Spring statement: What can Sunak do to address the cost of living crisis?

National insurance, fuel duty and VAT changes are all being considered

21 March 2022

Rishi Sunak will unveil his spring statement on Wednesday where attention is set to focus on how the Chancellor will support households through the cost of living crisis. The PA news agency looks at some of the options open to the Treasury.

Fuel duty cuts

Arguably one of the easiest ways to win over voters and support households with the cost of living crisis would be via a cut to fuel duty.

The Government has frozen duty for 11 years but there are now calls for a cut as oil prices hit highs on the back of the Ukraine conflict and prices at the pumps soar to record levels.

Figures from data firm Experian Catalist show the average price of a litre of fuel at UK forecourts on Sunday was 167p for petrol and 179p for diesel.

This is an increase of 18p for petrol and 26p for diesel over the past month.

Labour has calculated the average family is facing an annual rise of £386 on the cost of petrol and is calling for a cut to be funded by a windfall tax on energy firms who have enjoyed the sky-high gas and oil prices.

National insurance

Another option open to the Chancellor would be to hold off the planned national insurance rise previously announced.

Mr Sunak and Prime Minister Boris Johnson have both been adamant in the past that a rise would not be delayed as the extra cash would be used to fund the care sector.

The Chancellor could decide to go ahead with the rise but offset it with a cut in income tax – although this would create fury among business leaders, with businesses having to match national insurance payments by employees.

An alternative to scrapping the planned national insurance rise could also be to shift the thresholds for when the payments are made. The Resolution Foundation has suggested the threshold is lifted from £9,568 to £12,500.


There is no talk of the Government reducing VAT across the board but Mr Sunak could give a helping hand to the hospitality sector to ensure households can still enjoy themselves.

The Government had been due to increase VAT for hospitality firms from 12.5% to 20% from April 1 – having cut them back to 5% during the pandemic.

But pub bosses, including JD Wetherspoon chief Tim Martin, have warned that food and drink prices could jump if the planned rise goes ahead.

A move to halt the latest proposed increase would help people spending money on eating out, event tickets and holiday accommodation.

However, such a move would primarily benefit businesses in the sector, some of whom used the temporary reduction in VAT during the pandemic to help them cope with soaring inflation rather than passing the benefits directly to customers.

Last month, 250 bosses urged the Treasury to hold the VAT level to protect jobs and to help stave off higher inflation.


Another option open to the Chancellor is to uprate benefits to put more money in the pockets of low and middle income households.

The Resolution Foundation is calling for a five percentage point increase to keep pace with inflation, calling it the most effective way to support families hardest hit.

The think-tank said it would deliver four times more support to the bottom half of the income distribution per pound spent than scrapping the rise in national insurance contributions.

Energy bills

Mr Sunak has already unveiled his plans to help with rising energy bills, with a £200 loan to each and every family to cut their gas and electricity payments from October – although not until the price cap jumps 54%.

Households will have to pay back the £200 energy bill rebate over four instalments from next year when energy prices should supposedly fall. However, if energy prices do not fall, the timing for when payments start could be delayed.

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