The current rate of inflation and the threat of future inflation rises underpinned this year’s Spring statement. In this context, the Chancellor’s decision to reduce petrol duty by five pence in the pound should be welcomed. As should his unexpected changes to the National Insurance (NI) threshold and the planned reduction in basic rate income tax, although it is difficult to escape the suspicion that the tax reduction forms part of the strategy for the next election.
As far as pensions is concerned there is nothing of direct relevance, but the change to the basic rate of income tax will impact tax relief on contributions. Also, current rates of inflation mean that the levels of indexation offered within public sector defined benefit schemes take on a greater relevance and value. Although not part of the Spring Statement, it was also announced yesterday that the government is committed to reinstating the state pensions triple lock.
Despite all this, it’s difficult to escape the general consensus within the mainstream media today that much more could have been done to address the real challenges being faced by most people within our society. Approximately 42% of all adults receive annual income which is less than £12,570, the basic tax personal allowance and new NI threshold. They will no doubt be more concerned about how to feed and keep their family warm rather than saving money on petrol.
This is not just political rhetoric. The Office for Budget Responsibility states that average standards of living are now as low as they were in 1956, effectively when records first began.