Here's What To Expect From Jeremy Hunt's Autumn Statement
Jeremy Hunt will deliver his Autumn Statement on 17 November (Alamy)
Chancellor Jeremy Hunt is set to deliver his Autumn Statement on 17 November, setting out the government’s spending plan for the year ahead. Here’s what is expected to be in it.
What has Chancellor Jeremy Hunt said we can expect?
Chancellor Jeremy Hunt is expected to implement significant increases to the amount of tax most people pay, as well as spending cuts when he delivers the Autumn Statement on Thursday, in a bid to reduce government debt and fill the hole in public finances, which is reported to be at about £50bn.
Hunt, who was appointed as Chancellor by Liz Truss after she sacked Kwasi Kwarteng, and kept on by her successor Rishi Sunak, has repeatedly warned there is “a tough road ahead” for the UK as the government attempts to balance the books.
He made the comments in a statement on Friday following news that the UK economy had shrunk by 0.2 per cent between July and September.
“To achieve long-term sustainable growth, we need to grip inflation, balance the books and get debt falling. There is no other way,” he continued.
But Hunt insisted there were still some positives in the country’s economic outlook, adding that the “resilience of the British economy is cause for optimism in the long run”.
The Chancellor stated on Sunday that he wanted to ensure any future recession was “as short and shallow as possible”, while warning that “we're all going to be paying a bit more tax”.
Hunt even described himself as a "Scrooge" who will be making "horrible decisions" in the run-up to Christmas, claiming that he “will be asking everyone for sacrifices”.
He told Sky News that, if the UK was “responsible with public finances” then it would be able to continue support for energy bills and other measures into next year.
Will the government cut public spending?
Jeremy Hunt has repeatedly warned that no area of public spending would be exempt as he planned for his Budget, with all departments up for potential cuts.
There is also the possibility that the government could continue to raise public spending but at a lower rate than inflation, meaning overall spending will fall in real terms.
Government sources suggest to the Daily Mail that the Chancellor wants to implement a 50:50 split between spending cuts and tax rises.
The BBC reports, however, that “the accepted wisdom in the Treasury” is that there will be more spending cuts than tax rises, meaning cuts of about £35bn and tax rises of around £20bn.
One area that could be at risk is defence spending. Rishi Sunak’s government has not committed to keeping the 2019 manifesto pledge of increasing defence spending to 3 per cent of GDP by 2030. There are reports that the Chancellor is considering plans to freeze defence spending over the next five years.
Health spending, one of the biggest outgoings for the government, could also be facing cuts. But the NHS Confederation has warned “there is no fat left to trim” within the NHS, which is seeing record waiting times and staff shortages.
Another option for the government is delaying the planned cap on social care costs, which would have ensured a £86,000 limit on what someone can pay for care during their lifetime from October 2023.
When it comes to education spending, 28 MPs have written to Hunt urging him to spare the sector from cuts while children recover from the effects of lost learning during the pandemic, according to The Times. The letter’s signatories include Kit Malthouse, who was education secretary under Liz Truss, and his entire ministerial team.
Levelling up secretary Michael Gove has also hinted that large infrastructure spending could be cut, including the HS2 rail line. Speaking to Times Radio last month, he said “everything will be reviewed” before adding that the high speed rail link is a “significant investment”.
What will happen to benefits and state pensions?
In the final days of her administration, Truss committed to keeping the triple lock on state pensions, which ensures that pensions increase by whichever is highest – 2.5 per cent, inflation or average wages.
Sunak and Hunt have yet to repeat that pledge, but it is now widely expected that both state benefits and state pensions will increase by inflation, which currently stands at 10.1 per cent.
But, according to the Daily Mail, ministers are still considering scrapping the triple lock altogether after 2025 and replacing it with a new formula.
Hunt announced last month that Truss’s energy price guarantee, which promised to ensure typical households wouldn’t pay more than £2,500 a year on their energy bills, would become means tested from April 2023.
It’s expected that the Chancellor will use his autumn budget to announce who will be targeted by this support, with those on low income and pensioners most likely to benefit.
Will the government raise taxes?
According to The Times, Hunt is planning to freeze income tax bands for a further two years. This is often described as a “stealth tax”, as earners will be gradually pushed into higher bands as wages rise.
The £12,570 threshold where you start paying 20p income tax and 12p National Insurance is already being frozen for four years until April 2026.
It’s expected the Chancellor will now announce that the income tax freeze will be kept in place until April 2028, alongside freezing the £50,270 threshold at which you start paying 40p income tax.
The Times also reported that the 45p tax rate threshold could be reduced from £150,000 to £125,000, bringing 250,000 extra into the highest tax bracket.
Pensions tax relief is another area being looked at, according to The Telegraph, with ministers considering dropping the point at which the relief is applied from 40p to 20p, affecting around 5.5 million higher-rate taxpayers.
There are also reports that Hunt could review capital gains tax and dividend tax in a bid to raise money.
Capital gains tax, which is charged on the sale of assets such as shares and second properties, could be linked with income tax rates in future. Another option is reducing the current £12,300 allowance, which has been frozen until April 2026.
Some also expect Hunt to look at cutting the £2,000 tax-free dividend allowance, while also potentially implementing a 1.25 percentage point increase to all dividend tax bands.
Council tax, which is set by local authorities, could be too raised thanks to interventions in Hunt’s budget.
The Times has reported that ministers have been mulling over whether to remove the requirement for local authorities to hold a referendum if they want to increase council tax bills by more than 2.99 per cent, which could mean considerable increases in many areas.
Energy giants could also see their tax bill rise following widespread reports that the government is considering increasing the windfall tax on energy companies.
It's expected the tax would rise from 35 per cent from its current 25 percent and would run until 2028 rather than 2025.
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