Historic markers and milestones in 2022 spring statement
Rishi Sunak’s spring statement promised the first cut in basic income tax by a Conservative chancellor for more than 25 years, but came with economic forecasts that confirmed the UK was heading for its highest tax burden since the late 1940s, as well as the biggest drop in disposable income since records began in the 1950s.
Here are some of the key historic markers and milestones in the latest economic data.
– Highest annual inflation rate since 1991
The UK’s annual rate of inflation is forecast to hit 7.4% in 2022, according to the Office for Budget Responsibility (OBR).
This would be the highest level for more than 30 years – just short of the 7.5% reached in 1991, when the UK was in the middle of recession and John Major was prime minister of a Conservative government.
At the Budget last October, inflation in 2022 was forecast to average 4.0% this year. The sharp jump in the forecast, to 7.4%, reflects how quickly the state of the economy has changed in the past few months, thanks to the surge in the cost of living.
Meanwhile, quarterly inflation is expected to peak close to 9% in October to December of this year – close to the highest level in around 40 years.
– First cut in basic rate of income tax by a Tory chancellor since 1996
Rishi Sunak is the first Conservative chancellor of the exchequer for 26 years to announce a cut in the basic rate of income tax.
The last time was in November 1996, when Ken Clarke unveiled a cut in the basic rate from 24% to 23%.
Labour chancellors reduced the level still further in 2000 and 2008, but there have been no cuts since then, despite a string of Tory chancellors since 2010.
Mr Sunak said he intended to lower the basic rate of tax to 19% by May 2024.
– Highest tax burden (as % of GDP) since 1949/50
The net tax cuts announced by Rishi Sunak in his spring statement offset around a sixth of the net tax rises he has introduced since becoming Chancellor in February 2020, along with just over a quarter of the personal tax rises he announced last year, according to the OBR.
But the overall tax burden is still set to rise from the equivalent of 33.0% of GDP (gross domestic product, or the total value of the economy) in 2019/20 to 36.3% by 2025/26: the highest level since 1949/50, during the Labour government of Clement Attlee.
– Biggest drop in disposable income since the 1950s
The jump in inflation, together with the net rise in tax from April this year, means real household disposable income per person is forecast to drop by 2.2% in 2022/23.
This is the largest fall in a single financial year since comparable records began in 1956/57.
But the drop might have been even greater.
Measures announced by the Government since October last year have offset a third of the overall fall in living standards that would otherwise have occurred in the coming 12 months, the OBR said.
– National insurance to rise for only the fourth time in four decades
Mr Sunak confirmed that next month’s rise in the rate of national insurance from 12% to 13.25%, first announced last year, would go ahead.
This would be only the third increase in national insurance since the turn of the century, and only the fourth rise in nearly 40 years.
– Highest debt (as % of GDP) since 1962/63
Public sector net debt in the UK for the financial year ending March 2022 is now forecast by the OBR to reach the equivalent of 95.6% of GDP.
This would be the highest level since the end of the financial year 1962/63, when debt stood at 98.3% of GDP – a time when Harold Macmillan was Conservative prime minister and The Shadows were at the top of the singles charts with the guitar instrumental Foot Tapper.
– Fuel duty cut for the first time since 2011
Fuel duty has been held at 57.95p per litre in cash terms for more than a decade.
It has now been temporarily cut by five pence to 52.95p – the first reduction since March 2011, when it was cut by a penny.
It will be held at this level for 12 months, a decision that the OBR forecast will cost the Treasury £2.4 billion.
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