for too long.’
Ministers hint that red tape could be delayed to ease price pressure on food
New red tape could be delayed in an effort to ease pressure on food prices, ministers have suggested.
Environment Secretary George Eustice said the government is ‘kicking the tyres’ of planned regulation in areas such as tackling obesity and climate change.
Mr Eustice reportedly told the Food and Drink Federation’s annual conference in London yesterday that food prices could rise by 8 per cent or more because production was heavily dependent on gas for energy and fertiliser, as well as the chaos in Ukraine – one of the world’s biggest wheat producers.
‘If you have such a sharp rise in the oil and gas price, and you see the price of wheat double, then it is inevitable there will be some impacts on food prices,’ Mr Eustice said.
Asked by The Times which products would be most affected, the Cabinet minister said: ‘Probably some of the sectors like poultry which are heavily dependent on the price of wheat for their feed … they have a situation where feed costs account for around half of all their input costs, and they’re seeing a cost pressure there of sort of 20 to 30 per cent. And so at some point that’s got to feed through the system.’
Mr Eustice admitted the situation was ‘very volatile’ and supermarkets already ‘feel they’ve been absorbing and buffering increased costs for some time’.
Mr Walker said inflation was ‘pushing 10 per cent’ on food and they were hearing worrying stories of customers in distress.
‘We’re hearing of some food bank users declining potatoes and root vegetables because they cannot afford the energy to boil them,’ he said.
Tony Danker, director general of the Confederation of British Industry (CBI), said the economy needs a ‘spring in its step’.
‘What we need the Chancellor to do today is to shore up confidence in the economy to make sure we keep growing, because if we don’t, these problems just get worse,’ he told Sky News.
Mr Danker added that in the current climate: ‘There’s a risk that confidence wavers, businesses stop investing, consumers stay at home – so inflation is hard to tackle.
‘If we don’t have tailwinds in our economy, then the headwinds overwhelm us and so the Chancellor has to double down on growth, he has to help hardest-hit households with the cost of living, he has to help lots of businesses who are dealing already with the rising energy costs – there isn’t a price cap – and he needs to encourage businesses to be confident and invest and grow.
‘That’s the only way we really get through the year ahead.’
Jackie Mulligan, founder of local shopping platform ShopAppy, said this is ‘no cost of living squeeze, it’s outright strangulation’.
‘The current trajectory of inflation poses an existential threat to independent retailers around the UK. If things carry on like this, the term profit margin will disappear from the English dictionary altogether,’ she said.
Tory MPs have urged him to cut taxes immediately – or risk slowing the recovery.
Steve Baker, a member of the Commons Treasury committee, said: ‘We should be cutting taxes now – it is what the economy needs. In particular, we should be halting the rise in national insurance, which is a tax on jobs and a tax on the young to pay for the healthcare of the old.’
Former Cabinet minister Sir John Redwood also called for the national insurance rise to go as part of a £20billion package of tax cuts. ‘The Chancellor says he is a tax-cutter by instinct, which is good to hear. But now is the time to show it – a tax-cutting Chancellor would be cutting taxes now.’
Rishi Sunak faces renewed calls to spike his national insurance hike in tomorrow’s mini-Budget
Figures released by HM Revenue and Customs yesterday revealed tax revenues in the financial year to date are up by £132billion on the same period last year.
Officials said the impact of the pandemic meant the figures could not be compared directly.
But several key taxes hit record levels. Inheritance tax raked in a record £5.5billion in the financial year from April to February, smashing through the previous record of £5.4billion for the 2018/19 tax year.
Stamp duty pulled in £18billion, up from the previous record of £16.4billion after a year of red-hot activity in the property market.
And VAT receipts are £23.8billion larger than the same time last year, at £150.2billion. Improved revenues have also led to a sharp falling in government borrowing.
Britain has borrowed £138.4billion in the financial year so far, with one month left to go, according to data from the Office for National Statistics.
This is less than half the £290.9billion of borrowing which the Government racked up over the same time a year earlier, when Mr Sunak
‘This is no cost of living squeeze… it’s outright strangulation’: Small business owners feel the pinch as inflation hits 30-year high
Britons have reacted with fear at the intensifying cost-of-living crisis today as rising prices across the board sent UK inflation soaring to a new 30-year high in February.
The Office for National Statistics (ONS) said Consumer Prices Index inflation rose to 6.2 per cent in February, up from 5.5 per cent in January and again reaching the highest level since March 1992, when it stood at 7.1 per cent.
The rise was higher than expected and comes after prices lifted across food, clothing and footwear and a range of products and services – which are crippling businesses trying to fight their way back following the pandemic.
Among those concerned are Olga and Jovan Sipcenoka, who own a restaurant in St Albans, Hertfordshire, and said they are receiving calls ‘every week’ from suppliers raising prices. The couple, who have three children, added that the concerns about inflation are ‘crippling’ and that they are ‘preparing ourselves for a recession’.
Others raising fears today were Adam and Natalie Bamford, who own Derby-based firm Colleague Box, and said it was a ‘strange and complex time’ for the business amid a ‘frightening increase in household expenses’.
