The Chancellor is set to freeze a slew of tax thresholds and put the squeeze on department budgets in a belt-tightening Autumn Statement
Autumn Statement 2022 summary: key points and changes at a glance
Jeremy Hunt has delivered billions of pounds of extra NHS and schools funding but launched a slew of stealth taxes to shore up the country’s finances in a belt-tightening Autumn Statement.
The Chancellor has frozen or cut a number of tax thresholds, extended the windfall tax on energy producers and put the squeeze on department budgets.
Mr Hunt said his plan will lead to a shallower recession and higher long-term growth as he promised to prioritise “stability, growth, and public services”.
He said: “British families make sacrifices every day to live within their means and so too must their government because the United Kingdom will always pay its way.”
Here are all of Mr Hunt’s measures from the Autumn Statement:
Economic forecasts
- The Office for Budget Responsibility warned the UK is already in a recession as it delivered a grim set of forecasts to the Chancellor. GDP will fall 1.4pc in 2023 before bouncing back to growth of 1.3pc in 2024. It predicted that the UK’s inflation rate will be 9.1pc this year and 7.4pc next year.
- Mr Hunt said the OBR has forecast borrowing to hit 7.1pc of GDP, or £177bn, in 2022/23 and 5.5pc of GDP, or £140bn, next year. Back in March, the OBR predicted that borrowing would hit £99bn in 2022-23 and fall to £50bn in 2023-24. However, this was before the full economic impact of the war in Ukraine was understood and persistently high inflation forced central banks into aggressively tightening.
- Debt is is expected to hit a peak of 97.6pc of GDP in 2025-26 before falling to 97.3pc in 2027-28.
Tax changes
- The threshold for the top rate of income tax has been cut from £150,000 to £125,140, dragging hundreds of thousands of workers into the highest tax band.
- Mr Hunt slashed tax-free allowances on dividends and capital gains tax. The dividend allowance will be cut from £2,000 to £1,000 next year and then to £500 from April 2024. The Annual Exempt Amount for capital gains tax will be cut from £12,300 to £6,000 next year and then to £3,000 from April 2024.
- The windfall tax targeting the profits of energy companies is being extended. From January 1st until March 2028, the Energy Profits Levy will rise from 25pc to 35pc
- The Chancellor said that electric vehicles will no longer be exempt from Vehicle Excise Duty from April 2025.
- The Employers NICs threshold will be frozen until April 2028 but the employment allowance will be kept at its high level of £5,000.
Spending
- The NHS and schools have been given a multi-billion boost to their budgets but overall department spending will be squeezed in the coming years.
- Department budgets set out for the next two years at the 2021 Spending Review will be kept despite being significantly eroded by high inflation.
- Resource spending will rise 1pc a year in real terms for the following three years. The Chancellor said overall spending on public services will still increase in real terms over the next five years.
- The NHS budget will increase by an extra £3.3bn in both of the next two years. Social care funding will increase by £2.8bn next year and £4.7bn the following year, Mr Hunt said. It includes extra grant funding of £1bn next year and £1.7bn the year after.
- Schools will be given by an extra £2.3bn in both 2023/24 and 2024/25.
- Next year’s increase in benefit and pension payments will be tied to inflation, while pension credit will rise by 10.1pc.
- Mr Hunt said the defence budget will remain at at least 2pc of GDP but delayed the return to an international aid target of 0.7pc of GDP target. It was cut to 0.5pc of GDP during the Covid crisis.
- Public investment will not be cut in the coming years as he confirmed that capital spending on HS2, Northern Powerhouse Rail and new hospitals will go ahead. Research and development spending has also been protected and will hit £20bn by 2024/25.
Energy
- The cap on energy bills will continue for a further 12 months but will rise from £2,500 to £3,000. He said this is expected to provide households an extra £500 of support on average.
- An extra £900 of energy bills support will be provided to households on means-tested benefits, £300 more will be given to pensioners and £150 will be given to those on disability benefit.
- The Government will double investment in energy efficiency to hit a new aim of reducing energy consumption from buildings and industry by 15pc by 2030. An extra £6bn of funding to boost energy efficiency will be provided from 2025.
- Mr Hunt confirmed that the Government will proceed with the new nuclear power plan at Sizewell C. The Chancellor said the Government will sign the contracts for the initial investment with EDF in the coming weeks.
Other
- Mr Hunt said that changes to leftover EU regulations in five growth industries – digital technology, life sciences, green industries, financial services and advanced manufacturing – will be reviewed by the end of next year.
- The Treasury will also publish its decision on the Solvency II rules, which could unlock investment by cutting the buffers insurers are forced to hold.
- The National Living Wage will increase next year by 9.7pc, pushing up the hourly rate to £10.42 from April.