Here’s what Jeremy Hunt’s statement means for you
It may seem like it happened yesterday, but it’s actually been eight weeks since Kwasi Kwarteng unveiled his disastrous mini-budget and consequently tanked the pound, ravaged the economy, and sensationally quit.
Today, current chancellor Jeremy Hunt delivered his autumn statement, promising to put the UK back on the “balanced path to stability”. Hunt’s budget centred around raising £55 billion through tax rises and spending cuts in a bid to “balance the nation’s books”, and stressed that his priorities are stability, growth and public services.
But what does this actually mean? How will it affect young people? And what the hell is the ‘OBR’ anyway? Here, we’ve broken down some of the key points from Hunt’s announcement today.
THE ECONOMY
Hunt began by announcing that the Office for Budget Responsibility (OBR) – an independent body which provides economic forecasts and analysis of the public finances – has said that the UK economy is already in recession. Additionally, unemployment is expected to rise from 3.6 per cent to nearly 5 per cent in 2024.
Hunt hastened to add that we shouldn’t worry really though, because the International Monetary Fund expects one-third of the world economy to be in recession this year or next. (???)
The good (ish?) news is that while GDP is set to shrink by 1.4 per cent next year, it should rise in subsequent years. Inflation is also set to fall sharply by the end of next year, meaning that we should (finally) expect to see food prices drop. For now, though, inflation is still at a 41-year high of 11.1 per cent – meaning that something which cost £100 a year ago now costs £111.10 today.
TAXES, BENEFITS AND WAGES
For people over 23, the UK national living wage is set to increase from £9.50 to £10.42 an hour from next April. Benefits will rise in line with inflation, with an increase of 10.1 per cent coming into effect in April 2023. There will also be a 12-month extension to the household support fund of £1 billion, which means that councils will be able to distribute support to the most vulnerable.
Plus, Hunt is actually taxing the rich! The top 45 per cent of additional rate of income tax will also be paid on earnings over £125,140 instead of £150,000 – a total reversal of Kwarteng’s initial plan to scrap the 45 per cent tax rate for top earners.
So – what’s the catch? Well, Hunt is freezing the tax threshold until April 2028 (when Rishi Sunak was chancellor, he froze it until April 2026). The threshold for when you start to pay National Insurance contributions has also been frozen until April 2028. And this could spell trouble for people – especially low earners.
Why? Well – imagine you’re on a low income, such as £10,000 a year. You’re really struggling to cope with inflation, and your boss – in line with Hunt’s raising of the living wage – ups your salary so it’s more in line with rising living costs. Now you’re earning £12,570 – which helps, but still isn't enough to comfortably cover your expenses – and you’re paying tax and National Insurance contributions on top of it. Inflation has risen and your wage has risen – but the tax threshold hasn’t risen too, making your ‘pay rise’ pretty pointless and leaving you right back at square one.
This is what’s called a ‘stealth tax’.
ENERGY
The household energy price cap has been extended for one year beyond April, but made less generous, with the cap increasing from £2,500 to £3,000. This means that millions of people will face higher energy bills.
Hunt also announced an extra £900 support for people on benefits and extra £150 for people on disability benefits towards bills, but this still isn’t enough to make any meaningful impact.
Hunt also confirmed that the Government will proceed with the new nuclear power plan at Sizewell C.
PUBLIC SPENDING
Hunt also said the government will grow public spending at a slower rate than economic growth. This means that councils and public services cannot offer much support to vulnerable people in local communities. Resource spending will rise by just 1 per cent a year in real terms for the following three years, which is a far cry from the Local Government Association’s suggestion in October 2020 that an extra £10 billion was needed in public spending every year to help councils improve their services.
The NHS budget, meanwhile, will increase by an extra £3.3 billion in both of the next two years. Social care funding will climb by £2.8 billion next year and £4.7 billion the following year, Hunt said. There’s also an extra social care grant funding of £1 billion next year, and £1.7 billion the year after.