Jeremy Hunt has outlined a package containing “difficult decisions” that amounts to a “substantial tax increase” in an autumn statement he said would put the UK on a “path to stability”.
The package represents a significant change from his predecessor Kwasi Kwarteng’s unfunded tax cuts in the disastrous mini-budget less than two months, ago which was widely blamed for having spooked the markets.
Here are the main points from Chancellor Jeremy Hunt’s autumn statement:
Growth and recession
– The OBR has said that the UK is “now in recession”, Mr Hunt said, but he added “overall this year, the economy is still forecast to grow by 4.2%”.
– Mr Hunt promised his autumn statement will lead to a “shallower downturn” in the UK’s finances.
– Underlying debt as a percentage of GDP is expected to fall from a peak of 97.6% of GDP in 2025-26 to 97.3% in 2027-28.
– Mr Hunt announced two new fiscal rules, that underlying debt must fall as a percentage of GDP by the fifth year of a rolling five-year period, and that public sector borrowing, over the same period, must be below 3% of GDP.
Pay and support with the cost of living
– The energy price guarantee scheme will increase from £2,500 for the average household to £3,000 for 12 months from April, Mr Hunt confirmed.
– The Government will introduce additional cost-of-living payments for the “most vulnerable”, with £900 for those on benefits, £300 for pensioners and £150 for those on a disability benefit.
– The Chancellor said he will cap the increase in social rents at a maximum of 7% in 2023/24, saving the average tenant £200 next year.
– Mr Hunt has accepted a recommendation to increase the national living wage by 9.7%, making the hourly rate £10.42 from April 2023.
– The Chancellor told MPs the Office of Budget Responsibility (OBR) has confirmed “global factors” are the “primary cause” of inflation.
– The OBR forecasts the UK’s inflation rate to be 9.1% this year and 7.4% next year.
– He said the autumn statement will cause inflation to “fall sharply from the middle of next year”.
– The Chancellor confirmed the Bank of England’s remit will not be changed and it has his “wholehearted support in its mission to defeat inflation”.
– Mr Hunt reduced the threshold at which the top rate of income tax is paid from £150,000 to £125,140, but said he was not raising headline rates of taxation. He said those earning £150,000 or more will pay just over £1,200 more a year.
– Mr Hunt said he would protect the increases in departmental budgets already set out in cash terms, before growing resource spending at 1% a year in real terms over the next three years. He said public spending would grow “slower than the economy”.
– Electric vehicles will no longer be exempt from Vehicle Excise Duty from April 2025 to make the motoring tax system “fairer”.
– Mr Hunt increased the windfall tax on oil and gas giants from 25% to 35% and imposed a 45% levy on electricity generators to raise an estimated £14 billion next year.
– On business rates, Mr Hunt said the Government will proceed with the revaluation of business properties from April 2023.
– The stamp duty cuts announced in the mini-budget will remain in place but only until March 31 2025. Mr Hunt told the House the OBR expects housing activity to slow over the next two years.
– On business taxes, the Chancellor said he had decided to freeze the Employers National Insurance Contributions threshold until April 2028. “We will retain the Employment Allowance at its new, higher level of £5,000,” he said.
– The Chancellor rejected calls to put VAT on independent school fees.
– Mr Hunt said he will increase the NHS budget by an extra £3.3 billion in each of the next two years.
– The NHS will be asked to “join all public services in tackling waste and inefficiency”.
– Mr Hunt said the NHS would publish an independently-verified plan for the number of doctors, nurses and other professionals needed in five, 10 and 15 years’ time.
– He allocated for adult social care additional grant funding of £1 billion next year and £1.7 billion the year after.
Spending and benefits
– Mr Hunt said “with just under half of the £55 billion consolidation coming from tax, and just over half from spending, this is a balanced plan for stability”.
– The Chancellor said he will invest an extra £2.3 billion per year in schools over the next two years.
– It will “not be possible” to return to the 0.7% overseas aid target “until the fiscal situation allows”, Mr Hunt said.
– He said he will maintain the defence budget at at least 2% of GDP.
– Mr Hunt said he would move back the managed transition of people from employment and support allowance on to Universal Credit to 2028.
– The implementation of the Dilnot reforms will be delayed for two years, Mr Hunt confirmed, announcing an increase in funding for the social care sector of up to £2.8 billion next year and £4.7 billion the following year.
– The Barnett consequentials of the autumn statement mean an extra £1.5bn for the Scottish Government, £1.2bn for the Welsh Government, and £650m for the Northern Ireland Executive.
– The Chancellor said he would not cut “a penny” from Government capital budgets over the next two years, and would then maintain them at that level for the next three years.
– Working age and disability benefits will increase in line with inflation, with a rise of 10.1%, costing £11 billion.
– State pensions will increase in line with inflation in April, as Mr Hunt announced the “biggest ever cash increase in the state pension”.
Climate and energy
– Mr Hunt said “we remain fully committed to the historic Glasgow Climate Pact agreed at COP26 including a 68% reduction in our emissions by 2030”.
– The Chancellor said he would add an extra £6 billion of investment in energy efficiency from 2025 to help meet a new ambition of reducing energy consumption from buildings and industry by 15% by 2030, adding this could – according to today’s prices – save £28 billion from the national energy bill or £450 off the average household bill.
– The Government will proceed with the new nuclear plant at Sizewell C.