Chancellor accused of turning his back on the poor

In his spring budget, Chancellor Jeremy Hunt announced measures to cut national insurance, extend the repayment period for universal credit advances, scrap the debt-relief-order fee and increase the amount parents are allowed to earn before they start having to repay child benefit.

Despite the chancellor striking an upbeat tone with talk of a recovering economy, there has been widespread criticism that the policies he unveiled help the wealthiest while providing little comfort for families fighting poverty.

What the cut in national insurance means for you

From 6 April, the national insurance paid by employees is to be cut from 10% to 8%. On the same day, the amount paid by self-employed workers will drop from 9% to 6%.

According to Sky, if you earn less than £32,000 a year, the cut in national insurance won’t make up for the fact tax thresholds have been frozen. Tax thresholds are the amount you’re allowed to earn before you start paying tax or before you start paying a higher rate of tax. These were frozen in 2021 and will remain static until 2028.

What this means is you end up paying more tax because, although your pay may keep up with inflation, the tax thresholds don’t. As a result, you end up paying tax on a higher proportion of your wages.

So if you earn £16,000 a year, despite the cut in national insurance, frozen tax thresholds mean you’ll be worse off by £607 a year.

In comparison, if you earn £50,000 a year, you’ll be better off by £752 a year.

Other measures unveiled in the budget

As well as the cut in national insurance, Hunt announced people on universal credit will now have 24 months to repay advances, up from 12 months.

He also revealed a variety of changes to debt relief orders.

The household support fund was extended for six months.

And the government is looking at applying the child benefit high-income threshold to households rather than individuals. In the meantime, the amount parents can earn before they have to start repaying their child benefit will increase from £50,000 to £60,000.

Reaction to the spring budget

Commenting on the spring budget, Danny Sriskandarajah, chief executive of the New Economics Foundation (NEF), said: 

“We live in a country where homelessness has skyrocketed in the past year, families can't afford their weekly shop, and our public services have been stripped to the bone. Yet today the chancellor chose to offer tax cuts which will benefit the richest fifth of households 12 times more than the poorest.”

Alison Garnham, chief executive of Child Poverty Action Group, said:

“For almost fifteen years, the four million kids from poor families have been at the bottom of the pile and today is no different...  Families needed the two-child limit and benefit cap to be scrapped… but the chancellor turned away."

“The national insurance cut won't help those on the lowest incomes, and while the eleventh-hour money for the household support fund will avoid a cliff edge cut, it's another temporary workaround when struggling families need lasting measures to ensure they have enough to live on.”   

Simon Francis, coordinator of the End Fuel Poverty Coalition, commented:

"What we needed from the chancellor was a long-term plan for warm homes and cheaper energy, but instead the government has condemned families to another winter in cold homes and has failed to fund reform to Britain's broken energy system.”

“The price households pay for their energy is still 60% higher than in 2021 and levels of energy debt are soaring. Meanwhile the wider cost-of-living crisis means people simply can't afford to keep the lights on."

Paul Kissack, chief executive of the Joseph Rowntree Foundation said:

“This was a budget for big earners and big owners. Prioritising capital gains tax cuts for owners of multiple properties is an insult to almost four million people facing destitution in the UK today.

“Cutting national insurance gives you an eye catching headline but doesn’t fill the gap for the millions in our country experiencing deepening poverty. For the people struggling to afford the rent or the weekly shop, or having to visit a food bank, that widening gulf is all too real”.

Meanwhile, Peter Kelly, director of The Poverty Alliance, commented: 

“National insurance and capital gains tax changes will give away huge amounts of money to the richest households, but are worth very little or nothing at all to the poorest households who are struggling to avoid destitution.

“The chancellor’s decision to extend the repayment period for budget advances under universal credit is welcome, giving households financial breathing space at a time when they are struggling to stay afloat as a result of deductions and debt.”