The Office for Budget Responsibility has said the UK economy will shrink by 2% in recession with debt ballooning, after Jeremy Hunt gave his autumn statement.
He said energy bills will rise to £3,000-a-year on average from April, as he reduced the amount of support households. The 45p rate of income tax threshold has dropped to £125,000 and the Chancellor increased the windfall tax rate on energy giants. He also increased budgets for the NHS and the Department for Education. Benefits and said pensions and benefits will rise in line with inflation.
Labour’s Rachel Reeves said that “the mess we are in is not just a result of 12 weeks of Conservative chaos but 12 years of Conservative economic failure”. She added: “All they offer today is more of the same – with working people paying the price for their failure.” The pound fell against the dollar as a result of people selling off in reaction to the OBR’s gloomy growth forecast.
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Autumn statement live
Good morning and welcome to NationalWorld’s live blog of the autumn statement.
Jeremy Hunt faces the biggest moment of his political career this week when he delivers his first UK budget speech since becoming Chancellor of the Exchequer.
He is expected to announce a swathe of tax hikes and public spending cuts as the Prime Minister Rishi Sunak seeks to fill the fiscal black hole left behind by his predecessor Liz Truss. It is believed the autumn statement could see a reboot of the austerity introduced during the 2010s under David Cameron and George Osborne.
It comes after Hunt announced arguably the biggest set of u-turns in British political history on 17 October, as the Chancellor sought to repair the economic and political damage caused by Liz Truss’s disastrous mini budget.
The huge set of unfunded tax cuts promised by Truss during the Conservative leadership contest and implemented by ex-Chancellor Kwasi Kwarteng caused the pound to fall to record lows, led to a narrowly-avoided run on pension funds, and saw UK mortgage rates leap to their highest levels since the 2008 financial crisis. The UK now also faces a lengthy recession.
What time is the autumn statement?
Timings have not yet been officially released, but NationalWorld understands the speech will begin at approximately 11.30am, and last for around an hour. It was originally scheduled to be at 10.30am, but has been delayed so Rishi Sunak can make a statement after returning from the G20 summit.
Afterwards Labour’s Rachel Reeves will respond and an OBR forecast briefing will then take place at around 2pm. The OBR event will finally give the public and the markets an insight into the state of the UK’s public finances. The independent public body will be able to tell us how much of a budget deficit the UK faces, as well as how much the tax measures Hunt sets out will raise.
Why is autumn statement happening?
Before his sacking, Jeremy Hunt’s predecessor Kwasi Kwarteng promised to set out the government’s medium-term plans for the UK economy, and provide an independent forecast from the independent Office for Budget Responsibility (OBR), my colleague Henry Sandercock writes.
It came after he gave a mini budget that pledged to make a swathe of tax cuts without providing any costings. Liz Truss had hoped her tax cuts would fuel an economic boom because the cost of doing business in the UK would have been reduced - as well as keeping the UK out of a recession, she hoped trickle down economics and putting money back into people’s pockets would ease the cost of living. However, this was found to be fantasy economics.
Crucially, these tax cutting plans were not accompanied by the customary OBR analysis - something which spooked markets as they felt the government was about to embark on a costly public borrowing spree.
When it became clear the markets needed reassurance that the government did have a plan to get government borrowing under control, Kwarteng announced a budget event that would set out the Liz Truss government’s medium term plans. While initially scheduled for November, the then-Chancellor was forced to bring it forward to Halloween at the Conservative Party Conference in Birmingham after coming under severe political pressure.
Kwarteng was also forced to u-turn on a planned cut to the 45p income tax rate he wanted to introduce - a tax cut that would have benefitted the UK’s highest earners. However, this did not go far enough for MPs or the markets, and an embattled Liz Truss opted to sack Kwarteng in an apprent bid to extend the life of her premiership - a move that ultimately failed.
With Jeremy Hunt scrapping many of the mini budget tax cuts upon his appointment as Chancellor on 14 October in a bid to improve the UK’s economic position, it became clear Truss would soon be out of a job. This eventually took place a lot more quickly than anyone would have expected.
When Rishi Sunak then came into office, the emphasis turned towards tax hikes and spending cuts to fill a £40 billion black hole and restore the Conservatives credibility with both the public and the markets. He delayed the budget from Halloween to 17 November.
Jeremy Hunt has said this event will seek to “balance the books” - a direct reference to the austerity budgets seen during the tenure of George Osborne - and bring down the inflation that has been driving the cost of living crisis.
What could Jeremy Hunt reveal in fiscal policy event? From tax rises to public spending cuts
My colleague Henry Sandercock has written a piece on five things we can expect from Jeremy Hunt’s autumn statement. You can read the piece in full here.
The tax hike rumour mill has been in full swing since it became clear the UK has a big gap to fill in its finances.
Hunt told the BBC on Sunday (13 November) that he had been “explicit” that taxes are “going to go up”. The broadcaster also reported that the Chancellor is looking to raise an additional £20 billion in tax.
But the big question is which taxes will be hiked. The Treasury has managed to remain relatively tight-lipped about its plans for raising additional revenue from the taxpayer.
