Chancellor Jeremy Hunt has reduced the threshold at which the top rate of income tax is paid from £150,000 to £125,140 in his autumn statement. It means more people will pay the higher 45% rate.
Mr Hunt announced two new fiscal rules, telling the Commons: "The first is that underlying debt must fall as a percentage of GDP by the fifth year of a rolling five-year period. The second, that public sector borrowing, over the same period, must be below 3% of GDP."
The Chancellor went on: "The plan I'm announcing today meets both rules. Today's statement delivers a consolidation of £55 billion and means inflation and interest rates end up significantly lower. We achieve this in a balanced way: in the short term, as growth slows and unemployment rises, we will use fiscal policy to support the economy."
He said the OBR confirms "that because of our plans, the recession is shallower, and inflation is reduced", adding: "Unemployment is also lower with about 70,000 jobs protected as a result of our decisions today. Then, once growth returns, we increase the pace of consolidation to get debt falling. This further reduces the pressure on the Bank to raise interest rates because as Conservatives we do not leave our debts to the next generation."
Mr Hunt said the Office for Budget Responsibility (OBR) forecast is the UK's inflation rate will be 9.1% this year and 7.4% next year.
He went on: "They confirm that our actions today help inflation to fall sharply from the middle of next year. They also judge that the UK, like other countries, is now in recession. Overall this year, the economy is still forecast to grow by 4.2%.
"GDP then falls in 2023 by 1.4%, before rising by 1.3%, 2.6%, and 2.7% in the following three years. The OBR says higher energy prices explain the majority of the downward revision in cumulative growth since March. They also expect a rise in unemployment from 3.6% today to 4.9% in 2024 before falling to 4.1%."
He noted "today's decisions mean that over the next five years, borrowing is more than halved", adding: "This year, we are forecast to borrow 7.1% of GDP or £177bn; next year, 5.5% of GDP or £140bn; then by 2027-28, it falls to 2.4% of GDP or £69bn. As a result, underlying debt as a percentage of GDP starts to fall from a peak of 97.6% of GDP in 2025-26 to 97.3% in 2027-28."
