Jeremy Hunt has unveiled his Autumn Statement as he attempts to fill the £54billion black hole in the Government’s finances.
Although the Chancellor pledged to set out a plan to help grow the economy, the Office for Budget Responsibility (OBR) predicted overall growth of 4.2% in 2022 with the country now in recession.
“In the face of unprecedented global headwinds, families, pensioners, businesses, teachers, nurses and many others are worried about the future.
“So today we deliver a plan to tackle the cost-of-living crisis and rebuild our economy,” he said.
“We also protect the vulnerable because to be British is to be compassionate and this is a compassionate Conservative government.”
Here are the main points from Chancellor Autumn Statement:
Overall growth and recession
Although the OBR has said that the UK is “now in recession”, Mr Hunt promised his new policies will lead to a “shallower downturn” in the economy. The OBR has forecast the UK economy is expected to shrink by 1.4 per cent next year.
Underlying debt as a percentage of GDP is expected to fall from a peak of 97.6 per cent of GDP in 2025-26 to 97.3 per cent 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 three per cent of GDP.
Energy bills and cost of living
The energy price cap 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 seven per cent 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 per cent, making the hourly rate £10.42 from April 2023.
Inflation
The Chancellor told MPs the Office of Budget Responsibility has confirmed “global factors” are the “primary cause” of inflation.
The OBR forecasts the UK’s inflation rate to hit an average of 9.1 per cent this year and 7.4 per cent 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 that it has his “wholehearted support in its mission to defeat inflation”.
Tax
In order to help fill the gap in Government finances, the Chancellor announced the 45p tax threshold will now fall from £150,000 to £125,140.
He said those earning £150,000 or more will pay just over £1,200 more a year.
The income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds will be frozen until April 2028, something which will result in more people paying more tax as a result of "fiscal drag" as wages increase.
Mr Hunt said he would protect the increases in departmental budgets already set out in cash terms, before growing resource spending at one per cent 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 per cent to 35 per cent and imposed a 45 per cent levy on electricity generators to raise an estimated £14 billion in total 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.
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.
Health
Mr Hunt said he will increase the NHS budget by an extra £3.3billion in each of the next two years.
The NHS will be asked to “join all public services in tackling waste and inefficiency”.
The Chancellor 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 also allocated for adult social care additional grant funding of £1billion next year and £1.7billion the year after.
Spending and benefits
Mr Hunt said “with just under half of the £55billion 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 £2.3billion per year in schools over the next two years.
It will “not be possible” to return to the 0.7 per cent overseas aid target “until the fiscal situation allows”, Mr Hunt said.
He said he will maintain the defence budget of at least two per cent 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 £2.8billion next year and £4.7billion the following year.
The Barnett Consequentials - the way the Government allocates funding across the devolved nations - will involve an extra £1.5billion for the Scottish Government, £1.2billion for the Welsh Government, and £650million 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 per cent, costing £11billion.
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 per cent reduction in our emissions by 2030”.
The Chancellor said he would add an extra £6billion of investment in energy efficiency from 2025 to help meet a new ambition of reducing energy consumption from buildings and industry by 15 per cent 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 has also announced it will proceed with the new nuclear plant at Sizewell C.
