After chancellor Rishi Sunak gave his Spring Statement in the House of Commons on Wednesday, numerous think tanks and industry bodies have been offering their take on its contents.
The think tank, the Resolution Foundation, is concerned that as costs continue to rise over one million UK residents could be pushed below the poverty line, while the membership body for not-for-profit care and support sector organisations, the National Care Forum, believes that the chancellor’s measures only create more uncertainty around social care funding for the future.
After the government’s spending watchdog, the Office for Budget Responsibility [OBR] forecast the biggest fall in living standards since records began, the Resolution Foundation published its estimates that as many as 1.3 million people may not be able to afford basic necessities from April onwards.
The OBR has predicted that inflation could peak as high as 8.7 per cent in the fourth quarter of the year, the highest rate of increase seen in 40 years.
The chancellor conceded that “uncertain times” were ahead but defended his measures after having taken “exceptional” action during the Covid-19 pandemic to protect jobs and businesses.
He also insisted that the plan “going forward is to reduce taxes for people” and that the measures in the Spring Statement were “indeed tax cuts” to help ease the squeeze on households.
The three standout measures in the Spring Statement were a 5p fuel duty cut, a raising of the income threshold for paying National Insurance from £9,600 to £12,570, and a promise to cut the basic rate of income tax by one per cent by the end of the current Parliament in 2024.
However, Sunak opted to press on with the 1.25 per cent increase in National Insurance dubbed the health and social care levy, which the Resolution Foundation said in its study would push 1.3 more million into poverty, raising the total number of Brits considered to be below the poverty line to 12.5 million.
Torsten Bell, the Resolution Foundation’s chief executive, called the measures a “big but poorly targeted policy package” that would only provide “some help” to families on middle and higher incomes.
Bell said: “It [the Spring Statement] means we're all getting worse off, and at the bottom end you're having to cut essentials because you don't have lots of luxury spending to go in the first place. I think that is really serious.”
The think tank has estimated that when higher costs are factored in, typical household income could fall by £1,100, with only those earning over £49,000 per year set to pay less tax in two years’ time.
Although Sunak did announce £500 million more in funds to local authorities to help vulnerable households and had already announced the energy bill rebate, Bell hit out at his failure to provide further support.
“I think when we look back it will look like an odd decision, given we know where the impact of the next year is going to be felt,” he said.
In the care sector, reaction to the chancellor's measures on National Insurance was mixed. While welcoming the increase in the National Insurance threshold to help working carers, the National Care Forum’s CEO, Vic Rayner OBE, warned of uncertainty around how much funding would be left available for social care through the levy as a result of the move.
Rayner said: “We welcome the announcement of the increase in the National Insurance threshold by £3,000, equalising it with the income tax threshold, which we hope will help many of those working in social care from July onwards. The 5p cut in fuel duty is also welcome and will also help both employees and employers but is in no way sufficient to deal with the price increases that will fall particularly hard on domiciliary care provision.
“At this stage it is unclear what effect the change in National Insurance thresholds will have on the overall amount of funding for health and social care raised through the National Insurance levy.”
Criticising the level of funding reserved for social care in the plans for the levy prior to the Spring Statement, Rayner warned that ministers could ill afford to let funds set aside for the industry drop even further in the aftermath of the chancellor’s latest measures.
“The amount of money going from the levy to support social care is already too low - at £5.4 billion out of a previously estimated £36 billion – and the government cannot allow any reduction in the total promised for social care as a result of this Statement.”
Photo by Tara Clark on Unsplash
