Spring Statement 2022
Contents |
[edit] Introduction
The chancellor delivered the Spring Statement on 23 March 2022. He said forecasts from the Office for Budget Responsibility showed the economy would grow by 3.8% this year. Gross Domestic Product would grow by 1.8% next year, 2.1% in 2024, 1.8% in 2025, and 1.7% in 2026.
In October, the Office for Budget Responsibility forecasted growth of 6% for 2022 as a result of recovery from the Covid pandemic. In 2021 the economy grew by 7.5%, after the decline of 9.4% in 2020 during the first wave of the pandemic, the largest in a century. The Consumer Prices Index (CPI) shows inflation has risen to a 30-year high in recent months.
Below are some of the key items covered by the Spring Statement that are of relevance to the construction industry.
[edit] Fuel duty
Coming into effect as of 6pm on the 23rd of March, and only the second reduction in 20 years, a cut of 5p per litre, lasting 12 months. RAC Fuel Watch indicates this will reduce filling up an average tank by around £3.
[edit] Energy Saving Measures (ESMs)
Coming into effect in April 2022 a time-limited cut to zero from the 5% VAT rate for households installing things such as solar panels, heat pumps or insulation.
Coming into effect in April 2022 the government’s will increase the Household Support Fund by £500 million, as was done in October, to give a total increase of £1bn.
Coming into effect from April 2022 to support the decarbonisation of non-domestic buildings, the government is introducing targeted business rate exemptions for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief for eligible low-carbon heat networks with their own rates bill.
[edit] Small business
The business rates multiplier will be frozen in 2022-23, a tax cut worth £4.6 billion over the next five years. Eligible retail, hospitality, and leisure businesses will also benefit from a new temporary 50% Business Rates Relief worth £1.7 billion. The package of changes is worth £7 billion over the next five years meaning; the average pub, with a rateable value of £21,000, will save £5,200, the average convenience store, with a rateable value of £28,500, will save £7,000.
To help SMEs gain the skills needed, the government is subsidising the cost of high-quality training. Help to Grow: Management offers businesses 12 weeks of leadership training through the UK’s top business schools, with the government covering 90% of the cost. The cost of apprenticeship training is 95% subsidised for SMEs that do not pay the Apprenticeship Levy.
Extended to 31 March 2023, the temporary £1 million level of the Annual Investment Allowance, support for capital expenditure provides relief for investment across over a million SMEs.
The government is also helping firms adopt new digital technologies, with Help to Grow: Digital, offering eligible SMEs a 50% discount on approved software worth up to £5,000.
[edit] Income tax
Coming into effect in 2024, the UK’s basic rate of income tax will be cut from 20% to 19%, a £5bn tax cut for more than 30 million people.
[edit] National Insurance
Coming into effect in April 2022, eligible employers will be able to reduce their employer National Insurance Contributions bills by up to £5,000 per year – a tax cut worth up to £1,000 per employer. As a result, businesses will be able to employ four full-time employees on the National Living Wage without paying employer National Insurance Contributions.
Coming into effect in July the National Insurance threshold will be lifted by £3,000 to £12,570 creating the “largest single personal tax cut in a decade”. This will raise the National Insurance Contributions threshold in line with the point at which people start paying income tax. This will give 30 million people £330 each at a total cost of £6bn.
[edit] Employment allowance
The employment allowance will be increased from £4,000 to £5,000, giving a tax cut of up to £1,000 to 500,000 small businesses
[edit] R&D tax credits to be reformed
Research and development tax credits are to be reformed with the potential to make the R&D expenditure credit more generous this autumn, the statement goes into some depth to explain its current strategy and intentions.
[edit] Ukrainian support
The government has committed around £400 million in urgent economic and humanitarian support to Ukraine since the invasion, including fiscal support grants, donations and humanitarian aid, ready to provide up to $500 million in guarantees for multilateral lending to Ukraine. ‘Homes for Ukraine’ and the Ukraine Family Visa Scheme are supported through local authorities with £10,500 per person for support services, and between £3,000 and £8,755 per pupil for education services, and £350 per month for sponsors for up to 12 months.
[edit] Russian sanctions
Asset freezes have been imposed on Russian banks, collectively holding more than £250 billion in assets, and on over 1000 high-value individuals, entities and subsidiaries. The government has also barred the Russian state and over 3 million Russian companies from raising funds in the UK. Additional import tariffs of 35% on around £900 million of Russian imports, imposed export bans on high-end luxury goods to Russia, barred Russian ships from the UK, and prohibited Russian aircraft from operating in UK airspace. There is a commitment to phase out imports of Russian oil and oil products by the end of the year, with the newly established Taskforce on Oil.
A full copy of the Spring statement can be found here;
[edit] Reactions
[edit] UKGBC’s CEO, Julie Hirigoyen
"Today’s VAT cut to energy saving measures is a first step towards reversing the 70% collapse in the number of energy efficiency measures installed in our homes over the last 9 years. Together with 28 prominent business leaders, UKGBC wrote to the Chancellor ahead of the Spring Statement calling for this VAT cut, amongst other measures, and we’re pleased Mr Sunak was listening on this point.
"Whilst only a small step, it sends a useful signal to industry and households and will simplify what is currently a complex system for installers to navigate. But the major barrier to large-scale action to upgrade the country’s draughty homes is still the Government’s lack of serious funding, financial incentives and a national plan. This should start with fulfilling the 2019 election promise to spend £9.2bn on existing successful schemes for low income and social housing. We need to see an expansion of the small-scale Boiler Upgrade Scheme, a successor to the Green Homes Grant Scheme and long term financial drivers such as a green stamp duty.
