November 2022 United Kingdom autumn statement

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 () November 2022 United Kingdom autumn statement
Royal Coat of Arms of the United Kingdom (HM Government) (2022).svg
Presented17 November 2022
Parliament 58th
Party Conservative Party
Chancellor Jeremy Hunt
2023  ›

The November 2022 United Kingdom autumn statement was delivered to the House of Commons on 17 November 2022 by Chancellor of the Exchequer Jeremy Hunt, after being delayed by three weeks from its original scheduled date of 31 October. [1] The budget addressed the ongoing cost of living crisis, [2] and saw the announcement of a five-year package of tax increases and spending cuts designed to steer the UK through recession. An economic forecast published on the same day by the Office for Budget Responsibility (OBR) stated the UK had entered a recession after experiencing two quarters of a shrinking economy, and predicted the UK's economy would shrink during 2023. A reduction in households' disposable income was also forecast.

Contents

In his statement, Hunt committed to maintaining scheduled public spending plans until 2025, but said that spending would slow after then. He also lowered the threshold at which earners become eligible to pay the top rate of income tax, and announced an increase in the National Minimum Wage, as well as increases for pensions and benefits in line with inflation. The Energy Price Guarantee was extended to April 2023, but raised from £2,500 to £3,000. Shadow Chancellor Rachel Reeves described the measures as "an invoice for the economic carnage" caused by the government of Liz Truss.

Background

The autumn statement was delivered by Chancellor Jeremy Hunt in the aftermath of the mini-budget set out by his predecessor, Kwasi Kwarteng, who served as Chancellor in Liz Truss's brief government. That statement, outlined in September 2022 by Kwarteng, had been a programme of low taxation and high spending worth £45bn which it was hoped would promote economic growth, but had instead it led to economic turmoil, a weaker pound and financial intervention in the UK's bond markets by the Bank of England to prevent them from collapsing. With a budget deficit of £30bn–£40bn, the markets were concerned as to how this debt would be paid for. Truss and Kwarteng subsequently conceded to failing to prepare the ground for the mini-budget, but argued it had been impacted negatively by global events. After Hunt replaced Kwarteng as Chancellor in October he reversed the majority of the mini-budget's measures in an emergency statement to the House of Commons. A further statement providing a medium term fiscal plan had been scheduled for 31 October by Kwarteng, and an accompanying forecast from the Office for Budget Responsibility was due to be published on the same day, but after Hunt was retained as Chancellor by Truss's successor, Rishi Sunak, he deferred the statement until 17 November, announcing at the same time that its scope would be expanded into a full autumn statement that could outline longer term plans. By then, the markets had stabilised, and official projections suggested the interest on the government's debt could be up to £10bn lower than previously thought. Hunt argued that deferring the date would allow the statement to be based on "accurate economic forecasts". [3] [4] [5] [6]

On 3 November the Bank of England raised the base rate of interest by 0.75% to 3%, the largest single interest rate rise since 1989, and warned of a recession lasting at least two years. [7] On 11 November, figures released by the Office for National Statistics showed the UK economy had shrunk by 0.2% between July and September 2022. [8] Speaking to the BBC's Laura Kuenssberg on 13 November, Hunt said that his statement would include details of further help for people facing high energy bills once the Energy Price Guarantee expires in April 2023, and warned taxes would need to rise: "I've been explicit that taxes are going to go up". [9] [10] On 15 November, it was reported that inflation had reached 11.1% during October, up from 10.1% the previous month, and its highest since 1981. [11] On the same day, and while attending the 17th G20 Summit in Bali, Sunak said the priority would be to reduce inflation, and that decisions taken in the forthcoming autumn statement would be done in a "fair" way that would mean everyone benefitting from reduced levels of debt. [12]

There was some discussion about the actual size of the UK's debt after it emerged the government had changed the way debt is calculated. On 10 November, the Progressive Economy Forum, a centre-left think tank, questioned the actual size of the "black hole" and whether tax rises and austerity measures would be needed to fill it. The think tank argued that calculating the debt under the previously used method would show a gap of £14bn rather than the generally accepted figure which was estimated at the time to be as high as £50bn. In response, HM Treasury said that public finances would be assessed independently by the Office for Budgetary Responsibility. [13] The OBR subsequently said there was a £55bn gap in public finances. [14]

The statement

Jeremy Hunt was appointed Chancellor of the Exchequer after Kwasi Kwarteng was sacked by Liz Truss on 14 October 2022. He retained his role as chancellor under Rishi Sunak following Truss' resignation. Official portrait of the Chancellor of the Exchequer Jeremy Hunt, 2022 (cropped).jpg
Jeremy Hunt was appointed Chancellor of the Exchequer after Kwasi Kwarteng was sacked by Liz Truss on 14 October 2022. He retained his role as chancellor under Rishi Sunak following Truss' resignation.

