Are you a winner or a loser from Rishi Sunak’s plans?

The Chancellor’s Spring Statement was meant to ease the cost of living crisis. But how will it affect your finances, and will you end up richer or poorer? Richard Evans takes an in-depth look

TAXPAYERS The basic rate of income tax will be cut from 20p to 19p in the pound by the end of this parliament in 2024 – the first cut in the basic rate in 16 years. The Chancellor said the cut was “fully costed and paid for in the plan”, he announced this week.

However, he gave himself some wriggle room: Treasury documents said the tax cut would be made “provided that the fiscal principles outlined [elsewhere in the document] are met in future”. Those principles include “a prudent level of headroom … against the fiscal rules”, “continued discipline on public spending” and taking account of “the broader economic outlook”.

Mr Sunak added: “We’re cutting income tax in 2024, when the Office for Budget Responsibility expects inflation to be back under control, debt to be falling sustainably and the economy to be growing.”

Separately, the point at which employees start to pay National Insurance will rise in July from £ 9,880 to £12,570, to equalise it with the income tax threshold. A similar change will be made to NI thresholds for the self- employed.

However, the rate of NI rises by 1.25 percentage points next month. Those who earn less than about £40,000 are expected to gain more from the increase in the threshold than they lose from the rise in the rate.

But Paul Johnson, the head of the respected Institute for Fiscal Studies think tank, said: “What is the possible justification for cutting the income tax rate while raising the NI rate?

“It drives a further wedge between taxation of unearned income and earned income. Yet again it benefits pensioners and those living off rents at the expense of workers.”

DRIVERS From 6pm on Wednesday, fuel duty was cut by 5p per litre. The reduction will expire in March next year.

Drivers said the saving simply took the price back to what they were paying last week because petrol stations had increased their charges just before the cut came into effect.

HOMEOWNERS For the next five years, energy efficiency measures such as solar panels, insulation and heat pumps will attract zero VAT instead of 5pc. The Northern Ireland protocol prevents immediate implementation of the policy there.

LOW-INCOME HOUSEHOLDS The Government will double the Household Support Fund with an extra £ 500m. The fund helps households most in need to pay for essentials such as food and utilities.

LOSERS

The Chancellor did not respond to widespread demands for other steps to ease the cost of living crisis such as scrapping or postponing the rise in National Insurance rates next month.

And while he reacted to the rising costs faced by motorists by cutting fuel duty, there was no help for those who commute by public transport, who have also faced record increases in ticket prices. And more generally Mr Sunak was powerless to neutralise the destructive effects of inflation, which reached a new peak of 6.2pc last month, on people’s standards of living.

The Office for Budget Responsibility said: “The rise in inflation to a 40-year high this year is expected to reduce real household disposable incomes on a per-person basis by 2.2pc in 2022-23, the biggest fall in living standards in any single financial year since records began in 1956-57.”

BENEFIT CLAIMANTS The Chancellor said nothing about increasing benefits in line with the current high rate of inflation.

Mr Johnson said: “The big omission from this statement was anything for those subsisting on means-tested benefits. They will be facing cost of living increases of probably 10pc but their benefits will rise by just 3.1pc.”

LOW-EARNING PENSION SAVERS When the basic rate of income tax is cut from 2024, pension tax relief will be reduced. This means you will get only 19pc tax relief on your pension instead of 20pc – but this won’t affect earners on the higher rates of income tax.

RENTERS There were no giveaways to renters for them to cut their energy bills, while homeowners received a VAT cut.