Millions of people are to pay more in tax - and the UK is now believed to be in recession, Chancellor Jeremy Hunt has said. Mr Hunt is delivering his Autumn Statement in the House of Commons today (November 17).
Mr Hunt has promised to “tackle the cost-of-living crisis” and “rebuild our economy” as he set out plans for tax rises and spending cuts. He said there would be a “shallower downturn” as a result of his measures but the Office for Budget Responsibility (OBR) believed the economy was “now in recession”.
He told MPs his three priorities were “stability, growth and public services”. The OBR forecast the UK economy would shrink by 1.4% next year, Mr Hunt said.
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“The OBR forecast the UK’s inflation rate to be 9.1% this year and 7.4% next year,” he said. “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 (gross domestic product) 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%.” Mr Hunt was setting out a package of £30billion of spending cuts and £24bn in tax rises over the next five years.
He has announced a freeze in income tax thresholds which will mean millions of people pay more in tax. The threshold at which the 45p top rate of income tax is paid will be reduced from £150,000 to £125,140.
Meanwhile, energy firms have also been hit with an expanded windfall tax of 35%. This is up from the 25% already levied.
Mr Hunt also said he was committed to helping people raise their income, find work and become financially independent. He announced he will ask more than 600,000 more people on universal credit to meet with work coaches "so they can get the support they need to increase their work hours or earnings," he said.
His package is in stark contrast to his predecessor Kwasi Kwarteng’s ill-fated plan for £45bn of tax cuts, less than two months ago, which spooked the markets, pushed up the cost of borrowing and contributed to the downfall of Liz Truss’ short-lived administration.
Mr Hunt said: “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.”
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