Energy Bills Rising And Top Tax Threshold Lowered In Jeremy Hunt's "Difficult" Autumn Statement

Hunt said the move will mean the government is “asking more from those who have more means” as he seeks to balance the country's finances in the face of dire global economic conditions and the fallout from Liz Truss and Kwasi Kwarteng's "mini-Budget" in September. 

“I have tried to be fair by following two broad principles: firstly, we ask those with more to contribute more; and secondly, we avoid the tax rises that most damage growth,” Hunt said.

He told the Commons his plans would deliver a “shallower downturn” for the UK economy while “protecting the vulnerable” from the effects of the global downturn.

Labour said the Chancellor had "picked the pockets of purses and wallets of the entire country" and that the country was being "held back" by the government.

"Britain is a great country, with fantastic strengths. But, because of this government’s mistakes, we are being held back," Shadow Chancellor Rachel Reeves said.

"What people will be asking themselves at the next general election is this: Am I and my family better off with the Tories? And the answer is no.

The Liberal Democrats dubbed the Autumn Statement a "cost of chaos budget", and said "everyone is being forced to pay the price for this Conservative government’s incompetence".

"The country shouldn't be forced to clean up their mess," said Sarah Olney, the Liberal Democrats' Treasury spokesperson.

UK entering recession 

The Chancellor also confirmed that the UK was entering a recession, claiming the OBR forecast showed GDP would fall by 1.4 per cent in 2023, before rising by 1.3 per cent in 2024.

Opening his Autumn Statement on Thursday, Hunt said the government’s priorities were “stability, growth, and public services”. 

“We also protect the vulnerable because to be British is to be compassionate and this is a compassionate Conservative government,” he added.

He said his plan “reflects British values as we respond to an international crisis”, and added that the Office for Budget Responsibility had confirmed “global factors are the primary cause of current inflation”.

Bank of England remains independent

Hunt said inflation was the “enemy of stability” and that the Bank of England “has my wholehearted support in its mission to defeat inflation”. He also confirmed that the government has no plans to review the Bank’s independent status.

The Chancellor went on to comment on the “mini-Budget” brought forward by former prime minister Liz Truss and former chancellor Kwasi Kwarteng, which is widely believed to have contributed to the current situation.

Their fiscal event promised £45bn of unfunded tax cuts and an expensive energy support package in a bid to boost growth, but resulted in a period of financial turmoil that led the Bank of England to intervene to stabilise the economy.

The downturn caused Truss to sack Kwarteng and replace him with Hunt, but she herself was ousted from office less than a week later.

“Credibility cannot be taken for granted”

“I understand the motivation of my predecessor’s mini-Budget and he was correct to identify growth as a priority. But unfunded tax cuts are as risky as unfunded spending which is why we reversed the planned measures quickly,” Hunt told MPs.

He continued that “credibility cannot be taken for granted” and said that inflation hitting 11.1 per cent “shows we must continue a relentless fight to bring it down, including an important commitment to rebuild the public finances”.

Alongside announcing the change to the 45p tax rate threshold, which he claimed would cost those in the bracket “just over £1,200 more a year”, the Chancellor also announced that all income tax personal allowance thresholds will be frozen until 2028.

Energy support to target most vulnerable

Setting out his plan for energy bills, Hunt paid tribute to Truss and Kwarteng for their “leadership in this area”, and confirmed their plans for £55bn of support for households would remain in place this winter.

He also announced the Energy Price Guarantee would continue for 12 months from April 2023 “at a higher level of £3,000 per year for the average household”, meaning “an average of £500 support for every household”.

Additional support would also be extended to the most vulnerable “of £900 to households on means-tested benefits; £300 to pensioner households; and £150 for individuals on disability benefit”.

Pensions and benefits to rise with inflation

To further protect those “most exposed” to inflation, social rents will be capped at 7 per cent in 2023-24, which Hunt said would be “a saving for the average tenant of £200 next year”.

The National Living Wage will also be increased by 9.7 per cent in 2023, raising the wage to £10.42 an hour, which Hunt said was “the largest cash increase in the UK’s National Living Wage ever”.

On benefits and pensions, the Chancellor said he had had “some representations to keep the uplift to working age and disability benefits below the level of inflation given the financial constraints we face”.

But Hunt said this would “not be consistent with our commitment to protect the most vulnerable”, and confirm that benefits and the state pension would be increased by 10.1 per cent next year, costing the taxpayer £11bn.

The pension credit, which supports the poorest pensioners, would also be increased by 10.1 per cent, which Hunt said “is worth up to £1,470 for a couple and £960 for a single pensioner in our most vulnerable households”.

Electric vehicles taxed

Road tax would also be reformed, with electric vehicles no longer exempt from Vehicle Excise Duty from April 2025 to make the motoring tax system "fairer".

