Money Box Live: Spring Statement

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BBC Sounds. Music, radio, podcasts. Hello, welcome to the Moneybox Live podcast, recorded just after the spring statement. There was no waving the red briefcase outside of number 11 today. After all... As the government stressed, today's spring statement was not a budget. But there was still plenty for our podcast listeners to chew over. The Chancellor, Rachel Reeves, told the Commons she's proud of what she's done since taking office. Now our task.

is to secure Britain's future in a world that is changing before our eyes. She talked a lot about growth and headroom and fiscal rules, but there was this prediction about your money. The OBR say today that people will be, on average, over £500 a year better off under this Labour government.

So where will that £500 come from? What does everything she said have to mean for your money? Well, here on Moneybox Live, we are more focused on your pockets than on the politics. Get in touch now if you've got a question or a comment. moneybox at bbc.co.uk. Or you can send us a voice note or a message on WhatsApp. The number is 033 067 83 183. Now with me today, I have a panel of expert guests. I'm joined by...

Mike Brewer, the Deputy Chief Executive and Chief Economist at the Resolution Foundation, which is a think tank focusing on low to middle income families. I'm also joined by Elsa Littlewood, a partner at the tax firm BDO, and Sarah Pennells. Consumer Finance Specialist at the Pensions Company, Royal London. Hello. Hello. Hi. Good to have you all with us. A lot to dig into. Mike, before we do start digging into that...

detail. One question I've been asked quite a lot this week is what actually is a spring statement. I went out to chat to people about what might be in it. We'll hear that in just a moment. And a lot of people simply didn't know what a spring statement is. It's not a budget. What is it?

It's definitely not a budget. The Chancellor was very keen to remind people that she's committed to doing only one budget a year. And the idea is that that preserves a bit of stability in our tax and benefit system, which is a good thing. But we do have to have twice a year a report back from the Office of Budget Responsibility saying where it thinks the public finances are and how they're getting on. So it has to do two of these forecasts a year. And so today was really their day in the sun.

Chancellor took the opportunity to stand up in the House and make a statement at the same time. Yes, and there's plenty to chat about in that statement. Before we hear from the rest of the panel and hear a bit more from the Chancellor, let's hear what might make a difference to you. Earlier this week, I went to a park in Warrington to find out.

We shouldn't be taxed more because we're getting taxed more than enough anyway. This country is ludicrous when it comes to tax. And we need the police. We need the fire brigade. And we need the NHS. The NHS should have more money rather than less money because it's failing. Screwing the pensioners. And we've got... nothing to fight back with have we? Nothing at all. So what are your concerns? Well that we're getting poorer and poorer.

I get the feeling that they're afraid to overtax and upset people, but at the same time they can't reduce anything because we don't have the money in the country to put anything down. So I'm kind of expecting a very steady, we'll try and cut costs somewhere like they've done with the benefits that they've just cut. Shopping, you know, the prices, prices in the shops are so high at the moment. Are you concerned that the Chancellor might do something that drives those prices up?

I'm hoping that she does something to bring it down a bit. But if she can try and cut something down so a bit of money comes into her pocket, it would be nice. It would be nice. Did it happen? Sarah, no tax rises, more money for frontline services. That's what people want. Did we hear anything along those lines today? Well, we definitely heard that, you know, what we didn't hear was that...

There were going to be tax rises, as you say. And this was something that there was, there's been a lot of speculation about this, even though it was described as a spring statement. We just heard what that means. But I think many people were expecting there to be.

more of a budget-like event than it turned out to be. But I think one thing that will concern some people, even though we had the inflation figures today showing inflation has fallen by a little bit more than was expected, was actually the... OBR's prediction, the Office of Budget Responsibility's prediction of what inflation will be, particularly for the rest of this year. So it was saying...

an average of 3.2%, peaking at 3.8% in July. Now, we've been doing research into the cost of living since February 2022, and the most recent research we've done still shows people are concerned about things like... rising energy bills and rising food bills. And you know this as well as anybody, but inflation obviously doesn't mean prices are falling. Falling inflation just means prices are rising by less. I think although there wasn't a tax rise announced that could have really spooked people...