We know some taxes, like capital gains tax, are being earmarked for potential hikes. It has also been reported that income tax thresholds will be frozen until 2028 - something that would effectively work as a tax rise given incomes tend to increase over time.
Public spending cuts
A bit like tax rises, we know public spending is going to be cut - estimates reckon Hunt will seek to chop off £35 billion - but we don’t know where the axe will fall. According to the respected Institute for Fiscal Studies (IFS), this would amount to a cut of 15% from government departments’ budgets if health and defence remain ringfenced.
Ever since Liz Truss’s u-turns began, there have been many reports of departments being told to find efficiency savings. Spending on everything from schools, to policing and foreign aid could be slashed.
Triple lock pension scrapped
Pensioners have already taken a hit this year, after the pensions triple lock was frozen by the Boris Johnson government.
The freeze meant the state handout rose just 3.1% in April 2022 - despite inflation being three-times higher at the time. The cost of living has only continued to increase ever since, meaning pensioners have seen a real-terms cut in their incomes.
Liz Truss appeared to throw the future of the key Conservative manifesto pledge into doubt when it became clear she would need to perform u-turns after her mini budget. Mr Sunak has not provided any reassurance since then.
Former Chancellor Lord Hammond - who Jeremy Hunt is known to have consulted in recent weeks - told GB News on 10 November that he believed the policy might remain in place in the short-term. However, he called for a reappraisal of it in the “longer run” because he believes it is “unsustainable” in its current form.
Some targeted support
In amongst the doom and gloom, it’s expected Hunt will announce more targeted support for poor and vulnerable households in a bid to help them manage the cost of living crisis. Energy bills grants could be set to continue for pensioners and those on state benefits, while a higher cap is paid by everyone else.
Also understood to be under consideration is an increase to the national living wage - the legal minimum you can be paid if you’re aged 23 or over. The Times has reported the rate could rise from £9.50 an hour to around £10.40 - a near-10% increase - although it would still be well short of the Real Living Wage.
During his time as Chancellor, Sunak opted for targeted handouts - such as the cost of living payment - as opposed to the universal (and expensive) help Liz Truss sought to provide.
A grim OBR forecast
Capping it all off will be a long-awaited Office for Budget Responsibility (OBR) forecast that is expected to make for grim reading. Indeed, the lack of an OBR report at the mini budget was one of the main reasons for why markets received Kwasi Kwarteng’s tax cuts so poorly. Its omission gave the impression that the government was ignoring the economic realities faced by the UK, and were essentially flying blind.
The Financial Times has reported that the OBR has told the Treasury that borrowing costs are now £70 billion higher than expected, with borrowing set to rise to around £100 billion by 2026/27. In comparison, its previous assessment of the UK economy in March found a £31.6 billion deficit.
The reason why it has risen so much is that the cost of servicing government debt has risen since the mini budget as a result of a fall in the pound’s value and higher interest rates. The OBR is also believed to be factoring in a reduction in tax receipts during the likely recession the UK faces, and the continuing impact of inflation on public spending on things like benefits.
What is austerity?
Jeremy Hunt is widely expected to announce spending cuts in today’s budget, my colleague Henry Sandercock reports.
Some people are suggesting that the government is returning to the austerity measures that were implemented by the Conservative-Liberal Democrat coalition under former Prime Minister David Cameron in the 2010s.
What is austerity?
When the coalition headed by Cameron came to power in 2010, the economy was in a state of recovery following the 2008 financial crisis. The Conservatives had beaten Labour to become the largest party by rubbishing their rivals’ economic record.
Cameron’s Chancellor of the Exchequer, George Osborne, set about delivering on the Conservative Party’s pledge to “balance the books” in a bid to reduce the national debt and annual budget deficit. He aimed to achieve this goal by 2016 and turn a surplus by 2020.
Osborne pursued public spending cuts over tax hikes. He also cut corporation tax in a bid to stimulate economic growth.
The general impact of these and subsequent policies was that public services were hollowed out, the NHS struggled to deliver positive health outcomes, public sector workers saw their real-terms wages decline, and those on benefits saw their incomes drop.
At the same time, the budget deficit fell - albeit to levels that were nowhere near what Osborne had aimed for - and the national debt as a percentage of GDP continued to climb for five out of the six years he was in charge of the UK public finances.
The policy arguably came to an end under the Theresa May government, which spoke about supporting those who were “just about managing”. Austerity’s official death was confirmed when Boris Johnson got into office in 2019 and openly criticised it.
Is austerity good for the UK economy?
Austerity is a divisive policy that is very much a political decision, rather than the only way of solving a country’s economic woes.
While the Cameron government could point to consistent (albeit small) economic growth and record lows of unemployment, its austerity policies increased inequality between the UK’s richest and poorest, increased poverty and homelessness and created a precarious gig economy for workers. So, it was ok if you think economic growth is the most important thing for the government to pursue, but a bad thing if you think the health and wellbeing of the population ought to be the priority.
