Chancellor Rishi Sunak has cut fuel duty by 5p a litre and increased the National Insurance threshold in an effort to help struggling families.

Employees will now only pay NI on everything earned over £12,570 (in line with income tax) from July but the planned 1.25% hike will go ahead from next month.

Fuel duty will be cut from this evening for a year and Mr Sunak also promised to cut income tax by 1p in the pound in 2024.

But he acknowledged the impact of inflation, which is at a 30-year high, and the global economic uncertainty caused by Vladimir Putin’s invasion of Ukraine.

The Office for Budget Responsibility (OBR) downgraded growth in gross domestic product – a measure of the size of the economy – from the 6% forecast for this year at the time of the Budget in October to just 3.8%.

Next year’s growth forecast has been downgraded from 2.1% to 1.8%.

Inflation hit 6.2% in February, up from 5.5% in January, again reaching the highest level since March 1992, when it stood at 7.1%.

Mr Sunak said inflation was forecast to average 7.4% this year due to “disruptions to global supply chains and energy markets, combined with the economic response to Putin’s aggression”.

He said the UK’s actions against Mr Putin’s regime are “not cost-free for us at home” and present a “risk” to the recovery.

Mr Sunak said “it is too early to know the full impact of the Ukraine war on the UK economy” but the OBR acknowledged there was “unusually high uncertainty” around the economic outlook.

The cost-of-living crisis driven by rising fuel and energy prices was set to be exacerbated in April by the 1.25 percentage point hike in national insurance to fund the NHS and social care.

But Mr Sunak unveiled a £6 billion plan to increase the threshold at which people start paying national insurance contributions (NICs) by £3,000 to £12,570 from July.

Mr Sunak said it was “a £6 billion personal tax cut for 30 million people across the United Kingdom, a tax cut for employees worth over £330 a year”.

Around 70% of workers will have their tax cut by more than the increase coming in April, he said.

And he promised further support in 2024 with a pledge to cut the basic rate of income tax from 20p in the pound to 19 – “a £5 billion tax cut for over 30 million people”.

But Paul Johnson, director of the Institute for Fiscal Studies think tank, said: “What is the possible justification for cutting income tax rate while raising NI rate?

“Drives further wedge between taxation of unearned income and earned income. Yet again benefits pensioners and those living off rents at expense of workers.”

Analysis

Rishi Sunak has now set out his plans to cut the cost of fuel alongside a surprise cut to income tax as part of the drive to tackle the cost-of-living crisis facing more and more households.

His Spring Statement confirmed widely trailed plans to cut fuel duty as well as some changes to National Insurance, which will raise the threshold for higher payments.

The proposal to cut fuel duty comes after 11 successive years in which duty was frozen and comes as petrol prices have soared to record levels.

But in a surprise announcement, he also revealed there will be a one penny cut in income tax.

The spring statement was preceded by angry clashes between the Prime Minister and opposition Labour leader Sir Keir Starmer over the sacking of 800 employees working for ferry operator P&O.

The PM said the government was taking legal action over the decision as there were grounds for believing employment law had been broken.

So, what has been the reaction to the mini-budget? Is it enough to tackle the energy crisis and spiralling price increases?

We got the verdict from some of those affected:

The founder of campaign group Fair Fuel Howard Cox welcomed the 5p cut in duty.

He said: "It would be churlish not to be thankful to the Chancellor in cutting Fuel Duty by 5p for 12 months.

"Our relentless campaigning has been fruitful.

"It will give some respite to millions of motorists, that have had and continue to have no choice but to drive.

"Just as important this fiscal relief to hauliers and small businesses teetering on survival, desperately need this reduction more than most road users, it’s way overdue.

"It will only benefit drivers and the economy if the new fuel taxation level becomes permanent and is accompanied by the introduction of an independent pump pricing watchdog, we’ve notionally called PumpWatch.

"Today’s fuel duty reduction must be passed onto drivers immediately."

And what does the Spring Statement do to help struggling families?

Lauren Abbott, a mother-of-two who lives in Kent said: "The biggest headache facing most families is the rising cost of energy, fuel and food and while I think the Chancellor's plans will be welcomed - particularly the rising National Insurance threshold - it's hard to know how much of a dent Rishi Sunak's policies are really going to make.

"The demands on household budgets are rising exponentially, with no signs of stopping, and it wouldn't take much for his efforts to become a small drop in an ocean of ever increasing costs.

"From April our energy bill will jump by an estimated £60 to £70 a month - while we're already noticing the weekly shop for our family of four costing £20 to £30 more a week than it did at the start of this year.

Add to that the rising price of fuel, which has taken the cost of a tank for our family car from just shy of £65 to closer to £90, throw in the increase in council tax, the impending 1.25% rise in National Insurance and like many, we're looking at how we should tighten our belts to cover it.

"For low-income households or those who have already watched their Universal Credit be cut back after the end of the pandemic uplift, I dread to think how they foresee meeting their basic needs in the coming months.

"While the 5p reduction in fuel duty will no doubt put some pennies back in our pocket - and I'd rather it in mine than theirs - it really could be just pennies considering fuel was £1.20 a litre not that long ago. In fact the RAC tells me the policy will save me about £3.30 a tank after the reduction is applied tonight."