The statement, which Hunt described as being made "in the face of unprecedented global headwinds", [15] set out a five-year programme of tax increases and spending cuts worth £55bn that the Chancellor argued would lead to a "shallower downturn" with fewer jobs lost. [16] It would see an overall increase in government spending over the coming two years, with a commitment to maintain public spending targets until 2025. [17] [18] Hunt said the programme of measures would help to curb inflation, something that had led to a fall in living standards and "real challenges" for families as a result. [19] He said of his predecessor, Kwasi Kwarteng, that he had been "correct" to prioritise growth in the September mini-budget, but added that "unfunded tax cuts are as risky as unfunded spending". [20]

In its report, published at the same time as the autumn statement, the Office for Budget Responsibility (OBR) concluded the UK had entered a recession after experiencing two quarters in which the economy had shrunk. While predicting an overall growth of 4.2% for 2022, the OBR forecast the economy would shrink by around 1.4% during 2023. After that, however, it predicted growth for the years 2024–2026, with 1.3% in 2024, 2.6% in 2025, and 2.7% in 2026. The rate of inflation was predicted to be 9.1% in 2022 and 7.4% in 2023. Unemployment was expected to rise from 3.6% to 4.9% by 2024. [18] The OBR also forecast that disposable income would fall by 7.1% over the next two years, taking it to its lowest level since records began in 1956–57, and reducing incomes to 2013 levels. [21]

Key points

Reaction

Responding to the statement, Rachel Reeves, the Shadow Chancellor, described Hunt as having "picked the pockets" of the country with "stealth taxes", and called the measures announced by him "an invoice for the economic carnage" caused by the Government of Liz Truss. But Hunt said the measures would get the UK through an economic "storm". [20] Nicola Sturgeon, the First Minister of Scotland, described the statement as "repeating mistakes of the past" and "a reintroduction of austerity". [25]

Although generally positive, market response to the autumn statement was described by the Financial Times as being "muted". William Hobbs, chief investment officer at Barclays Wealth said that the "grown-up tone and the mostly orthodox thinking" behind the budget "seem to have been well received", [26] while Anna Macdonald, fund manager at Amati Global Investors, saw opportunities for investors: "We still see a lot of pressure and a lack of confidence in domestically exposed equities. But selectively they are looking like very good value now." [26]

The Office for Budget Responsibility stated the UK was in a recession that would cancel eight years of growth and UK households would experience the largest fall in living standards since records began. [27] The Resolution Foundation suggested the autumn statement had increased pressure on "the squeezed middle" of wage earners, and extended the real wage recovery lag to 19 years, meaning that real wages would not return to 2008 levels until 2027, leaving wage earners £292 a week (roughly £15,000 a year) worse off than they would have been. [27] [28] The Financial Times noted that much of the revenue the Chancellor planned to raise would be through what it described as "stealth taxes" – the freezing of allowances and thresholds – which would push millions of taxpayers into paying higher taxes through rising wages. Tim Stovold, of accountants Moore Kingston Smith, described the statement as "a reasonably soft landing" for very high earners, who had been warned that "those with the broadest shoulders would pay the most" – a situation that had not materialised. [26]

In its analysis of the autumn statement, the Institute for Fiscal Studies said that the most difficult decisions had been postponed until after 2024, and that the UK was entering a "new era" of high taxation. [29] Laura Kuenssberg, the BBC's political editor, questioned whether those difficult decisions would ever be made: "Perhaps after all, the cuts pencilled in for just after the next election may never come to pass. Chancellors have found it tempting to push their attempts to balancing the books back and back." [30]

Addressing the £55bn gap in public finances, and following debate about its accuracy, Labour Party leader Sir Keir Starmer said he did not dispute the Office for Budget Responsibility's forecast, and that Labour would seek to "repair the damage" if it were to win the next general election. [14]

Tony Danker of the Confederation of British Industry said Hunt had prioritised stability and the battle against inflation over economic growth in the Autumn Statement. Danker said higher growth was also needed to fund the growing health and social care costs. Danker also stated that nothing in the plan indicates the economy will avoid a further "decade of low productivity and low growth". [31]

Responding to criticism of the decision to delay the cap on the amount of money people would have to pay towards their social care, Steve Barclay, the Secretary of State for Health and Social Care, told the 20 November edition of BBC One's political programme, Sunday with Laura Kuenssberg , it had been a "difficult decision" but that delaying its introduction for two years would allow more money to be invested in social care. [32]

