As part of his newly announced autumn budget, Conservative chancellor Jeremy Hunt has unveiled a slew of tax rises and spending cuts in a bid to tackle the cost of living crisis and rebuild the UK’s economy.
Speaking to MPs in the House of Commons, Hunt said the government’s priorities were “stability, growth and public services”, however he warned that the budget involved “difficult decisions”.
Before announcing the statement, he further confirmed that the UK was “now in recession”, however said that his decisions would lead to a consolidation of 55 billion pounds that could see interest rates “significantly lower”.
Hunt stated that the Office for National Statistics, which announced inflation to be at a 40-year high of 11.1 percent yesterday, had ensured the plans would lead to a “shallower” recession.
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An increase on living wage
The national living wage will increase by 9.7 percent next year. From April 2023, the hourly rate will be 10.42 pounds, representing an annual pay rise worth over 1,600 pounds for a full time employee.
Benefits are also set to rise in line with inflation, Hunt said, at a cost of 11 billion pounds, an increase of 10,1 percent.
Pledge of 55 billion pounds to help vulnerable
Hunt said the government would be sticking with its plan to spend 55 billion pounds to “help households and businesses with their energy bills” this winter.
From April, he said he would continue the Energy Price Guarantee for a further 12 months at a higher level of 3,000 pounds, instead of the initial 2,500 pounds, per year for the average household, with further cost-of-living payments to go to the most vulnerable.
Additionally, the chancellor announced a 13.5 billion pound package of support for business rates payers in England, in what he said was a bid to protect businesses from rising inflation, with the multiplier to be frozen in 2023-24.
Relief for 230,000 businesses in retail, hospitality and leisure sectors will be increased from 50 to 75 percent next year.
A 1.6 billion pound Transitional Relief scheme to cap bill increases for businesses experiencing higher bills will also come into effect from April, limiting bill increases for small properties to five percent.
Small businesses who will lose eligibility as a result of new property revaluations will see their bill increases capped at 50 pounds a month through a new separate scheme worth over 500 million pounds.
A renewed energy efficiency strategy
Fresh funding will be used to improve the UK’s energy efficiency, with a new target of reducing energy consumption from buildings and industry by 15 percent by 2030. Alongside the government’s already set pledge of 6.6 billion pounds, Hunt announced an additional six million pounds, from 2025.
He added: “Our commitment to the British people is, over time, to remove this single biggest driver of inflation and volatility facing British businesses and consumers.”
Hunt affirmed the UK would remain committed to the Glasgow Climate Pact agreed at Cop26, including a 68 percent reduction of emissions by 2030.
Reduction in tax threshold but 25 billion pound tax increase
Speaking on the topic of tax, Hunt said he would be asking those with more to contribute more while also avoiding tax rises that would damage growth through tax rises of 25 billion pounds by 2027-28.
Hunt added that he will be reducing the tax threshold at which the 45 pence rate becomes payable from 150,000 pounds to 125,140 pounds.
The most profitable businesses will be asked to “bear more of the burden”, with the threshold for employer National Insurance to be fixed until April 2028, while the Employment Allowance will continue to protect 40 percent of businesses from paying NICS.
Additionally, the chancellor has decided to freeze a range of tax allowances, stating: “I am maintaining at current levels the income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds for a further two years taking us to April 2028.
Levelling Up to continue, Scotland, Wales and Northern Ireland to receive further funding
Hunt confirmed that, as part of former prime minister Boris Johnson’s Levelling Up Fund, at least 1.7 billion pounds will be allocated to priority local infrastructure projects around the UK before the end of the year.
He noted that many of the tax and spending decisions applied to Scotland, Wales and Northern Ireland. The Scottish government will receive an additional 1.5 billion pounds over 2023-24 and 2024-25, the Welsh government will receive 1.2 billion pounds and the Northern Ireland Executive will receive 650 million pounds.