Spring Statement announces £17.6 billion of household support

The Office for Budget Responsibility (OBR) has set out its assessment of household living standards following the Spring Statement of March 2022, published alongside its Economic and fiscal outlook. The fiscal watchdog said the £17.6 billion of support announced in the statement, delivered through the energy support package, the fuel duty cut and the rise in the NICs primary threshold, would not be enough to prevent a record fall in real household disposable income (RHDI) per person¹.

The OBR forecast that RHDI per person would fall by 2.2 per cent in 2022-23, which it described as "the biggest fall in living standards in any single financial year since ONS records began in 1956-57"¹. It said 2022-23 would be only the ninth occasion since the 1950s that RHDI per person had fallen on a financial year basis, and the first since 2016-17¹. Without the Spring Statement measures, RHDI per person would have fallen by around another 1 percentage point, meaning the government had offset around a third of the fall that would otherwise have occurred¹.

The OBR said inflation had reached a 30-year high in January 2022, and that the Russian invasion of Ukraine was expected to push it higher, with the rise to a 40-year high expected during the year¹. It attributed the squeeze on incomes to nominal earnings failing to keep pace with rising prices, higher global goods and energy prices, and net changes in personal taxes and benefits¹.

On energy bills specifically, the OBR noted that when the rebate measures were announced, the government said the £350 would offset just over half of the £694 in annual energy bills taking effect in April¹. Its forecast assumed a further rise in the price cap of around 40 per cent in October 2022, implying average annual energy bills around £1,100 higher between April 2022 and March 2023¹. The combined effect of the initial rebates and NICs cuts was sufficient to offset just under half of that rise, it said¹.

The OBR said real incomes had been stagnant since the start of 2019 and were now expected to remain so over the next few years, with RHDI per person only sustainably returning to its pre-pandemic level in 2024-25, two years later than forecast in October 2021¹. It said the level of RHDI per person troughs in late 2022 before starting to recover in 2023 as energy prices fall and inflation eases¹. By 2026-27, cumulative growth in RHDI per person is 0.2 percentage points lower than in the October forecast¹.

The OBR added a qualification on the record: on a calendar-year basis, the fall in 2022 is the largest since 2011 rather than the largest on record¹.

Why it matters for households

The forecast covers the financial year 2022-23, which began in April 2022. It describes a fall in real household disposable income per person, meaning the money households have left after tax and benefits, adjusted for rising prices. The OBR's central estimate is a 2.2 per cent fall over the year, with the level troughing in late 2022¹.

The £17.6 billion of support reduces the scale of that fall but does not remove it. The OBR estimates the measures offset around a third of the decline in real per-person disposable incomes, and just under half of the rise in average annual energy bills between April 2022 and March 2023¹. The energy rebate of £350 was described by the government as offsetting just over half of the £694 annual increase in bills taking effect in April¹.

The OBR's figures also imply that the recovery to pre-pandemic income levels is delayed. It now expects RHDI per person to return sustainably to its pre-pandemic level in 2024-25, two years later than its October 2021 forecast and four years after the start of the pandemic¹. For context on how inflation is measured across different household types, see the site's guide to the Household Costs Index and its comparison of CPIH and the Household Costs Index.

What happens next

The OBR's forecast assumes a further rise in the energy price cap of around 40 per cent in October 2022¹. It expects the level of RHDI per person to trough in late 2022 before recovering in 2023 as energy prices fall and inflation eases¹. The next scheduled fiscal event after the Spring Statement has not been reported in these documents.