Retailers in Northern Ireland have branded Chancellor Rishi Sunak’s Spring Statement announcements a missed opportunity.
The Chancellor said 70% of workers will get an effective tax cut as he raises the threshold for paying National Insurance (NI) by £3,000. He also announced a 5p cut to fuel duty to come into force at 6pm tonight and said the basic rate of income tax will go from 20% to 19% by the end of Parliament in 2024.
However, the Office for Budget Responsibility said that the Spring Statement only unwound a sixth of the tax rises imposed since February 2020.
UK households are set to see the biggest drop in their spending power in 2022-23 since records began in 1956, due rising prices combined with the impact of tax increases, according to the OBR.
The UK economy is forecast to grow by 3.8% this year, according to the OBR – a sharp drop from its previous prediction of 6.0%. The economy is then forecast to grow by 1.8% in 2023 and 2.1% in 2024.
The OBR predicted UK inflation is now set to average 7.4% this year – the highest since August 1991 – as the Ukraine crisis will further disrupt supply chains and send energy bills soaring. It had previously forecast Consumer Prices Index inflation to average 4% in 2022.
Real household disposable incomes per person – the money people have to spend after covering essentials, and taking into account inflation – are forecast to fall by 2.2 per cent in 2022-23, the biggest fall in a financial year since the Office for National Statistics began keeping records.
Reacting to the Chancellor’s Spring Statement, Retail NI Chief Executive Glyn Roberts said: “While it is welcome that the Chancellor is to cut Fuel Duty by 5p per litre and increase Employment Allowance NIC payments, this statement does not begin to tackle the perfect storm of cost increases facing our members.
“It is not just a cost-of-living crisis we face; it is a cost of doing business crisis as well. Increasing National Insurance for business is the wrong tax at the wrong time and will limit economic growth at a time when we need it more than ever. This is a missed opportunity.”
Ann McGregor, Chief Executive, Northern Ireland Chamber of Commerce and Industry (NI Chamber) said: “The Spring Statement falls short of the action businesses needed to see today. While there are some positive announcements that firms will welcome, it did not fundamentally address the huge cost pressures they are facing.
“For example, while cuts to fuel duty are welcome, in reality, the reduction is small when compared to the larger tsunami of surging costs that is bearing down on firms and households.
“The Statement lacked the kind of decisive action which businesses, who are already struggling with a rapidly escalating ‘cost of doing business’ crisis, needed to see. Smaller firms are particularly exposed as they have neither the protections, or financial support provided to households, nor the negotiating power of larger businesses.
“As the economic outlook is likely to get worse before it gets better, many firms will be forced to continue raising prices, further fuelling the cost-of-living crisis. Businesses are braced to face some gruelling weeks and months ahead. More is needed to support them and protect jobs through the domestic and global economic shocks to come.”