Andrew Hubbard, Editor-in-chief of Taxation magazine gives his reaction to the Spring Statement 2022.
REACTION: SPRING STATEMENT 2022
A few weeks ago the smoke signals from the Treasury suggested that the Chancellor would have nothing to say today about tax. By the beginning of this week it seemed that everything had changed and tax would now be centre stage. I even saw one report that suggested Rishi Sunak would unveil a major reform of corporation tax, so we really went into today’s statement blind. Would we be facing another all-nighter ploughing through thousands of pages of press releases or would we be able to sit back and enjoy afternoon tea?
It became pretty clear early on in the speech that the support for lower paid families would have to be balanced with the impact on the economy of the Ukraine conflict, particularly a predicted inflation rate of more than 7%. Even a few weeks ago it could never have occurred to the Chancellor that he might have to announce that all of his assumptions about the headroom in the economy could be wiped out by the consequences of the invasion.
I suspect that without this the Chancellor would have been bolder in making immediate changes to the system, but he has had to temper his ambition. Nonetheless there were some notable announcements. A rise in the NIC threshold was widely predicted but there might be some surprise that a full £3,000 increase will be introduced almost immediately. Similarly had the rate of fuel duty not been cut it would have been a shock. The VAT reduction on energy saving materials was something of a rabbit out of the proverbial hat – but then we knew that a rabbit would be released at some point during the speech.
To support these immediate announcements we have the grandly named ‘tax plan’. I have to say that I was expecting something more substantial than the relatively short document that was published, this seems to be nothing more than a rehashed version of today’s speech. The direction of travel is clear with the slogan ‘capital, people, ideas’, but we will have to await the detail until consultation over the summer. Provided that there is genuine consultation over the way that the reforms are implemented then it will be worth the wait.
The Chancellor finished with an impassioned announcement of a reduction in the basic rate of income tax to 19%, but not until April 2024. Coupled with the NIC changes this is a radical reshaping of the way the tax system will impact on most earners and my colleagues and I are already scratching our heads trying to work out the consequences of all of this. If the Chancellor manages all of this without creating some anomalies he will do better than any of his predecessors, of whatever political persuasion, have managed to do. Watch this space...
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