Hunt ‘not ducking difficult decisions’
JEREMY Hunt last night denied ducking difficult decisions in his autumn statement after delaying billions of pounds of spending cuts until after the next General Election.
In his first budget since becoming Chancellor last month, Mr Hunt set out
£25 billion of tax rises in a plan prioritising “stability, growth and public services”.
He said he was taking “difficult”decisions, which would tackle inflation and make the recession the UK is believed to have entered “shallower” than it would otherwise be.
The economy is still set to shrink 1.4 per cent in 2023, and unemployment is set to rise by 500,000.
However, Mr Hunt put off most of the £30bn in spending cuts in the £55bn “consolidation” exercise until after the spending review period ending 2024/25.
It means that if Labour win the next election, they would have to decide whether to implement what they would regard as a Conservative austerity agenda.
Paul Johnson, director of the respected Institute for Fiscal Studies thinktank, said: “Given the profound uncertainty around the outlook, and the potential economic and social costs of an unnecessarily large up-front fiscal tightening, this is probably the right choice, on balance.
“But delaying all of the difficult decisions until after the next election does cast doubt on the credibility of these plans.
“The tight spending plans post-2025, in particular, may stretch credulity.”
But Mr Hunt told ITV’S Peston programme: “I think that a Conservative Chancellor who stands up in the Commons and announced £25bn of tax rises, I don’t think anyone would say that is deferring a horrible decision.
“That is confronting this problem head-on and what support we can give to the economy in the next two years, of course we do while we’re going through a recession.
“In the end, what the country wants, what families want, is the confidence that comes from honesty about the problems, but also having a plan in place that gives them hope for the future that we can get through this.”
Mr Johnson said the “sombre” budget including a doubling of UK Government debt interest payments in just a year, with the national debt hovering around 97% of GDP after huge spending on the pandemic.
“The sharp and sustained increase in how much we now expect to spend on debt interest, in particular, has forced difficult decisions elsewhere,” he said.
“At around £100bn a year by the end of the forecast period, spending on debt interest will be higher than spending on any single public service bar the NHS.”
Speaking for almost 50 minutes in the Commons, Mr Hunt said: “We want low taxes and sound money. But sound money has to come first, because inflation eats away at the pound in people’s pockets even more insidiously than taxes. So, with just under half of the £55bn consolidation coming from tax, and just over half from spending, this is a balanced plan for stability.”
Despite Liz Truss and Kwasi Kwarteng’s disastrous mini-budget costing the nation £30bn, Mr Hunt blamed Vladimir Putin’s invasion of Ukraine for a “recession made in Russia”, rather than in Downing Street, because of a surge in energy prices.
Mr Hunt confirmed working age benefits and the state pension would rise by 10.1% from April to protect the vulnerable, and the National Living Wage would rise by 9.7% to £10.42 an hour, giving a full-time worker in Scotland a pay rise of over £1,600 a year.
The Energy Price Guarantee, which is holding the average household bill to £2,500 a year, will become less generous in April, when the average bill rises to £3,000.
Mr Hunt also announced extra spending on health, education and business rates in England and would generate another £1.5bn for Holyrood under the Barnett funding formula over the next two years, and the UK Government would fund a feasibility study
What the country wants is the confidence that comes from honesty about the problems, but also having a plan in place
into improving the A75 linking Gretna to Stranraer and the ferry port at Cairnryan.
On personal taxes, Mr Hunt said he would reduce the threshold at which the 45p top rate becomes payable in England from £150,000 to £125,140.
Income tax personal allowance, higher rate thresholds, National Insurance and inheritance tax thresholds have all been frozen until April 2028.
The Scottish Government sets its own income tax thresholds and rates next month.
The Chancellor said public spending increases will be limited to 1% between 2025 and 2028, forcing government departments to make significant efficiency savings.
He said the defence budget would remain at “at least 2% of GDP” and that would “not be possible to return to the 0.7% target” on aid spending. There was a promise of £6bn on energy efficiency in 2025.
The Office for Budget Responsibility (OBR) forecast unemployment would rise by 505,000 from 3.5%, to peak at 4.9% in the third quarter of 2024.
Inflation is expected to be 9.1% over the course of this year and 7.4% next year, contributing to a dramatic fall in living standards, but fall sharply from mid-2023.
Labour’s shadow chancellor Rachel Reeves said the Government has adopted the “Bobby Ewing strategy” by trying to pretend the minibudget was a “bad dream”.
She told MPS: “The Chancellor and Prime Minister are trying to convince us that Britain faces problems that are nothing to do with them, that the mini-budget – which imposed a Tory mortgage premium, put pensions in peril and trashed our reputation around the world – was all just a bad dream.
“It’s their Bobby Ewing strategy. Downing Street as Dallas. Old cast members return as if nothing has happened, with tangled plotlines to keep the audience.
“But the truth is it has lost all credibility and everyone knows it is long past time that this series was cancelled.
“The Conservatives would have us believe that they are not responsible for the last 12 years of failure. In doing so, they take the British people for fools.”
Deputy First Minister John Swinney said the pension and benefit rises were welcome, but Mr Hunt’s budget had been an “austerity” one, and it was unclear how much of the extra Barnett money would be lost in other cuts.
He said: “Do not underestimate the corrosive effect of inflation. These numbers are all very well, but if inflation is sitting at 9.1%, the estimate this year, and 7.4% next year, these are corrosive increases in underlying costs.
“So the numbers might sound good, but you’ve got to take inflation into account as to what you can pay for.
“And the second thing is that the outlook on public expenditure is dismal, absolutely dismal. Households across Scotland are paying a steep price for the economic mismanagement of the UK Government
Scottish Green MSP Ross Greer said: “There is nothing compassionate about this Tory government or its economic vision.
“Hunt has succeeded only in returning the UK to the Victorian era, when families were allowed to go hungry, homelessness was rife and poverty caused death and devastation.”