Money saving expert Martin Lewis has reacted to the UK Government's new plans on how it intends to help struggling families. During the Spring Budget statement on Wednesday, Chancellor Rishi Sunak vowed to stand by British families as the cost of living crisis deepens.
Amongst the announcements, Mr Sunak announced that National Insurance starting thresholds will rise to £12,570 from July, meaning people across the UK will keep more of what they earn before they start paying personal taxes. The cut, worth over £6 billion, will benefit almost 30 million working people with a typical employee saving over £330 in the year from July.
Mr Sunak also announced that fuel duty for petrol and diesel will be cut by 5p per litre from 6pm on Wednesday, March 23 to help drivers across the UK with rising costs – a tax cut worth £2.4 billion. To let people keep more of what they earn, the basic rate of income tax will also be cut by 1p in the pound in 2024, when the OBR expect inflation to be back under control, debt falling sustainably and the economy growing. You can find the key points about everything announced today here.
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The Chancellor also set out a series of measures to help businesses boost investment, innovation, and growth – including a £1,000 increase to Employment Allowance to benefit around half a million smaller firms. But although the measures might sound promising, financial expert Martin Lewis - who founded website MoneySavingExpert before selling it on - wasn't overly impressed when he live tweeted his analysis on the statement. Here's how Mr Lewis reacted the the Spring Budget.
Energy measures
Firstly, Mr Lewis listed the chancellor's three immediate measures to tackle the energy crisis:
- Motorists' cut in fuel duty by 5p per litre until March 2023
- Removal of VAT on solar panels, heat pumps or insulation insulation and wind and water turbines
- Vulnerable household targeted support. Household support fund with £500 million new funding available through local authorities from April.
Analysing the three changes, Mr Lewis wrote: "If that's all he's doing on energy - it is limited and won't impact the majority of households who will see a likely £1,300 average increase in year-on-year bills by October. My head has sunk. I just hope there's a rabbit to come out of the hat."
National Insurance
It was announced that national insurance starting thresholds will rise to £12,570 from July. It means people across the UK will keep more of what they earn before they start paying personal taxes. You can get more stories like this by subscribing to our newsletters.
Mr Lewis said the decision was a "good call". He wrote: "As predicted he is confirming the 1.25% point rise in National Insurance rate (so people will pay roughly 10% more NI than before) for the health and care levy."
He continued: "This is the big one. Increasing the National Insurance threshold so it now matches Income tax from July. That £3,000 rise of threshold to £12,570 is a gain of £330 a year And more than offsets the 1% rise for many on lower incomes...My rough mental calculation is that those who earn under £39,000 will see no rise in NI (from July) and most see a cut. Those who earn over that amount will see a rise (This is from combining new 1.25% point higher rate, with the £3,000 starting threshold)."
He added that the Institute of Fiscal Studies did the numbers in detail and that his calculation was a little high. He also said people on Universal Credit could be adversely affected by the threshold rise.
He said: "Still double-checking, but it's likely those that get Universal Credit will see around half the gain from the increase in the National Insurance threshold eaten away due to tapering. Ie UC is based on net income, which will increase, so UC will drop."
Basic income tax
From 2024 it was announced that the basic rate of income tax would be cut from 20p to 19p in the pound. Mr Lewis said: "So with a 1p cut in income tax basic rate in 2024, looks like we know when the next general election is then."
Overall initial response
Following his series of tweets, Mr Lewis posted a video on his Twitter account showing his initial reaction to the budget. In the video, he said "On energy, [it's] not particularly generous. We know we've got the £150 council tax rebate coming for those in bands A to D in April...and the more controversial loan not loan scheme coming in October. So, limited help for energy, but I think what the chancellor would argue is that there's the household support fund to help the most vulnerable in energy and the cut in national insurance should offset it a bit.
"None of this will offset totally the rise in energy bills which are likely to be around £1,300 year on year increase in October, but it will mitigate it somewhat. And then his (Mr Sunak's) rabbit out of the hat is that from 2024 - likely to be an election year - income tax or basic rate of income - will drop to 19p. I'm not going to talk about that a lot. It's a long time away and it ain't going to help anyone right now."
