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Written by Wesleyan

Spring statement reaction 2022

financial planning
2 min read

The Chancellor Rishi Sunak was under pressure to tackle the growing cost-of-living crisis in today’s Spring Statement.

He stood to address the House of Commons against a backdrop of soaring inflation, with prices rising at their highest rate for 30 years as fuel, energy and food costs surge.

Let’s look at the key announcements from the Chancellor today and how they may impact doctors, dentists and teachers.

Tax

Rishi’s ‘rabbit out of the hat’ announcement was a 1% cut in the basic rate of Income Tax, from 20% to 19%, from April 2024.

It was backed up by an increase to the National Insurance threshold, from £9,568 a year to £12,570, bringing it in line with the Income Tax personal allowance.

It was a move designed to soften the impact of a looming 1.25% NI rate hike next month, which will fund the NHS and social care.

But Nathan Wallis, Chief of Staff at Wesleyan Group, said: “While the Chancellor’s announcement today was more generous than expected, it still does not go far enough.

“Some people are being kept awake at night with impossible choices due to the cost-of-living crisis and this will do little to ease the burden.”

Earnings

It was disappointing not to hear any update after the freeze on public sector pay was lifted at the last budget.

Negotiations between unions and pay review bodies are underway, but any increase is unlikely to keep pace with inflation, which is currently at 6.2% and could top 10% by the end of the year.

Alec Collie, Head of Medical at Wesleyan Group, said: “Below-inflation pay awards seem likely and will represent another real-terms pay cut for doctors, teachers and other public sector workers.”

Cost of Living

One of the most anticipated announcements today was a 5p cut to Fuel Duty, which makes up more than a third of the price charged at the pumps.

Energy costs were also addressed to an extent, with the Chancellor announcing the removal of VAT on energy saving devices like solar panels for the next five years.

But Nathan Wallis, Chief of Staff at Wesleyan Group, concluded: “The Chancellor’s announcements today go some way to addressing the very real challenges being faced in households across the UK, but are unlikely to go far enough.

“Many households are now focusing on how to manage day-to-day costs but dipping into pensions or savings to pay bills –could have significant implications on people’s finances in the future.

“For those that can afford to put money aside for the longer term, it’s crucial to make sure savings are working as hard as possible by considering investments, which give savings a shot at real-term growth.”

If you have any questions about any of the issues raised in today’s Spring Statement, get in touch with a Specialist Financial Adviser from Wesleyan Financial Services, who will be happy to talk through your options.