Plenty of announcements in today’s autumn budget. The Chancellor took an hour to outline all his proposals to the House of Commons, in which he said the government would prioritise ‘Stability, growth and public services’.
Many of the measures had been well trailed and the overall message – of tax rises and cuts to public services – was no surprise. Blaming unprecedented global headwinds from the aftermath of COVID, and the Russian invasion of Ukraine, Jeremy Hunt announced the ambition to save £55bn. His aim is to ensure the downturn in the UK economy will be shallower than it would otherwise be and inflation be brought back under control.
The Chancellor was also careful to quote the OBR’s assessment of these measures on several occasions, no doubt seeking to draw a clear distinction with his immediate predecessor’s disastrous ‘fiscal statement’ in September. From this, we learnt that the UK is officially in recession and inflation is forecast to be 9.1% this year and 7.4% in 2023. GDP will fall by 1.4% next year, before rising in the following years.
His approach is to be governed by two rules: that the underlying debt must fall as a percentage of GDP within five years and that public sector borrowing must be below 3% of GDP.
The following summary is not exhaustive. For the full speech go to The Autumn Statement 2022 speech - GOV.UK (www.gov.uk)
Tax rates
Higher earners will start to pay the 45p rate on earnings over £125,140 (previously £150k).
Income Tax, Inheritance Tax and National Insurance thresholds will be frozen until April 2028.
The Dividend Allowance will be reduced from £2,000 to £1,000 next year, and £500 from April 2024
Also of note for those involved in employee share plans, the Annual Exempt Amount in capital gains tax will be reduced from £12,300 to £6,000 next year and then to £3,000 from April 2024.
Business
Employers National Insurance Contribution threshold will be frozen until April 2028 and the VAT threshold will be maintained until March 26.
Funds will be raised by ensuring reforms resulting in multinationals paying ‘the right tax’ and, together with a clamp down on tax avoidance, will raise £2.8bn.
There will be windfall taxes on energy providers from the 1 of January of 35% on energy profits and a 45% levy on electricity generators.
Business rates re-evaluation will continue from April 2023; however, there will be £14bn tax cut to benefit pubs and small businesses.
Public services
Spending will grow at 1% a year in real terms for the next five years. State pension and benefits will increase by the 10.1% inflation rate from next April.
There will be a review into the reason behind the 600k of our economically inactive population of working age. Those on Universal Credit will be encouraged to increase their hours or earnings and there will be extra funding to target benefit fraud and error.
There will be a review of the current state pension age in 2023 and the National Living Wage will increase to £10.42 from April next year.
Defense spending will be at least 2% of GDP, and overseas aid will remain at the currently reduced amount of 0.5% of GDP.
To combat climate change, the government remains committed to a 68% reduction in emissions by 2030.
The Schools budget will be increased by £2.3 bn extra each year for the next two years.
The NHS will receive an additional £3.3bn.
The Social sector will receive £1bn extra next year and £1.7bn the following year. In addition, local authorities will have additional flexibility to raise council taxes to fund this area.
The budget for the NHS will be Increased to £3.3bn and the Chancellor announced a review into how the new integrated care boards can operate efficiently and with appropriate autonomy and accountability.
Energy
The Chancellor announced the intention to move to greater energy independence and increased energy efficiency which would be ‘above all nuclear’ and that a new nuclear power plant would go ahead at Sizewell. He set a target for buildings and industry to be 15% more energy efficient by 2030 and a new energy efficiency task force to be announced by the Secretary of State for BEIS in due course.
Infrastructure
There would be no cuts to the capital budget for infrastructure investment and commitments to northern powerhouse rail, HS2, the new hospital programme and to broadband roll-out would continue.
Innovation
The Chancellor cited the importance of AI, robotics and quantum mechanics and announced supply-side changes to EU regulations for the digital industry, life sciences, green industries, financial services and advanced manufacturing.
David Mortimer
Head of External Affairs, CGIUKI