That inflation news, although inflation will be falling over the longer term, things are not getting better on that front, maybe as quickly as people wanted. Although Rachel Reeves did suggest inflation will hit its 2% target by 2027. But you're right, gung up a bit.

before then. Right, we heard some of the people of Warrington's priorities. Let's hear a bit more from Rachel Reeves. The global economy has become more uncertain, bringing insecurity at home as trading patterns become more unstable. and borrowing costs rise for many major economies. Mr Speaker, the job of a responsible government is not simply to watch this change. This moment demands an active government.

Well, the shadow chancellor at Mel Stride said the spring statement was essentially an emergency budget. Inflation, which was down to 2%, bang on target on the very day of the last general election under a Conservative government. We are now told this year we'll be running at twice the level as was forecast under ourselves in 2024. This is going to mean prices bearing down on households. and on businesses right across the country because of her choices.

Mike, Rachel Reeves made a claim that the OBR says households will be on average over £500 a year better off under this government. Now, I have been buried in the paperwork. I have not managed to track down exactly where that's come from. from. Have you? Well, we think so, yes. And you do have to scrutinise these claims very carefully, don't you, around budget time or spring statement time. So this is not one of those claims that is about particular things the government has done.

benefits and so as a result people are better off so this is not one of those facts So instead, what the Chancellor is doing is pointing to forecasts for the overall size of the economy made today by the Office of Budget Responsibility and pointing out that if we look at those bits of the economy which in the end flow to households and we measure how... Now that's changed since this time a year ago. Then those forecasts have improved to a tune of about £500 per household, but on average.

OK, thank you very much for explaining that a bit. Now, some of the changes that are going to happen were announced last week. The government announced reforms to benefits that will make it harder to claim personal independence payment, or PIP, which is a... a benefit for people with long-term health conditions or disabilities. And today the Chancellor had more detail on welfare reforms.

We are reforming our welfare system, making it more sustainable, protecting the most vulnerable and most importantly, supporting more people back into secure work, lifting them out of poverty. So today we had some more detail and we also had an expansion of the changes, a cut, the universal credit health element is being cut for new claimants and on top of that cut it's also being frozen. The Universal Credit Standard Allowance will increase from £92 per week in 2526 to £106 a week by 2930.

while the universal credit health element will be cut for new claimants by around 50% and then frozen. On top of this, we are investing £1 billion to provide guaranteed personalised employment support to help people back into work. Mike, changes last week, changes today, they all sort of blur together, don't they? Can you summarise exactly what is going to be different for claimants?

Well, there are three changes. So let's start with the good news, which is that the standard allowance of universal credit, so everybody on universal credit will get this, that's going up over the next five years, a little bit faster than inflation, so that by the end of the parliament it'll be...

it'll be about £5 a week higher than it would have been otherwise. And actually, outside the pandemic, that's the first rise in the basic rate of universal credit ever. So we should note that. But then there's two bits of less good news. As you flagged, PIP... personal independence payment, the disability benefit that's not linked to work but just paid to people who are not able to perform.

everyday activities, that will be made harder to claim. And the government now says it thinks that about 800,000 fewer people will get the daily living bit of personal dependence payment by the end of the parliament. And it's a very big loss. It's on average.

£4,500 a year for those people who don't get that anymore. And the third change is to the health bit of universal credit. So that goes to people who are... not working because of their health, and that will be frozen for existing claimants and then cut in half and then frozen for new claimants from next April.

And these payments are very important to many people with disabilities. There's quite a lot of anxiety around about this. People like supply teacher John, who we spoke to before the Chancellor stood up, he has cerebral palsy and gets about three... hundred pounds each month in pip and he told us how important the payments are to him

Hi Moneybox, this is John. Just wanted to speak about the real impact of the government's welfare reforms, particularly the new 4.1 category rule for personal independence payments, and I will currently lose out.

i sit in front of a classroom every day showing young people a different kind of diversity and you know what they get it young people are far more accepting and understanding of my visible needs from cerebral palsy which is a cradle to grave disability, the biggest problem with these changes. is that disabilities don't fit neatly into boxes. I have lifelong conditions that affect multiple areas of my daily life but because my disabilities are spread across different tasks

rather than all concentrated into one, I now risk losing that support. What protections are in place for those who rely on personal independence payments, not just to live? but to contribute and pay taxes. This isn't just about money, it's about independence, dignity and basic security. This benefit is what helps me to stay and work. Thank you very much for covering this important issue.

