Spring Statement 2022: What advisers need to know

He adds: "But perhaps what really stands out is what was missing. In the face of what the [Office for Budget Responsibility] calls the biggest hit to household finances since comparable records began in 1956-57 he has done nothing more for those dependent on benefits, the very poorest, besides a small amount of extra cash for local authorities to dispense at their discretion. Their benefits will rise by just 3.1 per cent for the coming financial year. Their cost of living could well rise by 10 per cent."

The economic picture

This statement was not supposed to be a major fiscal event but a challenging economic environment with rising inflation, a growing cost of living crisis, and further uncertainty stemming from the war in Ukraine, forced the chancellor to produce more than just a set of economic and fiscal forecasts.

The UK currently has the largest tax burden since the 1960s, with various rates and reliefs frozen until 2026.

Inflation hit a new 30-year high of 6.2 per cent in the 12 months to February, putting further pressure on people's household finances.

This marked an increase on the 5.5 per cent jump in January, and according to the Office for National Statistics, was driven by the increasing cost of energy and transport as well as rises in the price of games, toys, clothing and footwear.

What's more, inflation is expected to accelerate in April when the energy price cap is lifted.

Source: ONS

The OBR, the independent forecasting agency of the government, has revised down its economic forecast for this year to 3.8 per cent, down from 6.5 per cent expected last October, but said it was difficult to forecast the full impact of the Ukraine conflict on the economy.

There is also no anticipation that the level of GDP growth will bounce back in 2023, as growth is expected to be almost half the rate of this year, at 1.8 per cent. 

The eye-catching part of the statement from the chancellor from an economic point of view was his expectation that inflation will average 7.4 per cent this year, versus the 4 per cent he had predicted last October.

That figure can be seen in the context of the inflation print for February coming in at 6.2 per cent, itself a 30-year high, meaning that in at least several of the months ahead, inflation will be higher than that.  

Sunak had to make a judgement call, said Boris Johnson ahead of the statement. “Will he do more to protect households from the effects of energy prices which have risen even further in the last two weeks?