Rishi Sunak is the new UK Prime Minister after being formally appointed by King Charles III. The former chancellor was confirmed at a private audience with the King on Tuesday morning after Liz Truss, the shortest-reigning PM in history, formally tendered her resignation after just 49 days in office.
Addressing the nation from outside Downing Street afterwards Mr Sunak said the country was "facing a profound economic crisis" and that "mistakes were made" by Ms Truss' government, which faced major backlash and market turmoil after a disastrous mini-budget just week into her premiership. Mr Sunak said: "I have been elected as leader of my party and your Prime Minister in part to fix them and that work begins immediately."
As the face many recognise as overseeing the government's finances during the pandemic and major schemes such as Eat Out to Help Out the new Prime Minister's track record and public pronouncements offer a glimpse of what his leadership could mean for your money.
With millions likely to struggle to pay their bills this winter and a cost of living crisis Mr Sunak will be under extreme pressure to help those hardest hit including benefits claimants, middle earners, and pensioners. Here's a taste of what the new prime minister is likely to do as prime minister and what that oculd mean for your finances.
Pension triple lock
A key issue for Mr Sunak – especially for Conservative voters, who tend to be disproportionally older – will be addressing the state pension triple lock. At the moment the state pension is supposed to increase each year in line with whichever of the following three things is highest: inflation as measured by the consumer prices index (CPI); the average wage increase; or 2.5%. Introduced by the Conservative/Liberal Democrat coalition government in 2010, the Tories' 2019 manifesto pledged to keep the triple lock in place for the duration of that parliament. However the triple lock was suspended during the pandemic because of an unusually large 8% rise in average earnings following the end of the government's furlough scheme.
In April pension pay rose by just 3.1% as inflation rose close to 10%, leaving millions of pensioners worried about meeting their bills. Since then ministers have given varying responses on its future. Last week, while still in office, Ms Truss said she was "completely committed" to maintaining the triple lock – the government had previously pledged to restore it from April 2023 – but foreign secretary James Cleverly said he could not give people "certainty" that the state pension would rise with surging inflation.
While it's not clear what the government's new position will be under Mr Sunak his statement after formally entering the race last weekend could offer a clue with the former chancellor saying he would “deliver on the promise of the 2019 manifesto". If this is to be true the triple lock will stay in place and the state pension will increase by 10.1% next April – a massive win for pensioners. However Mr Sunak's willingness to discard the 2019 manifesto during the pandemic – admittedly an unprecedented situation – means we can't be entirely sure what he will do. New chancellor Jeremy Hunt – whose continuation in the role is yet to be confirmed – has also refused to confirm the triple lock for next year.
Benefits uplift
For several years benefits in the UK have been uplifted in line with inflation – the CPI figure from the previous September – each April. Under Liz Truss’ government ministers refused to confirm whether this would be the case in 2023 with benefits already well behind living costs, putting pressure on millions of households.
When benefits were last increased in April it was based on the previous September’s figure of 3.1%. However by then inflation was running three times higher. Back when Mr Sunak was serving as chancellor under Boris Johnson he committed to uprate welfare payments in line with September’s CPI, which has reached 10.1% according to figures published on by the Office for National Statistics (ONS) earlier this month. Although nothing has been announced yet that could mean good news for benefits claimants – although the new Prime Minister will also be under pressure to be seen to be prudent with government finances as he enters Number 10.
Income tax
All tax thresholds and allowances are currently frozen for five years as part of policies introduced by Mr Sunak while he was chancellor. During the summer leadership campaign Mr Sunak vowed to cut the basic rate of income tax from 20% to 16% by the end of the next parliament meaning millions of households would pay 20% less in income tax and save hundreds of pounds.
However experts say Mr Sunak is unlikely to cut income tax any time soon given the fallout from the mini-budget. A fiscal event by chancellor Jeremy Hunt, who is expected to retain his role in cabinet, is planned for next Monday.
National Insurance
Last week Jeremy Hunt said that a 1.25 percentage point rise in National Insurance which took effect in April will still be reversed in November meaning around 28m workers in the UK are set to keep an extra £330 a year on average. Lower earners – those on less than £12,570 a year – won't benefit from the change because you don't pay any tax under this amount. The initial rise was part of Mr Sunak’s fiscal plan while he was chancellor but early indications and the current political climate indicate it might be difficult for him to bring back the controversial rise.
Stealth taxes
An Institute for Fiscal Studies report this month said all households on every income level would on average lose more from freezes over the next three years than they would gain from the UK Government's recent tax cuts – most of which have now been reversed. The four-year freeze to the higher-rate tax threshold means that by 2025-26 some 7.7m people (14% of adults) will be paying higher-rate tax – the highest rate on record. You can read everything the report said here.
Experts believe the income tax threshold freeze will make an increasing amount of money as more people are pulled into the higher tax bracket – more taxpayers will pay higher rates of income tax as well as paying more inheritance tax and capital gains tax, which are also frozen.
Mr Sunak will be under major pressure to shore up the public purse and is therefore unlikely to reverse the freeze. Mr Hunt said the 20p basic tax rate would remain indefinitely and although it's not been confirmed which measures will remain under Mr Sunak's premiership more details are likely to be revealed this week and at next Monday's fiscal event.
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