Rishi Sunak is expected to pledge to “stand by” hardworking families and set out further plans to support people with the rising cost of living when he unveils his spring statement later.
It is understood the chancellor will unveil proposals intended to build “a stronger, more secure economy” as people across the UK face growing household bills which have been exacerbated by the war in Ukraine.
He will also say that building a strong economy is fundamental in enabling the United Kingdom to counter the threat that Russia’s President Vladimir Putin poses to its values.
Watch and follow the chancellor’s spring statement on Wednesday from 12.30pm on Sky News
“We will confront this challenge to our values not just in the arms and resources we send to Ukraine but in strengthening our economy here at home,” Mr Sunak is expected to say.
“So when I talk about security, yes – I mean responding to the war in Ukraine.
“But I also mean the security of a faster growing economy.
“The security of more resilient public finances.
“And security for working families as we help with the cost of living.”
The chancellor’s spring statement is also tipped to outline how the government plans to create a new culture of enterprise, with the private sector more, investing more and innovating more.
Sunak to deliver spring statement amid cost of living crisis
Mr Sunak will produce a fiscal statement at a pivotal time for the country when hard pressed families are facing enormous increases in their cost of living.
Those are going to ramp up much higher in the coming months as the impact of the Russia-Ukraine war intensifies – and subsequently, the cost of living is likely to be at the top of the chancellor’s agenda for his statement.
For households it is the impact on fuel prices and energy bills that is hurting most – leaving Mr Sunak facing calls to take concrete action.
As a result of the invasion, the Bank of England now thinks inflation will top 8% in April and go even higher in the autumn.
Fuel duty one policy to watch
One thing to look out for in the statement is whether the chancellor cuts taxes on petrol – like other countries in Europe and further afield have already done.
The average price of petrol has shot up to an all-time high of 165.37p a litre, an increase of more than 55% in the last two years. Diesel has also risen by a similar proportion to 177.47p per litre, according to figures compiled by the government.
As a result, the average tank of fuel now costs almost £90, up by about £33 compared to May 2020.
More recently, wholesale costs have been rising sharply, partly made more extreme by Russia’s war in Ukraine.
Reports suggest a 5p per litre cut in fuel duty is on the cards.
Chancellor facing calls to ease NI hike
There are also question marks about what the Treasury plans to do to ease the pain of the health and social care levy which is due to come into force in April.
This change – effectively an increase in National Insurance payments – will involve serious increases in tax payments for most families at the very point that inflation is nearing its peak.
An increase in the National Insurance threshold has been talked of as a possible move.
Labour urge chancellor to introduce windfall tax on oil giants
Labour have called on Mr Sunak to consider a windfall tax on oil producers – whose profits have been boosted by soaring oil and gas prices – to pay for cost of living help for households.
Elsewhere, the government cut VAT for the hospitality sector during the pandemic and it remains at a reduced rate of 12.5%.
It is due to return to 20% in April but industry groups have called for it to remain lower for longer to benefit jobs.
And the chancellor is reportedly also resisting pressure to boost spending on defence.
However, government borrowing is now £26bn lower than expected for the financial year so far, putting the chancellor in a “better” position to ease the cost of living crisis – according to the Resolution Foundation.
Borrowing for the first 11 months of the 2021-2022 fiscal year was £138.4bn, less than half of the record £290.9bn from the same period the previous year.
The figure is on course to come in below the £183bn forecast by the government’s Office for Budget Responsibility in October, largely due to stronger-than-expected tax revenue.
However, The Office for National Statistics (ONS) said interest payments on government debt jumped to £8.2 billion last month, up from £5.4 billion a year earlier and the highest for any February on record.
Ahead of the spring statement, the Labour Party branded Mr Sunak the “high tax chancellor” after releasing their own analysis revealing that he has raised more tax than any individual in his position in half a century.