In addition, Mariona and Robert Bolohan, co-founders at London-based translation agency Lotuly, said they were ‘extremely worried’ about the impact of inflation and that the price increases were ‘getting out of hand’.
Here is what a selection of Britons have said today about rising inflation and concerns over the cost of living:
Olga and Jovan Sipcenoka, who have three children and own Per Tutti restaurant in St Albans, Hertfordshire
Olga: ‘As a family-run business, the worry about inflation is crippling and with each day that passes we can feel its impact on our bottom line. Suppliers call every week with new price increases, which is really stressful.
‘For now, we haven’t increased our prices as we have to be in line with our local competitors including some very big chains, and our current dilemma is how long we will be able to swallow the extra costs without passing them onto the customer.
‘And if we do put prices up, how well will it be taken by our guests? Will they be able to afford to dine out as much as they do now?
‘We are a family of five and these are really worrying times. We are preparing ourselves for a recession, as the UK economy is currently facing a perfect storm.’
Adam and Natalie Bamford, owners of Derby-based gifting company Colleague Box
Adam: ‘It’s a strange and complex time balancing the books of business and the frightening increase in household expenses.
‘Having a business where both of the income earners rely on profits it’s an endless battle of increasing our product costs to ensure we take enough home each month just to cover the basics of living.
‘When we created the business, we had the ambition of wealth building but we are now resigned to the lofty ambition of covering costs and ensuring our employees are paid each month.
‘While business is currently very good, the costs going out the door are relentless and the increase in energy and National Insurance around the corner are another massive hurdle.’
Mariona and Robert Bolohan, co-founders at London-based translation agency, Lotuly
‘We’re extremely worried about the impact of inflation on our business. If people and businesses have less disposable income or money, that translates very quickly into reduced sales.
‘The cost of living is increasing enormously and that means we are being forced to take on work that doesn’t pay enough just so we can cover our backs.
‘This is such a vicious circle and it’s hard to get out of it especially as a small business owner without any outside help.
‘I’d definitely suggest the Government start working on capping the cost of certain types of basic foods and also bills.
‘The price increases we are seeing are getting out of hand, with some people reporting over £2,000 for gas/electricity in their next bill. Living with someone vulnerable makes these increases even harder to cope with.’
Jackie Mulligan, founder of the Shipley-based local shopping platform ShopAppy
‘This is no cost of living squeeze, it’s outright strangulation. The current trajectory of inflation poses an existential threat to independent retailers around the UK.
‘If things carry on like this, the term profit margin will disappear from the English dictionary altogether.
‘The thousands of bricks and mortar retail businesses we work with are having to cope with rising costs across the board at the same time as customers, understandably, are having to rein in their spending as their disposable income is being hit with a sledgehammer.
‘Independent retailers already have five and a half times more debt than they had pre-pandemic, and the rate at which inflation is rising will push many off the high street altogether, impacting communities and people’s access to local services.
‘In the absence of Government support, customers need to do whatever they can to support their local businesses. Use them or lose them.’
Lucinda O’Reilly, director at London-based The International Trade Consultancy
‘As a sole trader who works from home, many of my business and personal expenses are intertwined.
‘I’ve been making efficiencies and cost reductions in terms of who and where I buy things from and also thinking really hard about how I do things in the most efficient way regarding energy use and car journeys.
‘It takes time and energy away from focusing on growing my business and can be quite soul destroying after a while.
‘But I’m one of the lucky ones, at least I don’t have to make the choice between eating or heating my home as many people are doing these days.’
Craig Bunting, owner of Derby-based coffee shop Bear
‘It’s hard to identify a cost that isn’t going up at the moment and, as a business owner, it’s a nightmare knowing when and how to act. It’s important to acknowledge the cost of living increases our customers are experiencing. This has to be taken into account when making business decisions.
‘As a hospitality business owner, I believe the Government needs to do more for our sector, to support the jobs our industry creates and to protect against some of the incredible cost increases our businesses are seeing.
‘VAT should remain at 12.5 per cent and the business rates burden should be an immediate priority for hospitality, leisure and tourism going into the spring and summer.’
Sarah Loates, of Derby-based Loates HR Consultancy
‘The economy is running hotter than a boiling kettle, and many of our clients, especially those in the manufacturing sector, are being crippled with rising energy and labour costs.
‘As an HR consultancy, we don’t want to add to their woes by increasing our prices.
‘It’s like being in a boat with a hole, where we prudently reduce our costs and bail out the water, while more water seeps in through the hole.
‘Over the past three months we have seen our office lease, energy, salaries, IT, insurance and bank fees all increase.
‘And that’s before the National Insurance increases in April.
‘At some point we will have to increase our prices too, but we are reviewing our pricing model before we go down that route.’
Lee Chambers, a psychologist at Preston-based Essentialise Workplace Wellbeing
‘As a small business, we are agile and do what we can to mitigate cost increases.
‘While we are well aware we have to play the hand we are being dealt, it’s challenging as there are a multitude of things incrementally creeping up, which puts pressure on those who work with us, and our clients’ bottom lines too.
‘As dynamic and quick-moving as we can be, these things hit our bottom line very quickly and some of our clients are going through a tough time.
