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Pressure on government to combat spiralling costs of living in Spring Statement

  • 16/03/2022
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Calls are getting louder for the chancellor Rishi Sunak to soften spiralling inflation for consumers given the impending cost of living crisis, ahead of the Spring Statement next week.

Financial adviser Hargreaves Lansdowne joined the voices calling on the government to delay the projected 1.25 per cent national insurance (NI) hike scheduled for April this year.

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said: “We need some flexibility from the Spring Statement, because there’s a serious risk in sticking to business as usual while millions face the biggest cost of living crisis in a generation.”

She added that barring catastrophes, very little is meant to happen in a Spring Statement aside from updated forecasts and a handful of consultations, but added: “We need decisive action to address the cost-of-living crisis.”

“We’ve had reports that the Office for Budget (OBR) could upgrade its forecasts, giving the chancellor room for manoeuvre. We’ve also had reports that the chancellor has ruled out a number of measures that would ease pressure on spending. We’ll have to wait until closer to the announcement itself before the full picture emerges.”

Alongside shelving the NI hike, HL also advocated a bigger rise in Universal Credit up from the 3.1 per cent already earmarked and a cut to fuel duty and/or VAT which constitutes almost 86p of the cost of a litre of fuel, among other measures.

Helen Morrissey, senior pensions analyst, Hargreaves Lansdown noted there are “other pressing problems in the world right now” but said the limit on Lifetime ISAs should be raised up from £4,000, which has been held for five years. The property price limit has also been held at £450,000, while house prices have risen 25 per cent.

“Setting a fixed limit and then walking away to leave buyers to wrestle with rising prices isn’t good enough. Overall limits need to be linked to house price inflation, so buyers know they won’t be getting into a scheme they could be forced out of by a hot property market.”

She added: “We also want to see consultation on the LISA penalty. If you take cash out of the LISA before the age of 60 – for any reason other than to buy your first property – you face a penalty of 25 per cent. While it may look like you are just giving up the government bonus, it also takes a chunk of the money you have invested.”

The government temporarily reduced the LISA penalty to 20 per cent in response to the pandemic, and it should consult on cutting it permanently, she added.

Elsewhere, Chancellor Rishi Sunak is expected to provide an update on jobs and the post-pandemic bounce back.

In February the Chancellor announced a package of support measures to counter inflation including a £150 council tax rebate for homes in bands A to D, as well as a £200 credit on energy bills to be repaid over the next five years.

With public borrowing expected to come in under previous forecasts for the year, there is hope of further handouts or other benefits such as child benefit being increased to keep up with rising bills.

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