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Tag: Autumn Statement

  • Autumn Statement: Jeremy Hunt warns of difficulties as living standards fall

    Jeremy Hunt has warned that families face “real challenges” as government forecasters predict the greatest drop in living standards since records began.

    According to the Office for Budget Responsibility, household income will drop by 7% over the next 18 months.

    In his Autumn Statement, the chancellor said tax increases and spending cuts would help tame inflation, which he blamed for the drop.

    However, Labour claimed that fairer tax decisions could have been made.

    Shadow chancellor Rachel Reeves called the emergency budget measures “an invoice for the economic carnage” caused by former Prime Minister Liz Truss’ policies.

    It was deliberately stripped of surprises and political theatre, with many of the announcements having been trailed in the media beforehand.

    Mr Hunt told the BBC’s political editor Chris Mason his plan would bring down soaring prices, while protecting public services.

    “These are real challenges for families up and down the country,” he said, adding: “I’m not pretending these aren’t going to be difficult times, but there’s a plan, there’s hope – and if we follow this plan, if we stick with it, we can get through to the other side.”

    In the next two years, before the next general election is due, there will be further support for households and extra money for schools, the NHS and social care in England.

    But after 2025 spending cuts are set to kick in for many departments.

    The key measures were:

    • Tax thresholds will be frozen until April 2028, meaning millions will pay more tax
    • Spending on public services in England will rise more slowly than planned – with some departments facing cuts after the next election
    • The state pensions triple lock will be kept, meaning pensioners will see a 10.1% rise in weekly payments
    • The household energy price cap has been extended for one year beyond April but made less generous, with typical bills capped at £3,000 a year instead of £2,500
    • There will be additional cost-of-living payments for the “most vulnerable”, with £900 for those on benefits, and £300 for pensioners
    • The top 45% additional rate of income tax will be paid on earnings over £125,140, instead of £150,000
    • UK minimum wage for people over 23 to increase from £9.50 to £10.42 an hour
    • The windfall tax on oil and gas firms will increase from 25% to 35%, raising £55bn from this year until 2028

    The Resolution Foundation think tank said the Autumn Statement piled further pressure on “the squeezed middle” earners.

    But it said increasing benefits in line with prices would make a “huge difference to those on low-to-middle incomes”.

    Mr Hunt denied that he had been forced to raise taxes and reduce spending because of the turmoil caused by Ms Truss’s mini-Budget.

    He said there had been mistakes, but insisted the government had “corrected those within weeks”.

    He argued that other countries, such as Germany, France and America were all facing similar problems as a result of the conflict in Ukraine and rising energy prices.

    However, Mr Hunt denied he had postponed difficult decisions, with the squeeze on government departments to come.

    Lean years ahead

    The Chancellor’s tone was sober; the facial expressions of Conservative MPs business-like rather than emblazoned with smiles.

    Even the opposition parties were relatively muted too: times are and will continue to be very difficult for millions of households.

    For all of the numbers, the forecasts, the rhetoric, the standout statistic comes from the government’s independent analysers, the Office for Budget Responsibility: Living standards are falling further right now than at any point since the 1950s.

    Bad news.

    Add to the mix a chancellor wrestling with a recession; responding with tax rises – taxation levels are their highest for 75 years – and government spending below what it was expected to be.

    He argues that protecting the state pension, benefits, and the announcements on spending for education and health shield the government against the suggestion this is another era of austerity.

    But lots of government departments face lean years, inflation pickpocketing their spending power.

    And Mr Hunt has also postponed the big spending squeezes until after the next election.

    That could turn out to be a hospital pass to the future and, after an election, to the next government, whatever its political colour.

    The OBR, which produced an economic forecast to accompany Mr Hunt’s statement, says high inflation and rising interest rates will lead to consumers spending less, tipping the UK’s economy into a recession “lasting just over a year”.

    It predicts the economy will shrink by 1.4% in 2023 before growth slowly picks up again.

    The forecaster also says that as a result of Mr Hunt’s decisions, the tax burden would rise to its highest level since the end of World War Two.

    Mr Hunt described a target to reduce government debt in five years time as one of “two new fiscal rules”. But speaking on BBC Newsnight, OBR chairman Richard Hughes suggested the plan could end up only being an aspiration because the end date can be extended every year at the budget.

