Spring Statement: The moves Rishi Sunak decided not to make and why they matter

Rishi Sunak has offered some new help through the tax system for millions of workers worried about the mounting cost-of-living crisis and the impact of the Ukraine war on the economy.

The chancellor cut 5p off fuel duty and eased some of the burden from the forthcoming national insurance hike by raising the threshold at which people start paying by £3,000.

However, Labour dubbed the chancellor “Alice in Sunak-land” and accused him of ignoring the scale of the crisis since there was no new help on energy bills or benefits. The Independent took a closer look at what he left out.

Universal Credit and other benefits

The chancellor chose not to act on calls from Labour, campaigners and experts to boost universal credit and other benefits to keep pace with inflation and ease the burden on the very poorest.

While benefits will increase 3.1 per cent next month as previously planned, Mr Sunak did not announce any further increases – despite inflation jumping to 6.2 per cent.

Institute of Fiscal Studies (IFS) director Paul Johnson said it would not been enough to meet expected inflation levels of 8 per cent – and warned that those on means-tested benefits were facing cost-of-living increases of 10 per cent.

The IFS expert said it meant a “big cut in living standards” for those on the lowest incomes. “What was completely missing was anything for people on universal credit or the state pension,” said Mr Johnson.

The Trussell Trust – the nation’s largest network of food banks – said it would mean “many more people will have no option but to use a food bank” this year.

Mr Suank did say he would double the emergency Household Support Fund – aimed at allowing local councils to distribute hardship funds to the very poorest – to £1bn.

But Citizens Advice said the chancellor’s statement was “very disappointing … it will barely touch the sides of the crisis and the unprecedented demand we’re seeing”.

Energy bills and windfall tax

Mr Sunak resisted Labour and Lib Dem demands for a windfall tax on oil and gas giants, after the opposition urged him to raid record profits and use it to ease the burden on families struggling with energy bills.

In fact, there was nothing new in the chancellor’s spring statement that would reduce household bills, despite record inflation and the added impact of Russia’s Ukraine invasion.

The chancellor had already announced a £200 loan for gas and electricity payments from the autumn, although not until the price cap jumps 54 per cent in April – with further hikes expected in October.

Labour’s shadow climate secretary Ed Miliband tweeted: “The rise in energy bills is a national emergency. Rishi Sunak thinks £200 of loans is the answer. He just doesn’t get it.”

Money saving expert Martin Lewis said his head “sunk” following Mr Sunak’s plan. He said it “won’t impact the majority of households who will see a likely £1,300 average increase in year-on-year bills by October”.

Green levies on energy bills

Some “net zero” sceptic Conservatives had been particularly keen to see the chancellor cut VAT and green levies on energy bills.

But Mr Sunak decided to keep the green levies aimed at paying for energy efficiency measures and the move towards renewable energy.

Backbench Tories had also urged the chancellor to use some of “financial headroom” to go further on tax cuts, after reported forecasts showing that the deficit was better than expected this year.

But Mr Sunak set aside some of the better-than-expected revenues for dealing with the deficit, rather than investing the full sum in driving down the cost of living.

The chancellor did announce that VAT will be cut to zero on energy efficiency products such as solar panels, heat pumps and insulation for the next five years.

But Green MP Caroline Lucas claimed there was “a climate-shaped hole at the heart of this statement” – saying the zero VAT incentive was not enough to deliver a “home retrofit revolution”.

Spending on military

Both Labour and Tory MPs had urged the chancellor to boost defence spending in light of Russia’s war on Ukraine, and the heightened threat level the invasion brings.

John Healey MP, shadow defence secretary, said there was a “deafening silence” from Mr Sunak when it came to defence spending.

“The spring statement had no halt to army cuts, no review of defence spending, no reform of military procurement and no change to the real cut in day-to-day MoD spending which means less money for forces recruitment, training, pay and families,” he said.

Mr Sunak said that there was a “moral responsibility” to help Ukraine and impose sanctions on Russia – but warned it would not be “cost-free” for the UK economy.

Fall in living standards and tax burden

Mr Sunak claimed his statement amounted to “the biggest net cut to personal taxes in over a quarter of a century”.

But the Office for Budget Responsibility (OBR) said the tax burden is set to hit its highest level since the 1940s. The amount of tax paid compared to gross domestic product will hit the highest level since the years after World War II.

The chancellor also failed to mention that the OBR predicted the biggest drop in living standards in more than 60 years. The public body predicted a significant cut in disposable incomes – saying it would be the biggest drop in spending power since records began in 1956.