And John, thank you very much for talking to us. Here's Hannah, who spoke to us after the Chancellor finished speaking. She has a brain injury and uses a wheelchair following an accident four years ago. She used to work as a doctor, but says she was unable to go back to that job. I think I was expecting there to be more cuts and a confirmation of the cuts that have been perhaps discussed and the changes that were feared last week.

I think that the saying that there needs to be investment in returning to work interviews perhaps isn't the right focus on changes. I feel like they need to spend more time looking at the system, how it's working and where it's broken, rather than sort of... cutting money from bits and pieces of different areas of the welfare system, because then that's not going to serve anybody and it's not going to improve any part of it.

So John and Hannah, they're clearly both feeling quite anxious. Mike, what do the changes mean then for people who are already claimants but are feeling this anxiety? Well, yes, and this is complicated and it's actually different for the two benefits we've talked about. So for people on personal independence payments, unfortunately, some people currently getting it will find themselves losing out in a year or so when the new assessment takes place under the...

So the government thinks that about 400,000 people who are currently receiving PIP will end up losing it when they take this new assessment. It's slightly better news for people on the health bit of universal credit where existing recipients won't see any large cash losses. They will just see that extra, the extra £97 a week they currently get. That will be frozen in nominal terms. So no overnight losses.

And in the last little while, the Department of Work and Pensions, the DWP, has published its impact and equality assessment of the government's welfare reforms. They suggest these changes to benefits could mean 250,000 more people in poverty. The OBR says that these changes mean there will be £4.8 billion of savings. Here's what Stuart, a retired solicitor in Sheffield, thinks about that.

I'm not sure where those savings are going to be made. Surely if people are in... entitled to a benefit they're entitled to it so therefore logically to me that means some people are going to go without therefore we're going to lose their employment the support that they were getting which seems to run counter to trying to get other people into employment.

The Chancellor said more than a thousand people a day are signing up to PIP and that one in eight young people are not in employment, education or training. So you can see why the Chancellor says that's unsustainable. Yeah, there has definitely been a large rise in the number of people claiming pip. It started before the pandemic, but it's carried on since. Now, we know that as a country, we are getting older. And as we get older, we do also get sicker.

But actually the rise in PIP has been even faster than the rise in ill health across the country as a whole. So there is something for the government to be concerned about. It is costing taxpayers a lot of money. But, of course, we're talking about people who are vulnerable by the nature of their disability or their poor health. And the sort of changes, the size of a change we're talking about, £4,500 a year is the average loss, according to the government.

And at the moment, that's going to be made with no sort of transitional protection. It's going to be you do your PIP assessment again after April 26, and you get a letter from DWP, and suddenly your income is down by £4,500 a year. That's going to be a very large shock. for these people. Mike, thank you. Thank you. From less than a dollar a week for your first year, read, watch and listen to trusted, independent journalism and storytelling. It all starts with a subscription to bbc.com.

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Now, tax rises were repeatedly ruled out by the Chancellor ahead of the statement, but you can't help but listen out for them in every fiscal event. Elsa, thank you for being so patient. Joining us now, there weren't any big tax... prizes? No, it was reassuringly boring and me along with all the taxpayers around the country and other tax advisors are breathing a heavy sigh of relief because there's always that worry that something will get slipped in.

reassuringly boring. I love that. But the government does want to boost tax income. Let's hear what Rachel Reeves had to say about cracking down on tax evasion. continuing our investment in cutting-edge technology, investing in the HMRC's capacity to crack down on tax avoidance, and setting out plans to increase the number of tax fraudsters charged every year by 20 per cent.

These changes raise a further £1 billion, taking the total revenue raised from reducing tax evasion under this Labour government to £7.5 billion. Elsa, what's actually likely to change? So there are various consultations launched today where the Treasury and HMRC are seeking people's views. They're very much looking at tax advisors and the role that they play in tax avoidance. Not all tax advisors, of course.

but really looking at how they can clamp down on that. And then looking at more prosecutions of tax fraudsters, rewards for informants, something that's worked very well in other jurisdictions, and something the Chancellor mentioned there, the use of AI and the recruiting. of private sector professionals to look at offshore non-compliance. So some really targeted investment. The Chancellor said they're going to charge 20% more tax fraudsters each year. That seems really ambitious.

