Autumn statement 2022: key points at a glance
Hunt’s opening remarks
Jeremy Hunt says the government will deliver a plan to tackle the cost of living crisis and rebuild the UK economy. The chancellor says his priorities are stability, growth and public services, and is providing “fair solutions” despite taking “difficult decisions”.
Aubrey Allegretti, political correspondent: The chancellor opens his autumn statement, which has been nicknamed the “memorial service for Trussonomics”, by seeking to pin the blame for the cost of living crisis on “unprecedented global headwinds”.
In a nod to the market chaos that plagued the last government, Hunt says his statement will deliver stability– but he wants to ensure the Conservatives are not just seen as a party of managed decline, stressing he will also seek to grow the economy.
Growth
The chancellor says forecasts from the Office for Budget Responsibility show the economy will grow by 4.2% this year.
Hunt says the economy is already in recession, with higher energy prices explaining the majority of the revision in growth forecasts.
GDP would then shrink by 1.4% next year, before rising by 1.3% in 2024, 2.6% in 2025 and 2.7% in 2026.
In March, the OBR had forecast growth of 3.8% for 2022 and 1.8% f0r 2023.
The economy grew by 7.5% in 2021, after a fall of 11% in 2020 – the biggest decline for 300 years – during the first wave of the pandemic.
Aubrey Allegretti, political correspondent: Hunt leans on the OBR, sayingit has adjudicated that “higher energy prices” explain the majority of lowerthan-expected growth forecasts.
And to calm jitters among MPs about fears of another recession, he says the International Monetary Fund expects one-third of the world economy to be in recession this year or next.
Hunt drops his first mention of “difficult decisions”, laying the ground for the harsh measures and stressing that those who believe they are unnecessary are “not being straight with the British people”.
Borrowing
Hunt says borrowing in the current financial year, 2022-23, will be 7.1% of GDP.
In cash terms, the OBR estimates the budget deficit – the gap between spending and income – is £177bn in 2022-23.
In its previous forecasts in March, the OBR had estimated borrowing would be 3.9% of GDP, or £99.1bn in cash terms, in 2022-23.
The chancellor says borrowing is “more than halved” by the actions in the autumn statement.
Public sector net debt is forecast to peak at 97.6% of GDP in 2025-26, and then to fall gradually to 97.3% of GDP by 2027-28.
Hunt announces two new fiscal rules: underlying debt must fall as a percentage of GDP within five years; and public sector borrowing must be below 3% of GDP.
Aubrey Allegretti, political correspondent: One of the key audiences Hunt mustsatisfy are the money markets, which will be hanging on his every word. Hunt’s new fiscal rules on borrowing are designed to be evidence of his claim that the UK “will always pay its way”.
Personal taxes
The chancellor announces a range of tax threshold freezes, including for income tax and inheritance tax for a further two years, on top of an existing four-year freeze, to April 2028
Dividend allowances will be cut. The annual exempt allowance for capital gains tax will also be cut
Hunt says the changes still leave Britain with more generous allowances than several other leading nations
The threshold for the 45p additional rate of tax will be cut from £150,000 to £125,140
Hunt says electric vehicles will no longer be exempt from vehicle excise duty from 2025 Aubrey Allegretti, political correspondent: Though the news has left the Conservative benches behind him muted and looking glum, Hunt tries to set out the positives so they have reason to leave the Commons chamber with some lines of defence to take with the media and frustrated constituents.
He says the changes will still leave the UK with the most generous tax-free allowances of any G7 country, adding that tax take will increase by just 1% over the next five years.
Business taxes
Windfall taxes will raise £14bn, including a new temporary 45% levy on electricity producers.
Hunt says the government will soften a blow for businesses on business rates with an almost £14bn tax cut on business rates, this will benefit about 700,000 businesses.
Employment allowance will be retained at a higher level of £5,000.
Aubrey Allegretti, political correspondent: Hunt is wary of the Conservatives’ long-cherished mantel as the “party of business”, and stresses that 40% of all firms will continue to pay no national insurance contributions at all.
Seeking to head off a possible Labour attack line, he says the government will continue pursuing tax avoidance and evasion.
Many of the announcements he is making relate to years long after the next general election – so some of the pain will not be felt for years to come. (Or even ever, if the Conservatives end up being kicked out of government after 2025.) Public spending Hunt says government spending will continue to increase in real terms every year for the next five years but at a slower rate.
The chancellor says “public spending discipline” must be shown through a “challenging period”.
Existing departmental spending under the 2021 spending round will be kept. Then departmental spending will grow at 1% a year in the three years that follow.
He says departments will need to make efficiencies. However, overall spending will “continue to rise in realterms” for the next five years. Aubrey Allegretti, political correspondent: Voters might wear higher taxes, but they would probably expect better from languishing public services. Hunt nods to that, saying he wants to “protect them as much as we can”. Attempting to dispel any claims his autumn statement offers a return to austerity, Hunt insists public spending will grow – albeit more slowly than the growth in the economy.
Foreign aid and climate
Hunt says the government will not be able to return foreign aid spending to a 0.7% of GDP until the economic conditions allow. It will remain at 0.5% for the remainder of the forecast period.
The chancellor says he confirms that, despite economic pressures, the government remains “fully committed” to Cop26, including 68% reduction in UK emissions by 2030.
Aubrey Allegretti, political correspondent: Twobig concerns about more internationally-focused spending have not been completely dampened down by Hunt. He says aid spending will not rise back to 0.7% of GDP target, and says defence spending will stay at at least 2%.
Education
Hunt says the chancellor will increase the schools budget, with an extra £2.3bn a year.
He says in difficult economic circumstances, a Conservative government is investing more in the public service that defines all of our futures.
Aubrey Allegretti, political correspondent: Having felt the heat over the weekend from two dozen Tory MPs – including a former education secretary – who demanded Hunt not cut education spending, he puts out that particular fire by saying it will grow by £2.3bn next year and the year after.
But how much of that will be left for educating children after pay increases, energy bills and inflation may still worry some.