What has Rishi Sunak announced to tackle the soaring cost of living and is it enough?

Chancellor Rishi Sunak has announced a raft of new measures to help tackle the rise in the cost of living - but what has he revealed and will it make a difference?

During his spring statement, the Chancellor acknowledged the war in Ukraine was going to have a large impact on the cost of living.

He noted the Office for Budget Responsibility had downgraded its growth estimates and said it expected inflation to rise to 7.4% and is already at a 30 year high of 6.2%.

To tackle this, the Chancellor made several major announcements to support working people.

What did Mr Sunak announce to help tackle the rise in the cost of living?

The biggest announcement was an increase in the national insurance contributions (Nics) threshold by £3,000 in July.

This means the amount people can earn before they start paying national insurance will rise to £12,568, which is in line with the income tax threshold.

The Chancellor said this would save people around £330 a year and for most it would offset the 1.25% rise in national insurance due to come in in April.

The other big announcement was a 12 month 5p cut in fuel duty lasting until March next year.

Fuel duty will be levied at a rate of 52.95 per litre for petrol and diesel, down from 57.95p.The average cost of a litre of petrol at UK forecourts on Tuesday was 167.3p, while diesel was 179.7p, figures from data firm Experian Catalist show.

This is an increase of 18p per litre for petrol and 27p for diesel over the past month.

ITV News Consumer Editor Chris Choi explains what it means for you as VAT is removed on energy saving measures:

No VAT on solar panels, heat pumps and other energy saving improvements.

This could knock £190 off cavity wall insulation or £160 off loft insulation. Better insulation can save households around £400 a year.

But this is a measure where to save money you have to spend money. It costs £4,800 to add solar panels to a typical UK home  (so todays measures would save about £240).

It takes years to break even so not the immediate help with energy bills many were hoping for. 

Mr Sunak said he will scrap VAT on households installing energy efficiency measures such as solar panels, heat pumps and insulation installed for five years.

He said a family having a solar panel installed will see tax savings worth over £1,000 and savings on their energy bill of over £300 per year.

The price cap on energy costs will rise by 54% from April 1, increasing yearly costs for households on direct debit tariffs by £693 and by £708 for those on prepayment plans.

Mr Sunak said he is doubling the Household Support Fund to £1 billion, allowing local authorities to tailor more support to the families which need it most.

They will receive the additional funding from April.

Although the announcements were welcomed, Labour accused Mr Sunak of not going far enough.

The OBR predicts British households will see the biggest fall in their spending power in 2022-23 since records began in 1956.

The OBR said: "Lags in CPI (or inflation) uprating of benefits mean they fall almost 5 per cent in real terms in 2022-23, reducing their real value by £12bn, and take up to 18 months to catch up fully with higher inflation".It means those who are unemployed, or on very low incomes, or who rely on the state pension are going to be in dire trouble in coming months.

Union leaders were quick to criticise the Chancellor for “tinkering around the edges” of the cost-of-living crisis.Unite general secretary Sharon Graham said: “With inflation at its highest for 30 years, Rishi Sunak’s spring statement just tinkers around the edges of this shocking cost-of-living crisis.

“Workers will still be facing sleepless nights worrying about how to make ends meet, overwhelmed by rocketing prices."

Labour shadow chancellor Rachel Reeves said Rishi Sunak was still taking money out of peoples purses Credit: PA

Labour shadow chancellor Rachel Reeves said: “Despite the Chancellor’s reluctant measures the facts are that he is still taking money out of people’s purses and wallets with an increase in national insurance contributions”.

She said: “Today the Chancellor comes along after 12 years of failure on energy efficiency and announces a VAT cut on building materials. This is wholly inadequate. A proper energy efficiency scheme like the one we have set out could cut bills by £400 to people from next year."

ITV News Consumer Editor Chirs Choi explains how you apply for the increased Household Support Fund?

The Chancellor has added £1 billion to the Household Support Fund designed to help people struggling with bills - but how do you apply.

You apply through your local council but payments are discretionary rather than an entitlement.

Councils close applications once their funding is used up - in areas of high take up this can happen faster than other areas.

Local Authorities have different procedures and criteria but in general these payments are focused on emergency one-off grants to pay for food, clothing and other household bills.

What about businesses?

Alongside the announcements for households, the Chancellor also announced a raft of new support measures for business.

He said he was hoping to prompt a new “culture of enterprise”, Mr Sunak said there would be tax cuts “on business investment and innovation with final decisions to be announced in the autumn Budget” and a reform of research and development tax credits.

He also announced the employment allowance for small businesses will rise to £5,000.

What about the future?

The problems with the cost of living are expected to last well into the future, particularly due to the instability in the energy markets.

Alongside all the announcements Mr Sunak made on Wednesday that are coming into effect in the next few months he also said by the end of this parliament the basic rate of national income tax would be cut from 20p to 19p.

He said the cut, which is planned for 2024, was already budgeted for.