Autumn Statement 2022: Jeremy Hunt’s Key Announcements

The Chancellor of the Exchequer delivered his Autumn Statement to The House of Commons on 17th November 2022. Continue reading to discover Jeremy Hunt’s key announcements.

Overview

The Autumn Statement 2022 comes at a time of significant economic challenge for the UK and the global economy. Central banks are raising interest rates to control inflation, which has pushed up the cost of borrowing for businesses, families and governments. Growth is slowing, and the International Monetary Fund (IMF) predicts that a third of the global economy will fall into recession this year or next.

These factors, coupled with higher levels of government debt due to the economic impacts of the COVID-19 pandemic and the current energy crisis, have contributed to a significant gap between the funds the government receives in revenue and its spending.

Jeremy Hunt announced today that the government would deliver a plan to tackle the cost of living crisis and rebuild the UK economy. The Chancellor says his priorities are stability, growth and public services, and he provides “fair solutions” despite taking “difficult decisions”.

To achieve this aim, the government has reversed nearly all the measures in the Growth Plan 2022. The Autumn Statement sets out further steps on spending and taxation, ensuring that each contributes broadly to repairing the public finances while protecting the most vulnerable.

In his opening statement, The Chancellor said:

“In the face of unprecedented global headwinds, families, pensioners, businesses, teachers, nurses, and many others are worried about the future.

So today, we deliver a plan to tackle the cost-of-living crisis and rebuild our economy.

We also protect the vulnerable because to be British is to be compassionate, and this is a compassionate Conservative government.”

Please visit the government’s website to read the full Autumn Statement.

Personal Taxes

The government has announced that the income tax threshold will be frozen until April 2028. Millions of individuals will pay significantly more taxes as their wages rise. It is estimated that average earners will pay roughly £2,500 more over six years, adding around £5 billion to the Treasury. Alongside the income tax threshold, the higher rate threshold, main national insurance and inheritance thresholds will also remain frozen until April 2028. However, a quarter of a million high earners will be pushed into the highest tax bracket as the threshold that the 45p rate of income tax becomes payable is reduced to £125,140.

Jeremy Hunt also announced plans to cut tax-free allowances for dividend allowance and capital gains tax. The tax-free dividend will be cut from £2,000 to £1,000 in 2023 and £500 from April 2024. The annual exempt amount for capital gains tax will be cut from £12,300 to £6,000 from next year and then to £3,000 from April 2024.

In September, the government increased the nil rate for all purchasers of residential property in England and Northern Ireland from £125,000 to £250,000. The threshold at which the duty was paid for first-time buyers also increased to £425,000. The Chancellor announced that the stamp duty cuts outlined in the mini-budget would remain in place, but only until 31^st March 2025. The new plans will generate an extra £180 million from stamp duty in 2024/25, with an additional £1.6 billion in revenues annually by 2027/28.

State pension payments and means-tested benefits

Since 2010, increases to the state pension have been based on a ‘triple lock’ commitment which guarantees that payments rise in line with the larger of either September’s Consumer Prices Index (CPI) measure of inflation, average growth, or 2.5%. The triple lock was suspended temporarily due to an increase in average earnings growth caused by pandemic-related restrictions easing and workers coming off furlough. The increase was instead based on the higher of 2.5% or CPI inflation – known as the ‘double lock’. Jeremy Hunt announced that the government will re-instate the triple lock for the new and basic state pensions – rising by 10.1%.

Additionally, from April 2023, means-tested benefits will also increase by 10.1%, in line with September’s CPI measures of inflation. The overall benefits cap will also rise from £384.62 a week to £423.45 a week if you’re a single parent or in a couple. And from £257.69 a week to £283.72 if you’re a single adult.

Economy and public finances

The Office for Budget Responsibility (OBR) has announced the UK economy has slowed for two quarters in a row and is currently in recession. The OBR has predicted a growth of 4.2% for this year overall, but the size of the economy will shrink by 1.4% in 2023. Growth rates of 1.3%, 2.6% and 2.7% have been predicted for 2024, 2025 and 2026, respectively. As part of the Autumn Statement, the government has announced that it will give itself five years to hit debt and spending targets instead of the previous three years.

Business Taxes

Whilst the employer’s National Insurance contributions threshold has frozen until April 2028, the employment allowance will be retained at a new, higher level of £5,000 until March 2026.

The government also announced that the R&D tax relief for SMEs deduction rate was cut to 86% and the credit rate to 10% but will increase the separate R&D expenditure credit rate from 13% to 20%.

Windfall tax on major gas and oil producers has risen to 35%, and a 45% energy profits levy rate will be imposed on electricity generators to raise a combined £14 billion next year.

Energy and Household Support

The government will extend the household energy price cap for one year beyond April. Typical energy bills will be capped at £3,000 a year instead of £2,500. Additional cost-of-living payments will be available to support the “most vulnerable”. Payments of £900 will be available to help those on benefits, £300 to support pensioners and £150 for those on disability benefits.

Foreign Aid

The Chancellor of the Exchequer confirmed that the government would only be able to return foreign aid spending to 0.7% of GDP once economic conditions allow. For the remainder of the forecast period, it will remain at 0.5%. The Chancellor has also confirmed that the government remains “fully committed” to Cop26, including the 68% reduction in UK emissions by 2030.

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