    Attacking Mr Hunt’s plans in Parliament, Labour’s Rachel Reeves said he had introduced “a Conservative double whammy that sees frozen tax thresholds and double-digit inflation erode the real value of people’s wages”.

    She accused the government of increasing taxes by “stealth” arguing that freezing the personal allowance – the amount of income someone does not have to pay tax on – would cost an average earner more than £600 per year.

    Speaking to the BBC on Friday, Ms Reeves said “fairer choices around tax could have been made”, criticising the Tories for not abolishing non-dom status and instead going to the “pockets of the ordinary working man and woman”.

    The Liberal Democrats said people were “being forced to pay the price for this Conservative government’s incompetence”.

    The SNP’s Treasury spokeswoman Alison Thewliss said: “This is a UK so weak that no-one would wish to join it – Scotland cannot be forced to stay in broke, broken, Brexit Britain.”

    There was also an attack from the chancellor’s own side with former cabinet minister, Conservative MP Jacob Rees-Mogg arguing that the measures announced were based on unreliable economic forecasts.

    “I’m particularly concerned about the tax rises, when an economy is going into recession,” he said.

    Meanwhile, a Conservative MP is seeking assurances from the chancellor that he will not increase fuel duty.

    The tax is suppose to rise in line with inflation, but has repeatedly been frozen. The Treasury has said a final decision would not be taken until the next Budget in spring 2023.

    Writing to the chancellor, Conservative backbencher Jonathan Gullis warned that a “substantial number” of Tory MPs would be opposed to a rise.

  • Autumn statement: Millions to pay more in tax as chancellor cuts top-rate threshold and lays out plan to plug ‘black hole’

    The chancellor said he “tried to be fair” and said his plan would lead to a “shallower” recession and £55bn in savings. However, the OBR said disposable incomes will fall by 7.1% in real-term costs – the lowest levels since records began in 1956/7, taking incomes down to 2013 levels.

    Millions more Britons will pay more tax as Jeremy Hunt cut the top-rate threshold and announced freezes on several other taxes in his autumn statement.

    The total amount of savings from the autumn statement has been costed at £55bn, through tax rises and cutting government spending.

    However, in real-term costs, UK households’ disposable incomes will fall by 7.1% over the next two years – the lowest levels since records began in 1956/7, taking incomes down to 2013 levels, according to the independent Office for Budget Responsibility.

    Some of the main announcements:

    • Higher rate of tax threshold reduced to £125,140
    • Benefits and state pension to rise in line with inflation
    • Windfall tax extended to March 2028 and increased to 35%
    • Electric cars no longer exempt from road tax from April 2025
    • An extra £2.4bn per year on schools
    • NHS to get £3.3bn and adult social care £1bn next year and £1.7bn in 2024
    • Freeze on income tax personal allowance, national insurance and inheritance tax thresholds
    • Minimum wage increases to £10.42 an hour
    • Social housing rent increases capped at 7% from next year.

    The chancellor said the government is introducing two new fiscal rules: that underlying debt must fall as a percentage of GDP by the fifth year in a rolling five-year period: and public sector borrowing over the same period must be below 3% of GDP.

    He said he had “tried to be fair” in his decisions by asking those “with more to contribute more” and avoided tax rises that “most damage growth”.

    Mr Hunt promised to “protect the vulnerable” and said his plan to plug what he previously called a fiscal “black hole” will lead to “a shallower downturn and lower energy bills”, while revealing his three priorities: “stability, growth and public services”.

    But opposition parties and unions have accused the chancellor of holding the country back, with Labour saying the plan means “working people are paying the price” for the Tories’ “failure”.

    Higher tax rates for the wealthiest and energy companies

    The chancellor said the 45p higher rate of tax will now be payable from £125,140, as opposed to the current £150,000.

    He said those earning £150,000 or more will now pay just over £1,200 more a year.

    Mr Hunt also expanded and increased the windfall tax, so from 1 January 2023 until March 2028 energy giants will have to pay 35%, instead of the current 25% on their profits.

    And there will be a temporary new 45% levy on electricity generators, which is in addition to the tax on the companies that provide energy to households and businesses.

    He also said electric car owners will no longer be exempt from vehicle excise duty from April 2025.

    And he announced the government, as expected, will proceed with the building of the new Sizewell C nuclear plant in Suffolk, which will create 10,000 highly skilled jobs and provide energy to the equivalent of six million homes over 50 years.