It does. And it requires a lot of investment. But the sort of spend to save policy that the Treasury have had is due to bring a really good return on investment. I think it's £1 spent on compliance. returns £22 of tax. So good investment. OK, good investment. Also changes to the penalty regime for people who are a bit late paying their tax. Yeah, there's a large amount of tax debt.

of the country at the moment, and it's over £40 billion. That's a huge amount of money, particularly when we're looking at those cuts in benefits that Mike was discussing. So there's a real focus on closing that tax debt, so using third-party tax debt collections. sorry, tax debt collectors, but also looking at that penalty regime. So as we move into the new world of making tax digital, there's a suggestion that the...

penalties are going to increase to 3% of your 15 days late paying, another 3% of your 30 days late paying, and then a 10% per annum rate after that, calculated on a daily basis. And that's really focused at changing behaviours. OK, good to know. Sarah, there were no changes to tax thresholds for income tax, but we are still in this ongoing freeze and that's been described as a stealth tax.

That's right. So there is no extension of this freeze in the personal allowance. Now, this started in April 2021 that the personal allowance and the tax thresholds were frozen. has been extended to 2028-29. And as you say, it is a stealth tax because... As earnings rise, more and more people end up paying tax or paying tax at the higher or additional rate. And in fact, HMRC released some figures just a couple of weeks ago about income taxpayers, and it showed that there's over 700,000.

more higher rate taxpayers between April 21 and 22. And it was raising a huge amount of additional tax. Now, there are things that you can do that are entirely lawful to try and reduce, especially if you're kind of on the threshold so for example things like and you'd expect me to say it's coming from a pension company but paying more into your pension making donations through to charity through gift aid things like that and also and this is more linked actually to the

in employers' national insurance, which obviously was announced in the budget last year. But we have seen an increase in the number of employers interested in administering pensions or making pension contributions through something called salary sacrifice. which reduces their national insurance, but also yours as someone who's in a pension scheme. So there are some things that possibly you can do, especially if you are in something like a workplace pension or a private pension. OK, thank you.

the head of the spring statement. There was lots of interest around ISAs, individual savings accounts. And that's partly because there were rumours that the Chancellor might change the amount that people can hold on in cash to try and drive people to invest more in stocks.

and shares instead. Here's a question on that from Chris. I heard from some friends that the Chancellor was contemplating major changes to cash ISAs, including the possibility of the tax wrapper being removed from existing cash ISA balances. Is that right? Could she actually do that to existing balances?

Chris, thank you very much for that. Sarah, before we get to Chris's question, the Chancellor didn't mention Kash Isis in her actual speech. I was listening out very carefully. The details always in the supporting documents. Was there any hint? Yes, there was. As you rightly say, she didn't mention it in the speech and I had very sort of flappy ears as well listening for that. But it was in the documents that basically the government is going to look at sort of the balance between where the...

are currently for cash and whether that should be tweaked. And I think it's just worth sort of having a bit of a history lesson. So ISIS have been around for 25 years, but it's only in the last 10 years. that you were actually able to put your whole allowance in cash. So for the majority of the time we've had ISAs, you were actually, you could only put half the allowance into cash and the rest had to go into stocks and shares. So no change, no retrospective change at the moment.

but it definitely is something the government wants to look at. And to Chris's question then, if there were changes at a later date, can those changes impact what you've already got saved?

Well, normally changes like this apply to money that you save in the future. So I think it would be very difficult for a government to say, OK, you save this money on the understanding that the tax regime was this. We're now going to change it not just for future savings, but... for money that you've already been saved.

I mean, we don't know quite what's on the Chancellor's mind or the government's mind. We do know that there is this real drive to get more companies and individuals investing and investing in the UK to help the kind of whole growth agenda. I think if the government's going to make changes, then any changes must be communicated really clearly. What we'd want to avoid is any knee-jerk reaction by savers because they sort of are really worried about a changing regime. That never goes down.

very well.