See also

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References

  1. ↑ "Rishi Sunak: What will the new PM and the Autumn Statement mean for my money?". BBC News. 26 October 2022. Retrieved 26 October 2022.
  2. ↑ Kemp, Ellie (26 October 2022). "Fiscal statement delayed until November, Downing Street confirms". Manchester Evening News. Retrieved 26 October 2022.
  3. ↑ "Jeremy Hunt delays Halloween economic statement". Sky News. Retrieved 28 October 2022.
  4. ↑ Parker, George; Strauss, Delphine; Giles, Chris; Stubbington, Tommy (26 October 2022). "Hunt seeks breathing space with new date for UK Autumn Statement". The Financial Times. Retrieved 28 October 2022.
  5. ↑ "UK tax and spending plan pushed back by two weeks, says Hunt". BBC News. 26 October 2022. Retrieved 28 October 2022.
  6. ↑ "Government's financial statement delayed till 17 November". Politics.co.uk. 26 October 2022. Retrieved 28 October 2022.
  7. ↑ "Bank of England signals interest rates probably won't go much higher". The Guardian. 3 November 2022. Retrieved 4 November 2022.
  8. ↑ "Recession looms as UK economy starts to shrink". BBC News. 11 November 2022. Retrieved 11 November 2022.
  9. ↑ "Jeremy Hunt: Everyone will have to pay more tax". BBC News. 13 November 2022. Retrieved 15 November 2022.
  10. ↑ Clements, Laura (13 November 2022). "'Everyone will have to pay more tax' warns Chancellor Jeremy Hunt". WalesOnline. Retrieved 15 November 2022.
  11. ↑ "UK inflation jumps to 11.1% on back of energy and food price rises". The Guardian. 16 November 2022. Retrieved 16 November 2022.
  12. ↑ "UK's reputation has taken a knock, admits Rishi Sunak". BBC News. 15 November 2022. Retrieved 15 November 2022.
  13. ↑ "Economists question 'black hole' in UK finances". www.BBC News. 10 November 2022. Retrieved 18 November 2022.
  14. 1 2 "Keir Starmer accepts £55bn 'black hole' calculation". BBC News. 18 November 2022. Retrieved 18 November 2022.
  15. 1 2 "Hunt unveils tax rises and spending cuts as OBR says eight years of growth to be wiped out". The Guardian. 17 November 2022. Retrieved 19 November 2022.
  16. ↑ "UK faces biggest fall in living standards on record". BBC News. 17 November 2022. Retrieved 17 November 2022.
  17. ↑ "Autumn statement: Jaw-dropping change of tack as Jeremy Hunt announces more spending – and sets trap for next election". Sky News. Retrieved 17 November 2022.
  18. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 "Autumn Statement 2022: Key points at-a-glance". BBC News. 17 November 2022. Retrieved 17 November 2022.
  19. ↑ "Autumn Statement: Jeremy Hunt warns of challenges as living standards plunge". BBC News. 17 November 2022. Retrieved 17 November 2022.
  20. 1 2 "Autumn Statement: Hunt has picked pockets of entire country, Labour says". BBC News. 17 November 2022. Retrieved 17 November 2022.
  21. ↑ "Autumn statement: Millions to pay more in tax as chancellor cuts top-rate threshold and lays out plan to plug 'black hole'". Sky News. Retrieved 17 November 2022.
  22. ↑ "Chancellor delivers plan for stability, growth and public services". GOV.UK. Retrieved 22 November 2022.
  23. 1 2 "Government plans £6bn to insulate UK's houses and gives go-ahead for Sizewell C". The Guardian. 17 November 2022. Retrieved 17 November 2022.
  24. ↑ Horgan, Rob (17 November 2022). "HS2, Northern Powerhouse Rail and East West Rail to go ahead as planned". New Civil Engineer. Retrieved 18 November 2022.
  25. ↑ Delaney, James (17 November 2022). "Sturgeon: 'UK Autumn Statement repeating mistakes of the past'". STV News. Retrieved 19 November 2022.
  26. 1 2 3 "Autumn Statement: A soft landing for higher earners?". The Financial Times. 19 November 2022. Retrieved 19 November 2022.
  27. 1 2 "UK workers 'will miss out on pay rises worth £15,000 over next five years'". The Guardian. 18 November 2022. Retrieved 19 November 2022.
  28. ↑ "Autumn Statement: Jeremy Hunt warns of challenges as living standards plunge". BBC News. 18 November 2022. Retrieved 19 November 2022.
  29. ↑ "Higher taxes look to be here to stay, says IFS". BBC News. 18 November 2022. Retrieved 18 November 2022.
  30. ↑ "Laura Kuenssberg: How much is the Autumn Statement going to hurt?". BBC News. 19 November 2022. Retrieved 19 November 2022.
  31. ↑ Thomas, Daniel (21 November 2022). "Jeremy Hunt has no plan for growth, says CBI boss". BBC News.
  32. ↑ "Health Secretary Steve Barclay defends delay to social care cap". BBC News. 20 November 2022. Retrieved 20 November 2022.
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