    However, there was no mention of fuel duty in the statement, as the law means it goes up by the Retail Price Index – which is set to be 23% in March next year.

    The OBR said that would add £5.7bn to the government coffers and would be a “record cash increase” and the “first time any government has raised fuel duty rates in cash terms since 1 January 2011, with an expected rise of around 12p a litre on petrol and diesel.

    It is understood the government is not making a decision on fuel duty now but will in the spring budget next year.

    Extra cash for schools and the NHS

    Much of the chancellor’s statement had been pre-briefed following the economic turmoil the mini-budget created after his predecessor announced surprise unfunded tax cuts.

    But Mr Hunt did pull a rabbit out of his hat as he announced an extra £2.3bn each year will be invested in schools for the next two years.

    As was expected, he increased the NHS budget by £3.3bn and said he has asked former Labour health secretary Patricia Hewitt to advise on how to make sure the new Integrated Care Boards work properly. They were introduced in April and are aimed at bringing NHS services in local areas together.

    Adult social care will get £1bn more next year and £1.7bn in 2024 and he said altogether, along with previous commitments, that means the government is committing to a “record £8bn” package for the health and social care system.

    ‘Stealth taxes’

    There will be a freeze on income tax personal allowance, the main National Insurance thresholds and inheritance tax thresholds for a further two years, until April 2028.

    These have been branded “stealth taxes”, with the freeze on income tax to bring in £6.8bn for the government as more people will be pushed into a higher tax bracket.

    On personal income allowances, he said the dividend allowance will be cut from £2,000 to £1,000 next year then to £500 from April 2024.

    The annual exempt amount for capital gains tax, which is paid on the profit of selling an asset that has increased in value such as property, will also be cut from £12,300 to £6,000 next year then to £3,000 from April 2024. It means people will have to pay tax at a lower threshold than before.

    Cost of living and minimum wage help

    On help for energy bills, Mr Hunt said the Energy Price Guarantee will continue for a further 12 months from April 2023 at a higher level of £3,000 per year for the average household. It is currently capped at an average of £2,500.

    There will also be additional cost of living payments next year for the most vulnerable, with £900 for households on means-tested benefits, £300 for pensioner households and £150 for those on disability benefits.

    Social housing rents will have their increases capped at a maximum of 7% in 2023-24, he added.

    And the hourly minimum wage will increase by 9.7% from April next year to £10.42 from the current £9.50.

    Pensions and benefits rise

    Mr Hunt committed to maintaining the triple lock on pensions, which promises to increase the state pension each year in line with the highest of inflation, average earnings or 2.5%. At the moment, that is inflation which reached a 41-year high on Wednesday of 11.1%.

    From April, pensions will rise in line with inflation of 10.1%, meaning an £870 annual increase.

    Benefits will also rise in line with inflation while a further 600,000 people on Universal Credit will be made to meet with a work coach to get more people into the workforce and in better-paid jobs.

    Defence and overseas aid

    Defence Secretary Ben Wallace had previously said he would quit if the government did not stick to spending 3% of GDP on defence by 2030.

    He has tempered his tone since as the economy dived but will have been disappointed by Mr Hunt announcing he is committing to “at least 2%”.

    On overseas aid, the chancellor said it will remain at 0.5% as he said the “significant shock to public finances” means it will not be possible to return to the 0.7% target.

    Source: Sky news.com 

     

  • Half a billion of levelling up funding will be lost to inflation, says think tank

    The leading think tank for the north of England, IPPR North, has calculated that £1 in every £13 allocated through the Levelling Up and Shared Prosperity Funds will be lost to inflation.  

    They say the chancellor’s move not to “inflation-proof” levelling up – a flagship policy of the Conservative’s 2019 manifesto – means that £560m will be lost from these two key pots of funding:

    • £223m will be lost from the Shared Prosperity Fund, the government’s replacement for EU structural funds over the next three years.
    • £340m will be lost from the Levelling Up Fund, named after the government’s flagship agenda, over the same period.

    Zoë Billingham, director of IPPR North, said the government is showing an “ever-weakening grip” on levelling up the north.

    She said: “This autumn statement leans on local government to raise council tax, just as people are suffering from the soaring cost of living, double digit inflation and stagnant economic growth. This is the wrong call.

    “Progress on agreeing devolution deals around the country is welcome, as is the decision to effectively scrap investment zones, as IPPR North has called for, and replace them with university led clusters.

