This week’s Autumn Statement was delivered against a backdrop of global economic instability. President Putin’s weaponisation of gas supplies to Europe has pushed energy prices to record levels and has come at a time when the UK economy is recovering from Covid-19. Combined, this has led to higher inflation and interest rates, and slower economic growth, which have hit public and household finances hard.
It was, therefore, vital that the Government took this opportunity to set out a fair and fully-costed plan to restore economic stability in the UK by balancing the books, getting debt falling as a share of GDP and tackling inflation, while working towards the longer term goal of achieving sustainable growth and investing in public services.
At the beginning of his speech, the Chancellor made it clear that difficult decisions had to be made in order to achieve this. However, he also set out commitments to do this in a fair way by ensuring that the greatest burden falls on those who can afford it most so as to protect the vulnerable, those on low incomes, and our public services.
Crucially, the OBR expects this package to reduce peak inflation and unemployment, and notes that GDP will be 1% higher due to these measures. The Bank of England also expects this package to help tackle inflation and keep interest rates lower for borrowers and mortgage holders.
The Autumn Statement priorities three areas: stability, growth and public services. I have summarised all the announcements below.
Stability
- Protecting and maintaining public spending for the next two years at the levels set out in 2021. Spending on departmental budgets will then be increased by 1% in real terms a year until 2027-28. Planned departmental capital spending will be maintained in cash terms.
- Freezing personal tax thresholds for a further two years and reducing the Additional Rate threshold. This will mean that the Personal Allowance will remain at £12,570 and that a taxpayer who earns more than £150,000 will pay £1,200 more in tax per year.
- Reforming the Dividends Allowance and Capital Gains Tax Annual Exemption Amount so that alternative forms of income are taxed more fairly.
- Increasing the National Living Wage (NLW) by 9.7% to £10.42 for workers aged 23 and over. This represents an increase of over £1,600 to the annual earnings of a full-time worker on the NLW, and is expected to benefit over 2 million low paid workers.
- Providing over £12 billion of additional targeted support to help the most vulnerable households. This year’s cost of living payments will continue to be delivered. Next year, extra one-off payments of £900 will be provided to the 8 million households on means-tested benefits, £300 to pensioners, and £150 for disability benefit recipients. £1 billion of extra funding will also be available through a one-year extension to the Household Support Fund.
- Uprating benefits in line with inflation. To protect the most vulnerable, benefits will be increased in line with inflation for 2023–24. More than 10 million households in receipt of working-age and disability benefits will see an increase in their benefit payments, and the average uplift for households Universal Credit will be around £600.
- Protecting the Triple Lock for pensions in full. In April, the State Pension will increase in line with inflation, which is the biggest cash increase in the State Pension ever.
- Continuing with the Energy Price Guarantee to support everyone for another year. This winter, the price households pay for the energy they use will be capped, so that a typical household will pay £2,500. From April 2023, the price cap will rise so that a typical household will pay £3,000. The Energy Price Guarantee will then end in April 2024.
- Providing £6 billion of additional funding to help reduce energy use by 15% by 2028. The Secretary of State for Business, Energy and Industrial Strategy will announce details of a new taskforce and a national campaign to deliver this in due course.
- Extending and increasing windfall taxes on energy companies. From 2023, the Energy Profits Levy rate will rise from 25% to 35% and will continue until the end of March 2028. A 45% Levy will be applied to extraordinary returns made by electricity generators. In total, these windfall taxes will raise £52 billion over 6 years.
- Shielding small businesses from most tax rises. Small businesses will be protected from the rise in Corporation Tax to 25% and further reforms to employer National Insurance, through the Small Profits Rate and Employment Allowance. This means only the largest 10% of companies will pay the top rate of Corporation Tax, and 40% of all businesses will be unaffected by the freeze in National Insurance thresholds.
Growth
- Protecting the £1.7 billion Levelling Up Fund Round 2. I have given my formal priority support to Charnwood Borough Council’s bid for funding for a Multiuser Games Area in Shepshed, as well as facilities for the new NFL Academy in Loughborough. This bid is hugely important for the Loughborough Constituency as it will improve life for local residents, attract further inward investment to the area and create a bridge between the two towns.
- Supporting businesses with the cost of their energy bills. By January 2023, proposals will be brought forward to support energy bills beyond April 2023. Full details will be made available at this point, but future support will be focussed where it is needed most: for energy intensive industries; small businesses; and the hospitality sector.
- Providing a £14 billion business rates package to support high streets. The Business Rates Revaluation will go ahead and, over the next five years, a generous support package will be provided to help the high street and protect businesses from large Rates increases. This support includes a freeze to the Business Rates multiplier, a Transitional Relief Scheme, a Supporting Small Businesses Scheme, and a 75% retail, hospitality and leisure relief, worth up to £110,000 per business.
- Making the £1 million Annual Investment Allowance permanent. An estimated 99% of UK businesses will be supported to invest through the now permanent £1 million level of the Annual Investment Allowance.
- Protecting £600 billion in capital investment over the next five years. Public capital investment will be maintained at record levels and key national infrastructure projects will be delivered, such as High Speed Rail, Northern Powerhouse Rail, and Sizewell C.
- Protecting and reforming R&D funding. Publicly funded R&D will be increased to £20 billion by 2024–25, and the Research & Development Expenditure Credit will also be increased from 13% to 20%. This will ensure the international competitiveness of R&D support and boost economic growth.
Public Services
- Investing £3.3 billion in additional funding in the NHS in each of the next two years to bring down ambulance waiting times, tackle the Covid-19 backlog and improve access to GPs.
- Investing £2.8 billion in adult social care next year and £4.7 billion the year after, which will double the number of people leaving hospitals on time and into care by 2024, addressing unmet needs and boosting low pay in the sector.
- Investing £4 billion in additional funding in schools over the next two years. The schools budget will be increased by £2 billion this year and £2 billion next year to help schools with rising costs as a result of inflation. This level of funding will mean the Government has fulfilled its pledge to restore per pupil funding to record levels, with real term per pupil funding rising at least to 2010 levels.
- Continuing to invest more than 2% of GDP in defence spending. Further details on the path of the defence budget will be set out at the Spring Budget.
I hope that this information is helpful. If you would like to read the Budget documents, they can be found here. You can also read the Chancellor’s speech here.
If you would like any further information about anything I have mentioned above, please do send me an email at: jane.hunt.mp@parliament.uk
