Chancellor Jeremy Hunt is to make an autumn statement on Thursday morning, setting out how the Government will cope with the cost of living crisis and spiraling inflation. The inflation comes after Liz Truss and Kwazi Kwarteng's mini-Budget crashed the UK economy earlier this year.
The Chancellor is expected to increase taxes - including income tax - and make budget cuts totaling 10s of billions of pounds. Benefits, pensions and minimum wages are expected to go up from next April. It is thought the cap on energy bills will continue after April, but at a higher level, meaning an increase in what we pay for gas and electricity.
The autumn statement is expected at 11.30am in a statement being made by Mr Hunt in the House of Commons. There will then be a statement on the state of the economy and a reaction to the mini-Budget at 2pm by the Office for Budget Responsibility.
Unlike the Kwarteng mini-Budget, this statement is expected to be fully costed - setting out how the Government will pay for what is announced.
Chancellor Jeremy Hunt will unveil a £54 billion package of tax hikes and spending cuts. Mr Hunt will say his “difficult decisions” are necessary to keep mortgage rates low and tackle the rocketing energy and food prices intensifying the cost-of-living crisis.
The Chancellor will insist his strategy “protects our long-term economic growth” while being “compassionate” to the most vulnerable on society.
“We aren’t immune to these global headwinds, but with this plan for stability, growth and public services – we will face into the storm,” he is expected to tell the Commons.
The long-awaited independent forecasts from the Office for Budget Responsibility (OBR) will also be published and are expected to detail bleak prospects for an economy teetering on a recession.
Mr Hunt will vow policies that will “work together” with the interest rate-rising Bank of England as he “makes sacrifices” in the form of £30 billion of spending cuts and £24 billion in tax rises over the next five years.
His package will stand in stark contrast to his predecessor Kwasi Kwarteng’s unfunded splurge of tax cuts less than two months ago, which further dented the UK’s finances.
Mr Hunt will warn that “high inflation is the enemy of stability” as it sends food and fuel bills soaring, causes businesses to fail and raises unemployment.
“It erodes savings, causes industrial unrest, and cuts funding for public services. It hurts the poorest the most and eats away at the trust upon which a strong society is built,” he is set to say.
“Families across Britain make sacrifices every day to live within their means, and so too must governments because the United Kingdom will always pay its way.
“We are taking a balanced path to stability: tackling the inflation that eats away at a pensioner’s savings and increases the cost of mortgages to families, at the same time supporting the economy to recover. But it depends on taking difficult decisions now.”
Prime Minister Rishi Sunak has warned that inflation is the “enemy we need to face down” but insisted the decisions in Thursday’s autumn statement would be “based on fairness, they will be based on compassion”.
Mr Hunt is expected to impose stealth taxes by freezing the rates at which workers begin paying higher rates, drawing more into higher brackets as inflation soars.
These are likely to be accompanied by a raising of the minimum wage, and a lowering of the threshold for when the 45% top rate of income tax comes in from £150,000 to £125,000.
The windfall tax on oil and gas giants is expected to be increased and widened to electricity generators.
But the energy bill support package unveiled by Liz Truss is expected to be made less generous from April when the average bill is set to rise from £2,500 to £3,000.
Mr Hunt will set out whether benefits and state pensions will rise in line with inflation.
He is expected to allow local authorities to further raise council tax without referendums and delay Boris Johnson’s lifetime cap on social care costs.
The Chancellor will seek to allay the criticism by going to the 1922 Committee on Thursday.
He will hope that his package will reduce the need for the Bank to further hike interest rates, with experts already pencilling in an increase from 3% to 3.5%.