    “Overall, the government is showing an ever-weakening grip on levelling up the country.

    Investing in and growing our regions is how we grow the UK economy. Northern Powerhouse Rail in skeleton form and levelling up funding eroded by high inflation won’t cut it.”

    Source: Skynews.com 

     

  • Chancellor accepts there is an ‘uncomfortable’ fall in living standards

    Jeremy Hunt says he accepts the “uncomfortable situation” that living standards are going down for everyone.

    Speaking to reporters after his autumn statement, he claims the government is “helping every bit as much as we can” to reduce the impact on households and businesses, as well as protecting public services.

    And indeed, amid the stealth tax rises and departmental cuts, spending is actually going up over the next two years under the government’s new plans.

    But while Mr Hunt says he believes the measures will make the current recession “shallower”, he hints further, tougher measures could be on the horizon.

    “We have been careful in a very balanced approach to make sure that we’re not making that situation worse,” says the chancellor.

    “But as soon as the recession is behind us, then, yes, we will consolidate to make sure that we’re balancing our books.

    “And I think that’s what people would want.”

    Source: Skynews.com 

  • Hunt pledges to increase NHS budget

    Moving onto the NHS, Jeremy Hunt says he knows how hard those in the healthcare sector work.

    “The biggest issues are workforce shortages and pressures in the social care sector. So today I addressed them both,” he says.

    Referring to himself in his former role as health and social care select committee chair, Mr Hunt notes that a proposal was put forward for a long-term healthcare workforce plan.

    He tells MPs an independently verified plan for the number of doctors, nurses and other professionals needed in five, 10 and 15 years’ time will be implemented.

    On social care, he says there are 1.6 million employees “working incredibly hard” under enormous struggles.

    But he notes that he has “very real concerns” about whether local authorities will be able to deliver the Dilnot social care reforms “immediately”.

    “So I will delay the implementation of this important reform for two years, allocating the funding to allow local authorities to provide more care packages,” he tells MPs.

    Mr Hunt also confirms he has “decided to allocate for adult social care additional grant funding of £1bn next year and £1.7bn thereafter”.

    He says combined with the savings from the delayed Dilnot reforms and more council tax flexibilities, this means an increase in funding available to the social care sector of up to £2.8bn next year and £4.7bn the year after.

    “We want Scandinavian quality alongside Singaporean efficiency” in the NHS, Mr Hunt says.

    He tells MPs he has asked former Labour health secretary Patricia Hewitt to help ensure new “integrated care boards” work properly.

    The chancellor says the NHS budget will increase in each of the next two years by an extra £3.3bn which totals a “record £8bn package for our health and social care system” overall.

    Source: Skynews.com 

  • Hunt says NHS must tackle waste

    Jeremy Hunt goes on to ask the NHS “to join all public services in tackling waste and inefficiency”.

    “We want Scandinavian quality alongside Singaporean efficiency – both better outcomes for citizens and better value for taxpayers”, the chancellor says.

    “That doesn’t mean asking people on the frontline to work harder, but rather asking challenging questions on how to reform all public services for the better,” he adds.

    A packed Commons chamber watches the chancellor
    BBCCopyright: BBC A packed Commons chamber is watching the chancellor Image caption: A packed Commons chamber is watching the chancellor

    There are clear attempts here by the chancellor to avoid some of these political decisions being framed as “tax rises”.

    Instead, for taxes like income tax and national insurance he is freezing the threshold at which people start paying certain levels of tax.

    What this means in practice, though, is that if people’s wages go up but the tax levels stay the same, they may not feel as big an impact from that wage rise.

    That’s because they’re paying more in taxes than they otherwise would have.

    Hunt says: “Because we want school standards to continue to rise, we’re going to do more than protect the school budget – we’ll increase it.”

    He says in 2023 and 2024 the government will invest an extra £2.3bn in schools.

    He says that the government’s message to school staff is: “Thank you for your brilliant work… the Conservative government is investing more in the public service that defines all our futures.”

    Turning to education, Chancellor Jeremy Hunt says “providing our children with a good education is not just an economic mission, it’s a moral mission”.

    He says the UK has “risen nine places in the global league tables for maths and reading in the past seven years”.

    He says he is “concerned” that school leaders don’t always have the skills they need to enter the workplace.

    He says he has appointed Sir Michael Barber as an advisor to work on implementing a “skills reforms programme”.

