The Chancellor’s Spring Budget: ACAT’s perspective

Following the Chancellor’s Autumn Statement last November an attempt was made to offer a perspective on the main items. A view was offered on the implications of resourcing the various ministries churches may be involved in.

The general conclusion was that the Autumn Statement provided very little encouragement for the personal budgets of church members. Consequently, church finances were likely to be stretched even further.

This follow up does not consider the detailed national economic statistics and forecasts which form the basis for the Chancellors budget because for most of us the issue is the impact on our personal finances.

 Expectations

2024 will almost certainly be a general election year with expectations that lower borrowing costs and reducing inflation would result in some degree of tax reduction. The hope implicit in the financial media was that at long last individuals might begin to see an easing of their financial pressures and a glimmer of hope for the future.

Several factors have conspired to reduce the chancellor’s options.

• The economy statistically in recession at the end of 2023
• Interest rates likely to remain at around 5.20% until the Autumn of 2024
• A surge in energy prices from increased shipping costs resulting from the war in Israel and Gaza and the continuing reduced oil production.

In summary the view of economists was that government options for tax reductions had improved very little since November.

https://www.bbc.co.uk/news/business-68449345

 Did the Budget contain any good news?

• National insurance contributions for employees and self-employed reduced by 2p in the £ resulting in estimated annual savings of £450 for someone on an average salary of £35,000 per year. This together with the National Insurance reductions implemented on 6th January brought the total estimated annual savings to £900 for a person on average earnings.
• For the self-employed estimated annual savings of £350 on average earnings of £28,200 per annum
• VAT Threshold increased from £85,000 to £90,000 per annum.
• Reduced capital gains tax on the sale of property from 28% to 24%
• Full child benefits paid – From April £25.60 first child, £16.95 for each additional child, to be paid where highest earner earns up to £60,000 per annum. Increased from £50,000 per annum.
• Longer repayment periods for lower paid workers taking out government emergency budget loans.
• Government grant fund for families struggling with the cost of living increased for a further six months.

Summary Conclusions

• With the exception of the marginal increase in child benefit there is arguably no encouraging news for the lower paid and those for whom life is a continual financial challenge.
• Local authorities are under extreme financial pressure with an estimated 10% to face bankruptcy in the next year. Services will be severely cut, impacting those who most need support.
• Charites dependent upon local authority grants will in turn face having to close.
• Families with average annual earnings will see a benefit from reduced national insurance contributions, but this is likely to be more than offset by continuing levels of interest rates and inflation.
• Separate to the budget, The energy price cap will fall by an average of 12%. For those standard or variable tariffs, energy prices are set to fall from April – June. However, costs are still approximately 40% higher than two years ago.
  https://www.moneysavingexpert.com/utilities/what-is-the-energy-price-cap/
• From 1st April 2024 the taxable turnover threshold which determines registration for VAT will be increased from £85,000 per annum to £90,000 per annum. If you own a small business with annual turnover below the VAT threshold there will be £1,250 per annum less VAT to charge customers and pass on to HMRC.
• As confirmed in the Autumn Statement, those in receipt of a state pension will see an increase of 8.5% providing some relief to senior citizens dependent upon it.
• As the income of members is unlikely to rise significantly and costs will continue to increase at the level of inflation or above, church budgets will be under increased pressure.
• The conclusions reached from the Autumn Statement appear even more relevant. “The strong must help the weak.” Those who are able are more than ever needed to serve and support their communities through the ministries of their church.