With interest rates at record lows throughout much of the 2010s and inflation levels remaining at relatively low levels for much of the decade, some economists argued the government could have afforded to borrow and spend more than it did to stimulate better GDP growth. They could also have targeted tax hikes at higher earners to bolster the nation’s finances.
Even the International Monetary Fund (IMF), which has been an advocate for austerity in countries it has had to bail out - including Greece and Argentina - warned Cameron and Osborne that they were pursuing too much austerity. The organisation said in 2013 that the economic policy was posing “headwinds” to GDP growth.
Your view of whether austerity was a success or not will depend on your political leanings. The policy did marginally improve the UK’s spreadsheet numbers - a key metric for those on the right who own assets and believe in trickle down economics.
But austerity also pushed more people into poverty and has weakened public services. Perhaps the biggest example of how weaker public services have impacted the UK in the wake of the policy came during the Covid-19 pandemic. After years of real-terms cuts, NHS and social care services struggled to effectively respond to the virus. This state of affairs contributed to the UK having one of the worst excess death rates in the western world.
Jeremy Hunt is expected to allow local authorities to raise council tax by 5% to bolster their finances, the Times reports.
Currently councils have to hold a referendum if they want to raise it by more than 2.99% plus a 1% social care levy.
This would not give any money to central government, but hopefully avoids the risk of councils going bankrupt.
The Times gives this a five out of five pain rating for taxpayers!
‘Bad economic news’ - Resolution Foundation
Torsten Bell, chief executive of the Resolution Foundation think tank, said he was expecting some “pretty bad economic news” as the Chancellor prepares to deliver his autumn statement today.
Mr Bell told Sky News the UK faced a “grim economic outlook”, with the economy growing very slowly and “possibly ending this Parliament as weak as it began”. He added that this would be “much weaker than we were previously expecting”.
The head of the economic think tank said that he expected unemployment to rise, “which is the opposite of what we’ve been seeing in the recent past”.
Mr Bell added that tax rises would largely hit middle and higher-income households, but that lower-income households were seeing “the highest inflation rate right now and finding the cost-of-living crisis hardest to deal with”.
What autumn statement could mean for drivers, from EV car tax to road pricing schemes
NationalWorld’s motoring correspondent Matt Allan has looked at what the autumn statement might mean for drivers. Here is what he’s expecting from Jeremy Hunt at 11.30am:
Car tax for EVs
Among the biggest changes hinted at for the Budget is applying car tax to electric vehicles for the first time. Until now owners of EVs have not had to pay annual Vehicle Excise Duty (VED) but Whitehall sources have hinted that today’s statement could include provision to change this by 2025.
The shift from petrol and diesel cars towards electric vehicles threatens to cost the Treasury £7 billion in lost VED and applying the tax - currently set at £165 for most cars - to EVs is seen as one way of addressing this. The Government source told the Telegraph that it was “inevitable” that EV owners would have to pay tax.
On Wednesday a former special adviser to ex-Transport Minister Grant Shapps hinted that Hunt could announce plans for a pay-as-you-drive road pricing programme. Meera Vahder tweeted: “Tomorrow Jeremy Hunt is expected to launch proposals on road pricing - a new form of taxation which will overhaul fuel duty and VED. Long awaited it takes a brave govt to propose wholesale change to the way we pay for driving.”
Road pricing has been raised as a potential solution to the declining revenue from fuel duty and car tax. Although millions of petrol and diesel cars will remain on the roads long after the 2030 ban on new combustion engine cars, income from the duty on petrol and diesel will plummet in coming years. It is predicted that by 2040, the Treasury will face a loss of £35bn between fueld duty and VED losses.
Under a road pricing scheme, drivers of all types of vehicle would pay according to how much and where they use their car. Such a scheme could factor in the type of vehicle and the roads it is driven on and its backers say it should support vulnerable groups such as those with mobility issues, and people in remote areas to ensure they are not adversely affected.
Motoring groups and fuel campaigners have urged the Chancellor not to change the current fuel duty rate, warning that adding to the price of petrol and diesel will only make inflation worse.
In his March mini-Budget, Rishi Sunak cut fuel duty by 5p per litre in a token effort to ease the pressure of soaring fuel prices. That brought the tax on fuel down from 57.95p per litre to 52.95p per litre, denying the exchequer millions of pounds in revenue. The reduction is due to remain in place until March 2023 but ending it early would be a quick way to raise more money for the Treasury.
However, observers have warned that doing so would have a damaging effect on the economy and push up inflation further. RAC fuel spokesman Simon Williams said: “Our analysis shows there is a clear link between inflation – however it’s measured – and fuel prices. When the prices drivers pay to fill up rise, inflation seems certain to follow.”
How to watch the autumn statement with NationalWorld
You can watch the autumn statement in full on NationalWorldTV or on our live blog above.
Jeremy Hunt is expected in the House of Commons at 11.30am.
Jeremy Hunt has left 11 Downing Street
Jeremy Hunt is on his way to the House of Commons for his autumn statement at around 11.30am.
He’s been pictured leaving No11 Downing Street. As this isn’t an official budget, he doesn’t have the famous red box - but instead a blue folder.