Politics

Five main points from the chancellor’s Autumn Statement

Jeremy Hunt has delivered his Autumn Statement in the House of Commons, promising to restore market confidence in the UK economy while committing to deep spending cuts.

The chancellor claimed his “plan for stability” will save £55bn, and it includes both tax rises and cuts to public spending. However, Hunt admitted that the UK was already in recession. 

Personal tax

The threshold for the highest rate of income tax has been slashed from £150,000 to £125,140, meaning more people will pay the 45p top rate.

Meanwhile, the chancellor announced a series of threshold freezes, which will ultimately bring in more revenue for the Treasury. Income and inheritance tax thresholds will be frozen for a further two years, on top of the existing four-year freeze. The annual tax exemptions for capital gains and dividends will be cut.

Hunt admitted: “We are asking more from those who have more.” However, The Telegraph said that “Britain is on course for its highest tax burden on record” as the threshold freezes will mean “thousands of people are dragged into higher tax bands”.

Business tax

Hunt has announced a new, and temporary, 45% levy on electricity companies, which is expected to raise £14bn. This is alongside a host of other windfall taxes including a rise in the existing tax on gas and oil companies from 25% to 35%.

The chancellor was quick to confirm that 40% of businesses would continue to pay no National Insurance contributions at all in an attempt to convince the public that the Conservatives remain the “party of business”. But, as Aubrey Allegretti, a political correspondent for The Guardian, explained: “Many of the announcements he is making relate to years long after the next general election – so some of the pain will not be felt for years to come.”

Public spending

Along with higher taxation, the chancellor is also cutting spending on public services. Despite promising that budgets would “continue to rise in real terms”, Hunt confessed that departmental spending would – in the short term – remain at the rate agreed in the 2021 Spending Review.

There was good news for the NHS, which will see its budget increased by £3.3bn in each of the next two years, and for schools, which will receive an extra £2.3bn in both 2023/24 and 2024/25.

Allegretti questioned the combination of taxation and public service cuts, suggesting that “voters might wear higher taxes, but they would probably expect better from languishing public services”.

Energy 

While the cap on residential energy bills will be extended for a further 12 months from next April, it will rise from £2,500 to £3,000. An extra £900 of support will be provided to households on means-tested benefits, £300 more will be given to pensioners and £150 will be given to those on disability benefit.

Hunt confirmed the government will press ahead with plans for a new nuclear power plant at Sizewell C in Suffolk, while also continuing to pursue a strategy of energy efficiency across the construction industry.

Foreign aid

Foreign aid spending will remain at 0.5% of national income, still below the government’s official target of 0.7%, although defence spending will be kept to at least 2% of GDP. There are no plans for foreign aid spending to be returned to the target rate. Laura O’Callaghan, writing for The National, said Britain has seen “its reputation as a leader in international aid” suffer as a result of successive cuts to the aid budget.

Recommended

Politics

Partygate: five things revealed by leaked police questionnaire

Politics

Boris Johnson’s manifesto-busting tax rise to fund social care

Politics

The biggest problems facing Boris Johnson as Parliament returns

Politics

Joe Biden: the verdicts on the president’s first year