    Source: BBC.com 

  • Hunt kicks off autumn statement

     The chancellor is on his feet at the despatch box in the House of Commons to reveal the government’s new economic policies.

    Mr Hunt begins by saying that “teachers, nurses and many others” are worried about the future given the economic climate.

    He says today he will unveil a plan to revive the economy.

    “We are honest about the challenges and we are fair in our solutions,” he tells MPs.

    “We will also protect the vulnerable,” he adds.

    He says the plan will lead to “a shallower downturn” and “lower energy bills”.

    The chancellor says the government has three priorities within the autumn statement – “stability, growth and public services”.

    Beginning with stability, he tells MPs “the furlough scheme, the vaccine rollout and the response of the NHS did our country proud, but they all have to be paid for”.

    Mr Hunt says the Bank of England has “my wholehearted support” and confirms that the government “will not change its remit”.

    The chancellor says “credibility cannot be taken for granted and yesterday’s inflation figures show we must continue a relentless fight to bring it down, including a rock solid commitment to rebuild our public finances”.

    He continues: “The OBR (Office for Budget Responsibility) forecast the UK’s inflation rate to be 9.1% this year and 7.4% next year.

    “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%.”

    Source: Skynews.com 

  • Sunak delivering statement on G20

    Prime Minister Rishi Sunak is giving a statement on the G20 summit he attended in Indonesia.

    He starts by addressing the missile strikes in Ukraine carried out by Russia as the summit took place.

    He says that “no blame” can be placed on Ukraine if the missile which landed in Poland and killed two people was fired by them in self-defence – the PM says blame lies solely with the Russians for launching the attack.

    Mr Sunak says the Bali summit “took place amidst the worst global economic crisis since 2008”.

    He notes, however, that this time the headwinds were caused by a G20 member – Russia – “turning off the gas taps and choking off the Ukrainian grain supply”.

    The prime minister then runs through what he did at the G20 summit, talking about leaders he met and pledges he made.

    He said the UK “committed to maintain free markets, free trade, and to reform World Trade Organisation”.

    And he added, on his meetings with other world leaders: “In each of these discussions, there was a shared determination to restore stability, deliver long-term growth and drive a better future – one where no single country has the power to hold us back.

    “In just a few moments, my right honourable friend, the chancellor, will build on these international foundations when he sets out the autumn statement, putting our economy back onto a positive trajectory and restoring our fiscal sustainability.”

    Source: Skynews.com 

  • What is the Autumn Statement?

    The government is set to announce tens of billions of pounds worth of spending cuts and tax rises, which will affect the take-home pay and household budgets of millions of people, as well as money for key public services.

    Autumn Statements take place annually, between yearly Budgets (which happen in the spring). But this one is a bigger deal than usual.

    When Rishi Sunak became prime minister, he said the UK faced a “profound economic crisis”. This will be the moment where we learn exactly how his government is going to tackle the crisis.

    We’re expecting Chancellor Jeremy Hunt to outline what’s going to happen to some of the things that shape our daily lives, such as taxes, benefits, pensions and help with energy bills.

    Hunt has said his priorities are economic stability and restoring confidence. It comes in the wake of his predecessor Kwasi Kwarteng’s disastrous so-called mini-budget. That caused market turmoil and led to the resignations of both Kwarteng and former PM Liz Truss.

    Source: BBC

  • What will be in the Autumn Statement?

    We don’t know exactly what the chancellor will say, but the BBC has been told Jeremy Hunt is set to announce around £30bn in spending cuts and £24bn in tax rises.

    These could include:

    • Income tax: There has been speculation that the government could raise money through income tax changes. For example, it could decide to freeze the amount people can earn before they have to pay a higher rate of tax
    • Benefits and pensions: It’s likely we’ll find out whether they will rise in line with inflation
    • Energy prices: The chancellor will set out details about further help for those struggling with bills. However, he has warned there will be limits on help. The current energy price guarantee ends on 1 April

    • Windfall tax: The government may decide to raise money by increasing taxes on the profits of energy companies
    • Social care: Hunt may also postpone the introduction of a cap on social care costs in England. The cap is due to come into effect in October 2023, and means people would not pay more than £86,000 towards care during their lifetime
    • Spending cuts: The government is expected to announce billions of pounds worth of cuts to public spending. This could affect services including the NHS, schools and the police

     

    Source: BBC