The Chancellor also announced that he is "reforming allowances on unearned income", with tax-free allowance for earnings on dividends cut from £2,000 to £1,000 from next year, and then to £500 from April 2024. 

Exemptions for capital gains tax will be cut from £12,300 to £6,000 next year and then to £3,000 from April 2024. 

“These changes still leave us with more generous allowances overall than countries like Germany, Ireland, France, and Canada,” he added.

Windfall tax expanded 

Hunt announced he would be expanding the windfall tax on energy companies, which have seen increased profits due to the rising costs of energy, in a move that will raise £14bn.

The tax will jump from 25 per cent to 35 per cent from 1 January 2023, and will continue until March 2028.

He also said that "from January 1st, we have also decided to introduce a new, temporary 45 per cent levy on electricity generators".

Public spending to grow slower than economy

On public spending, Jeremy Hunt said "we are going to grow public spending – but we’re going to grow it slower than the economy". 

"For the remaining two years of this Spending Review, we will protect the increases in departmental budgets we have already set out in cash terms," he said.

He said the government was going to grow spending at 1 per cent a year “in real terms” over the next three years.

Hunt added that “although departments will have to make efficiencies to deal with inflationary pressures in the next two years, this decision means overall spending in public services will continue to rise”.

Education spending up

The big surprise was an increase in funding for education. Hunt announced that the government will invest “an extra £2.3bn per year” in the schools system to ensure “school standards continue to rise for every single child”.

“Our message to heads and teachers today is thank you for your brilliant work, we need it to continue. And in difficult economic circumstances, a Conservative government is investing more in the public service that defines all of our futures,” he said.

The extra cash for schools and the NHS would translate into an additional £1.5bn Scotland, £1.2 bn Wales, and £650m Northern Ireland via the Barnett formula.

NHS budget increase

Hunt also announced he would “increase the NHS budget, in each of the next two years, by an extra £3.3bn”, but would still be asking it “to join all public services in tackling waste and inefficiency”.

“We want Scandinavian quality alongside Singaporean efficiency, both better outcomes for citizens and better value for taxpayers,” the Chancellor said.

“That does not mean asking people on the frontline, often exhausted and burned out, to work harder, which would not be fair. But it does mean asking challenging questions about how to reform all our public services for the better.”

Getting people working

To help people in work, the Chancellor said he had asked the work and pensions secretary, Mel Stride, to “thoroughly review workforce participation”.

“That is why we will ask over 600,000 more people on Universal Credit to meet with a work coach so that they can get the support they need to increase their hours or earnings.”

He added that another £280m will be invested to help the Department of Work and Pensions to crack down on benefit fraud and errors in the next two years.

There would also be a review on the pension age, which is due to increase to 68 between 2044 and 2046, to be published in early 2023.

Due to the “significant shock to public finances” caused by the global downturn, Hunt said it would not be possible to reinstate international aid spending to 0.7 per cent, and it would remain at its current level of 0.5 per cent.

Energy efficiency drive

On energy efficiency, Hunt said the UK had a new ambition to “reduce energy consumption from buildings and industry by 15 per cent” by 2030, and announced an additional £6bn a year in funding to help the country reach energy efficiency targets.

“Reducing demand by this much means, in today’s prices, a £28bn saving from our national energy bill or £450 off the average household bill,” he said.

To help the UK reach its climate targets, Hunt said the government will proceed with the new nuclear plant at Sizewell C, creating 10,000 highly skilled jobs providing “low-carbon, power to the equivalent of 6 million homes for over 50 years”.

Infrastructure and devolution spending

Hunt also confirmed that there would be no cuts to capital spending over the next two years, meaning that funding for infrastructure projects would continue in real terms, including plans to build HS2.

“This means that although we are not growing our capital budget as planned, it will still increase from £63bn four years ago to £114bn next year and £115bn the year after – and remain at that level, more than double what it was under the last Labour government,” he explained.

To help “unlock growth” across the country, Hunt said “we need to make it easier for local leaders to make things happen without banging on a Whitehall door”.

“Today I can announce a new devolution deal that will bring an elected Mayor to Suffolk, and deals to bring Mayors to Cornwall, Norfolk and an area in the North-East to follow shortly,” he said.

Supply-side reform

On supply-side reform, Hunt said he would use the UK’s new “Brexit freedoms” to review EU regulations in the “growth industries” of “digital technology, life sciences, green industries, financial services and advanced manufacturing”.

Import tariffs are also set to be removed on “over 100 goods used by UK businesses in their production processes, from car seat parts to bicycle frames”.

Research and development funding would also be maintained at its current level of 2.4 per cent of GDP, alongside an additional increase of £20bn by 2025.

 

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