Chancellor Jeremy Hunt has announced the government’s autumn budget, confirming a wave of economic measures to help strengthen the UK economy. It comes as the Office for Budget Responsibility (OBR) has confirmed the UK has entered a recession which it expects to last a year.
Mr Hunt has announced cuts in public spending and tax increases, as households are facing soaring food and energy bills and high inflation. Speaking in the Commons on Thursday (November 17) the chancellor 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”.
He promised his statement will lead to a “shallower downturn” in the UK’s finances. Here are the key points from Chanellor Jeremy Hunt’s autumn statement:
Energy bills
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The energy price guarantee scheme will increase from £2,500 for the average household to £3,000 for 12 months from April.
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The government plans to spend £55bn to help households and businesses with their energy bills this winter – with prices forecast to remain elevated through next year, this will mean an average of £500 support for every household.
New cost of living payments
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Additional cost-of-living support payments will be paid next year, with £900 going to households on means-tested benefits, £300 to pensioner households, and £150 for individuals on disability benefit.
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An additional £1bn of funding will be provided to enable a further 12-month extension to the Household Support Fund.
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The amount of support for households using alternative fuels such as heating oil and liquefied petroleum gas will be doubled from £100 to £200, to be implemented “as soon as possible this winter.”
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More plans to support business from next April will be announced “before the end of this year.”
Universal Credit and benefits
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Working age and disability benefits will increase in line with inflation, with a rise of 10.1 percent, costing £11 billion.
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The Department for Work and Pensions (DWP) will receive an extra £280m to tackle fraud and error. 600,000 people on Universal Credit will be encouraged to meet up with caseworkers to help them get back to work.
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Mr Hunt will also move back the managed transition of people from employment stand support allowance onto Universal Credit to 2028.
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The governments’ review of the state pension age will be published in early 2023.
Pensions
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Benefits and state pensions will rise in line with inflation and the pension credit will increase by 10.1 percent, at a cost of £11bn.
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On average, a family on universal credit will benefit next year by around £600. The benefit cap will also increase with inflation next year.
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The pension credit will be increased by 10.1 percent, which is worth up to £1,470 for a couple and £960 for a single pensioner in our most vulnerable households.
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The pensions triple-lock will remain in place.
National living wage
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The national living wage will be increased by 9.7 percent to £10.42 from April 2023 – it represents an annual pay rise worth more than £1,600 to a full-time worker.
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Mr Hunt said “it is the largest cash increase in the UK’s national living wage ever” and expects the increase to benefit over two million of the lowest paid workers in the country.
Income tax
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The government is asking those who earn more to pay more tax.
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The threshold at which the top rate of income tax is paid will be reduced from £150,000 to £125,140.
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The allowance on unearned income will also be reformed, with the dividend allowance to be cut from £2,000 to £1,000 next year and then to £500 from April 2024.
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The annual exempt amount for capital gains tax will be cut from £12,300 to £6,000 next year and then to £3,000 from April 2024.
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Allowances and thresholds for income tax, national insurance, and inheritance tax will be frozen for a further two years, creating a new deadline of April 2028 - this means as people’s wages go up, they will pay more tax.
House buying and renting
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Stamp Duty tax cuts announced in September’s mini-budget will remain in place until March 31, 2025.
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The OBR expects housing activity to slow over the next two years.
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The increase in social rents will be capped at a maximum of 7 percent in 2023-2024 – a saving of £200 for the average tenant.
Vehicle tax
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Electric vehicles will no longer be exempt from Vehicle Excise Duty from April 2025 to make the motoring tax system “fairer”.
Windfall tax
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From January 1 to March 28, the windfall tax on oil and gas giants will increase from 25 percent to 35 percent.
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From January 1 a new temporary 45 percent levy on electricity generators will be introduced.
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These measures will raise an estimated £14bn.
Business rates
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The government will reevaluate properties for business rates from April 2023 – Mr Hunt stressed there will be compensation provided for firms to help alleviate the burden.
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The announcement means two-thirds of properties will not pay any more while also introducing a new transitional relief scheme as part of a £13.6bn package.
NHS and social care budgets
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Over the next two years, the NHS budget will increase by £3.3bn and will cover all areas.
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An independently verified plan for the number of doctors, nurses, and other professionals will be published by the Department of Health and Social Care and the NHS.
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On social care, Mr Hunt said the increasing number of over 80s is putting “massive pressure” on services and he will delay the implementation of the Dilnot reforms for two years and allocate the funding to allow local authorities to provide more care packages.
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Mr Hunt wants the social care system to help free up some of the 13,500 hospital beds that are occupied by those who should be at home. He has allocated additional grant funding of £1bn next year and £1.7bn the year after for adult social care.
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Combined with the savings from the delayed Dilnot reforms and more council tax flexibilities, this means an increase in funding available for the social care sector of up to £2.8bn next year and £4.7 billion the year after.
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The increase in funding will allow the social care system to help deliver an estimated 200,000 more care packages over the next two years.
Climate and energy
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Mr Hunt said “we remain fully committed to the historic Glasgow Climate Pact agreed at COP26 including a 68 percent reduction in our emissions by 2030”.
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An extra £6bn of investment in energy efficiency will be added from 2025 to help meet a new ambition of reducing energy consumption from buildings and industry by 15 percent by 2030.
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According to today’s prices, this could save £28bn from the national energy bill or £450 off the average household bill.
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The Government will proceed with the new nuclear plant at Sizewell C.
Defence budget
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The defence budget will be maintained “at least 2 percent of GDP,” Mr Hunt said.
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This is consistent with the UK’s Nato commitment.
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On overseas aid, he said: “The OBR’s forecasts show a significant shock to public finances so it will not be possible to return to the 0.7% target until the fiscal situation allows.”
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The budget assumes that Official development assistance spending will remain around 0.5% for the forecast period.
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