Spring Statement: What does it mean for Wales?

Rishi Sunak said the basic rate of income tax will drop by a penny by the end of this parliament

Chancellor Rishi Sunak has announced his Spring Statement, with moves to cut tax on fuel and a rise in the amount people earn before they start paying National Insurance.

The basic rate of income tax will also be cut by a penny in two years time.

And there will be small amounts of money for the Welsh government from plans to help vulnerable families in England.

It comes as the chancellor said the future of the economy was uncertain, and it was too early to know the impact of the Ukraine war on the economy.

With rising energy costs, analysts say too that the UK faces the largest fall in living standards since records began in the 1950s.

Conservatives said the measures will ease pressures on the cost of living, but the Welsh government said the spring statement did not recognise the struggles people are facing.

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Tax changes

Rishi Suank's main tax changes will apply in Wales.

Tory MPs had been pressing for the planned national insurance rise to pay for health and social care to be rolled back.

That did not happen but Mr Sunak announced that the threshold that earners pay the tax will be raised to the same threshold they begin to pay income tax - £12,570.

It comes into effect in July, although the increase in national insurance begins in April.

The Treasury said it would benefit 1.2m workers in Wales with a "typical employee" saving more than £330 a year, and a typical-self employed person saving over £250.

A total of 1.26m people in Wales pay the basic rate of income tax and Mr Sunak announced that he intends to cut it from 20p in the pound to 19p.

That would not happen, though, until 2024.

Welsh ministers have never announced any plans to vary income tax but they have the powers to do so - Labour vowed in 2021 to leave tax rates alone until at least after the recovery of the economy from Covid.

Meanwhile forecasters at the Office of Budget Responsibility (OBR) said that the tax cuts announced undo only a quarter of the value of tax rises announced last year, and a sixth of the rises Mr Sunak has announced since becoming chancellor.

The fuel duty cut of 5p a litre, which he said was worth more than £5bn, comes amid rising petrol and diesel costs in part fuelled by the war in Ukraine.

The chancellor announced it would apply from 18:00 GMT and will run for a year - how much of an impact it has will depend on to what extent it is passed on by retailers.

The move will please Welsh Conservatives in the Senedd that had called for fuel duty to be cut.

There was no announcement for those on benefits.

Figures from January 2022 show that more than 394,000 are on universal credit or other benefits in Wales.

Gloomy forecast

The announcement was coupled with gloomy forecasts from the OBR.

Living standards are expected to drop by 2.2% this year, their largest fall in a financial year since records began 66 years ago.

Energy prices could push inflation to a 40-year high of 8.7% in the last few months of 2022.

It projected that tax hikes and rising costs would mean living standards would not recover to pre-pandemic levels until 2024-25.

What does not apply in Wales?

One of the measures announced to help vulnerable households will not extend to Wales.

The Household Support Fund is England only - but Rishi Sunak's plan to double the money available to £1bn.

England-only measures will trigger an extra £27m for the Welsh government, which has an annual budget of £20bn.

How have businesses reacted?

Louise Luporini, co-owner of Kardomah Cafe in Swansea, had hoped for a cut in the VAT rate for businesses.

She said: "As a business we could have done with more help with energy costs, with VAT.

"It's very difficult for us because we try not to pass it on to the customer and we try to absorb as many price increases as we can.

"This year is going to be a struggle. We're going to batten down the hatches and just try and survive."

Louise Luporini had hoped for a cut in VAT rates for businesses

Clare Tucker, who works in the cafe, said although there was "some leeway" with a rise in the threshold for national insurance contributions, it would not help with rising fuel and food bills.

She said: "It's not looking very bright with everything going up and unfortunately everything will continue to go up."

How have Welsh politicians said?

Secretary of State for Wales Simon Hart said the announcement "tackles the huge challenges facing Wales and the rest of the UK, with a package of support to ease the pressures everyone is experiencing around the rising cost of living".

In an interview with BBC Wales he left the door open for Rishi Sunak to come back with further announcements if the measures announced left too many people without enough help.

"The chancellor has always been pretty pragmatic about things," the Tory MP said.

But Welsh government finance minister Rebecca Evans argued the chancellor "just doesn't get it" and "doesn't understand the kind of pressures which are coming towards ordinary families".

She said he could have taxed oil and gas companies and used income tax instead of National Insurance to raise funds.

Ms Evans welcomed the change to the threshold but said it was a recognition by the chancellor that it was "the wrong mechanism at this point to be raising funds".

Wales TUC estimated that average annual wages will fall by £552 this year, based on inflation and the OBR's forecasts.

"The chancellor needs a reality check - we're in the biggest wages and bills crisis in living memory but he didn't announce anything close to the emergency support which families across Wales desperately need," General Secretary Shavanah Taj said.

Plaid Cymru said it would prefer to increase income tax to pay for health and social care as a rise in National Insurance was unfair on workers.

The party's Ben Lake, MP for Ceredigion, said: "Today's statement finally acknowledges that families are facing a cost of living crisis, but it is disappointing the chancellor failed to bring forward measures to actually address the scale of the problem.

"The seriousness of the crisis called for a fundamental change of approach, not further tinkering around the edges a broken strategy."

Welsh Liberal Democrat leader Jane Dodds said: "Today the chancellor has given rural regions nothing to help them cope with the crisis my residents are facing in being able to heat their homes.

"Welsh Conservative MPs are clearly failing to influence the chancellor despite almost exclusively representing rural parts of Wales."

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