"A big piece missing from the Spring Statement was significant immediate support for the over 6 million households who will be gripped by the fuel poverty crisis from April. Helping households to cut energy waste and switch to clean energy is the best way to lower their energy bills for good. UKGBC’s Net Zero Whole Life Carbon Roadmap demonstrates that a national programme of home retrofit could save on average £430 per home on their energy bills, releasing vital disposable income to vulnerable households.
"With energy bills set to soar further in Autumn, much more Government support is urgently needed to invest in the longer term energy efficiency solutions. The Prime Minister still has an opportunity to put this at the heart of his forthcoming British Energy Security Strategy. Government investment in domestic energy efficiency can quickly become self-financing, it's the common-sense response."
Read the letter sent with 28 prominent business leaders here.
Learn more about UKGBC Whole Life Carbon Roadmap here.
[edit] ECA’s Energy and Emerging Technologies Solutions Advisor Luke Osborne
“The industry breathes a sigh of relief at today’s announcement by the Chancellor. These are measures that will ultimately boost long-term growth for the economy, leaving families better-off, and our nation better protected from the impacts of global crises on energy prices.
“However, there is no time to rest easy – the electrotechnical sector must seize this opportunity to focus on delivering the installations and energy efficiency measures that will result in cheaper bills and lower carbon emissions for consumers.
“Only with the right investment in apprenticeships, skills and competence will that ambition be realised. While it is reassuring to have backing from the Government, there is a lot more that needs to be done.”
ECA Press release 23 March 2022 'Government answers ECA and industry calls for 0% VAT on renewables'
[edit] Eddie Tuttle, Director of Policy, Public Affairs and Research at CIOB
“CIOB understands that, given the current geopolitical issues, as well as the need to pursue a quick fix to the rapidly increasing cost of household bills, there was not a great deal included in the Chancellor’s Spring Statement that related directly to the construction industry. Government has clearly listened to sectoral calls for VAT cuts and we welcome Government’s commitment to reduce the VAT rate on home sustainable energy solutions to 0 per cent. However, we feel that there is a missed opportunity to both address the need to improve the quality of housing across the board and help alleviate the reliance on carbon intensive energy systems.
"The cost-of-living crisis is hitting Britain harder than ever, and while it is paramount that this is addressed by Government, there is a risk that progress will stall on significant societal issues, like our net zero commitments. With fuel prices soaring, the Chancellor must strike a balance between addressing consumer concerns whilst exploring other avenues to reduce carbon emissions and the UK’s dependence on fossil fuels. We recommend that the Government works with the construction industry to ensure that the reduced VAT for home sustainable energy solutions helps address whole home carbon emissions, as opposed to isolated measures. This is something we highlighted in the Government’s Heat and Buildings Strategy, recommending Government to utilise the expertise of the built environment to undertake a coordinated and long-term approach to decarbonise existing homes, instead of isolated activities and private market initiatives.
"CIOB believes that a National Retrofit Strategy, as proposed by the Construction Leadership Council (CLC), will be an essential step in improving the energy efficiency of existing buildings. The Strategy has been backed by CIOB and many other bodies within the built environment. This monumental task will require significant Government intervention, private sector investment and, most importantly, long-term political will and cross-party commitment. CIOB would like to see the Government allocate the remaining £5.3 billion that was committed in its election manifesto for domestic energy efficiency improvements.
"In terms of the general funding proposed in the Spring Statement, we welcome additional measures to alleviate the pressure on businesses through a review of the apprenticeship levy, increased thresholds for National Insurance and Employment Allowance plus cuts to fuel duty. However, it is uncertain how long these measures will last and if there will be new changes come the Autumn Budget to adapt to the geopolitical situation.”
Extract from CIOB 'support for the plan to reduce VAT on sustainable heating solutions from 23 March'
[edit] ICE's view on the 2022 UK Spring Statement: Chris Richards
"The Chancellor's solutions to the cost-of-living crisis, such as the fuel duty cut, will help remove some of the financial burden for those in need. Eliminating VAT on energy efficiency home improvements will also help to convince households to invest if they can afford it.
"The government is also working on an energy security strategy. This must seek evidence from the National Infrastructure Commission to design and deliver a realistic and stable change in the energy system – one that guarantees the security of supply while costs and carbon come down.
"There are many options to avoid turning the cost-of-living crisis into a deep-rooted one. A realistic and decisive plan moving towards a lower cost of operation for the UK infrastructure system is needed, and starts with decarbonising energy rapidly by 2030.
"With a faster than expected uptake in EVs, the impact on the £36bn revenue currently raised from motoring taxes will become apparent a lot sooner than anticipated. A combination of decreased fuel duty and VED receipts alongside more generous capital allowances for EVs through the corporation tax regime has resulted in the OBR forecasting a £2.1bn revenue reduction to the Treasury in 2026-27.
"The need for change in motoring taxes has become more pressing. ICE has estimated that the government has until the end of the decade to implement a fair, reliable and sustainable system that replaces fuel duty and Vehicle Excise Duty."
Extract from full ICE article article '5 ways Rishi Sunak's Spring Statement affects UK infrastructure- 23 March'.
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