Thank you. There was also an announcement on house building. The Chancellor said the OBR has concluded that Labour's reforms will lead to house building reaching a 40-year high. Ria is a student in Sheffield. She was watching the statement. And she had some questions about that.

I think it was nice that they did speak a little bit about affordable homes and they announced that I think it was around 18,000 but 18,000 new homes is nowhere near enough and as someone who is looking to get on the property ladder myself after leaving university. I still feel like very uneasy and there's very little guidance on how that's possible in the current economic situation that the country is in. So I think maybe it would have been nicer for more of a focus on that.

Mike, will building on this scale be possible and will it make homes more affordable for people like Ria? Well, actually, the announcement we had early this week on home building, two billion pounds going into subsidizing social housing and affordable housing.

It's actually less money than the previous government spent. Now, the get-out is that the government press release described it as a down payment pending further decisions coming later this year in the spending review in June. But if we don't get any more money added to that $2 billion in June, then...

I'm afraid this government will be doing less well than the previous government did when it came to subsidizing affordable homes. There was also a bit of bad news in the OBR document where in the small print, they said that they didn't think the government would hit its target. 1.5 million homes in england they had a slightly smaller number and it was across the whole of the uk but

But we shouldn't doubt that the government is very keen to get house building up. And actually, quite a lot of that increased growth that I talked about at the start of this programme is coming through from there being more building going on in the country, which means more homes, bigger homes, and also...

business is able to expand. That is an important part of growing the economy. Thank you and thanks to Ria for the question. It's not just today's spring statement of course. A lot of the changes announced in October's budget kick in in April. Probably worth a little bit of a quick

pressure on those. One of them was a rise in employer national insurance contributions that we've mentioned already. This is the tax businesses have to pay for their employees. Elsa, just summarise, what's changing there? So two things. The threshold at which that kicks in is being lowered and the rate that employers will be paying is increasing. So a very big cost to business.

So it is a hike for employers. Is it something the rest of us might feel down the line? I think it has to be. I think... Prices will increase because employers won't be able to stomach all of the increases. And there will be, no doubt, some pressure on replacement of roles as people leave. Maybe those businesses that are really struggling with that increase will be...

We will no doubt see. Sarah, if you're buying a house, there's a very important deadline looming, isn't there? That's right. So if you're buying a house in England or Northern Ireland, then you need to... complete your house purchase before the 1st of April if you want to save on stamp duty. And the reason is, up until now, you can buy property costing up to £250,000 and not pay stamp duty.

that threshold will go down to £125,000 on April 1st. If you're a first-time buyer, it's currently £425,000. That will fall to £300,000 from April 1st. But you have to complete, not just exchange, to do so by the current regime. Otherwise, you'll get the new stamp duty rates instead. So if you're listening to this, it's probably a bit late now to try and squeeze past before that deadline. Sarah, shall we end on a bright note for lower paid workers? There is...

a boost to their pay packets from next month. Yeah, always good to end on good news. So the national living wage will rise by just under 7%, so going up to £12.21 an hour, and that's for people aged 21 or over. But actually those aged 18 to 20... to get an even bigger rise. Their wage is going up, the national women wage, to £10 an hour. That's a rise of 16%. That's also kicking in from April 1st.

Thank you. Mike, when we see people's pay packets go up like this, I mean, does it boost how people are feeling? Is it likely to encourage growth, make us all feel a little bit richer?

Well, I would hope so. Those are chunky rises in the minimum wage, going to some of the poorest workers. But it does seem from your talking to the public at the start of the programme, there does seem to be a little bit of mood of pessimism around at the moment, isn't there? And I think the government's really fighting against that.

And I think what we saw today, heard today from the Chancellor was an attempt to try and tell the more positive story that things have been hard, but actually, no, growth is looking up and maybe we will be getting better off eventually.

Well, we don't get as long to speak on the podcast as the Chancellor does in Parliament. So that is all we have time for. Huge thanks to everybody who got in touch and took part. And thank you, of course, to our panel. We've been hearing from Sarah Pennells from Royal London, Mike Brewer from the Resolution. We also listen to every WhatsApp. Voice note, the number is 033-06-783-183.

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