‘I’m expecting double digit inflation and for the Bank of England to step in, but I’m not sure it’s going to make much difference. People are trying to stay hopeful but behind the scenes the uncertainty is horrendous.’
Shirley Leader, director of Petersfield-based woman’s clothing boutique Velvet & Rose
‘The increase in inflation is deeply worrying.
‘Already as a small boutique owner, my energy bill is at a record high.
‘On top of that, it is buying season and we are getting less for our money as fabric prices and duty have increased.
‘We absorb what we can, but at some point something will have to give.’
Ruth Bradford, of Bristol-based activity pack company The Little Black and White Book Project
‘With each day that passes, my concern about inflation is growing as people simply aren’t spending.
‘As a consumer I totally get it, it’s not pretty out there, but as a business owner it feels like I’m on borrowed time.
‘All I can do is hope that the website traffic I am seeing does come back and convert at some point as people still seem to be largely browsing.
‘It’s just so hard to predict anything right now and I can’t help feeling it’s just going to get worse.’
Jenny Blyth, owner of London-based gifting company Storm In A Teacup Gifts
‘The current level of inflation means people just don’t have spare cash to spend on things like gifts.
‘Our sales have bottomed out, leaving a wake of stress and anxiety.
‘This inflation is not just draining our pockets, it’s putting a high price on our mental health and that is something which is meant to be priceless.
‘The Government needs to sit up and listen to our cries for help.’
Marianne Clarke, owner of Nottingham-based pet portrait and grooming company, Selston Groom and Train
‘Rising energy bills and the cost of living crisis mean we have stopped putting our heating on when we are cold.
‘I now only use the heating to dry clothes.
‘I wear my dressing gown on top of my normal clothes all the time unless I am working.
‘The cost of everything just seems to be going up and up.’
Gillian Ferguson, of Scotland-based Twisted Empire Bakes
‘My profit margins are being obliterated.
‘We’re now effectively making another mortgage payment for gas and electricity, while the energy companies are reporting record profits.
‘You couldn’t print how I feel about this.’
Taxing jobs is the economics of the madhouse
By Alex Brummer, City Editor for the Daily Mail
The cost of living is soaring – filling up the car and buying food at the supermarket is becoming more expensive by the day, while a sharp hike in energy bills is imminent.
With mortgage and borrowing costs also on the rise, the inflationary background to Rishi Sunak’s Spring Statement today could hardly be more stark.
The Chancellor insists he will ‘stand by’ hardworking families. Here’s how he can achieve that while encouraging wealth creation and making Britain the high-skills, high-pay economy we all want it to be.
The simplest way of easing inflation would be to consign to the dustbin the national insurance increase of 1.25 percentage points – forecast to raise £14billion in 2022-23 and designed to help clear the NHS waiting list and fund social care.
Taxing jobs when the country faces rising prices and a potential slump – something that has followed almost every previous energy crunch – is the economics of the madhouse.
Thanks to falling unemployment, receipts from self-assessment have soared by almost 22 per cent over the past 11 months, while income tax from those on payrolls has jumped by almost 14 per cent to £170billion – way ahead of last year’s £150billion.
The NI hike may have looked necessary last September before the jobs market took off. It is not anymore. Another way is for Sunak to rethink the corporation tax rise.
This is due to rise from 19 per cent to 25 per cent in 2023 in another effort to balance the budget. But lower corporation tax rates pay for themselves.
In 2009-10, the levy stood at 28 per cent and receipts were just over £40billion.
But in 2020-21, with the tax down to 19 per cent, receipts soared to almost £55billion – in spite of Covid.
It’s a celebrated paradox: the lower the taxes, the greater the profit incentive and the more tax generated.
Sunak also plans to incentivise companies to invest more by offering more tax breaks for Research and Development. No one could argue with that. But he needs to go much further and keep the headline rate competitive.
And to ease the cost of living crisis, the temporary VAT cuts for hospitality introduced during Covid should be reinstated.
Britain’s hospitality industry is still reeling from the pandemic and now inflation means that many customers will stay at home because of rising prices.
Cutting the VAT on energy bills, a Labour Party proposal, could also help and release cash for spending elsewhere.
As for fuel duty, the Chancellor’s suggested 5p cut per litre will help – but looks measly given the prices at the pumps. Sunak should also reform business rates. These are deeply unfair.
As more sales have moved to the online giants, the burden on local shops and businesses has caused desolation on high streets. What is needed is a new ‘micro-charge’ added to every online sale.
Meanwhile, during Covid, cutting stamp duty to 0 per cent on homes costing up to £500,000 helped both to stimulate deals and provide an unexpected 70 per cent boost to the Exchequer.
Sunak should reintroduce the stamp-duty holiday to stimulate the market and encourage transactions. And finally, the Chancellor should encourage wealth creation.
There is a tendency in Britain, particularly on the Left, to abhor dividends, bonuses and gains from entrepreneurship.
But taxes on dividend income, capital gains and inheritance are critical to funding public services. We should be encouraging enterprise and entrepreneurship by making it clear wealth will not be penalised.
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