Today’s statement to the House of Commons from Chancellor Jeremy Hunt has been much talked about, with much of the detail already being aired on the national news channels early this morning.
Following the disaster of the ‘fiscal event’ delivered by the former Chancellor Kwarteng in September, it’s clear that it’s the battle against inflation and trying to restore the UK’s somewhat battered economic credibility which are highest on Hunt and Sunak’s agenda.
Today, Hunt has been setting out some of the detail of the government’s plans to tackle the so-called ‘black hole’ in the government’s coffers – to get national debt falling within 5 years – by finding around £54bn from a combination of tax hikes (especially stealth taxes) and government spending cuts in a massive fiscal tightening exercise.
What are the key measures Hunt has announced?
So far, he said the government’s three priorities are ‘stability, growth and public services’ with the aim of bringing about a ‘shallower downturn’ as he outlined the policies designed to impact these priorities. He also confirmed the Bank of England’s remit won’t be changed towards tackling inflation with monetary policy and that he will work with the Bank and use fiscal policy to ‘support the economy’.
He says that he is aiming to raise the funds half from tax changes and half from cuts in government spending.
In terms of personal taxes, there are a lot of changes to the income tax system with the threshold for highest rate of tax reducing to £125,000. As well as freezing income personal allowance, NI threshold and IHT tax thresholds for a further two years to April 2028. CGT exempt amount falls to £6000 next year then to £3,000 the following year. Stamp duty changes of the previous Chancellor will have a limited lifespan until 2025. Dividend allowances are cut too.
The triple lock has been retained on state pensions although a review of UK state pension age is to be published in early 2023. On energy, there’s an extension to the windfall tax on energy firms.
Of course, we must await the feedback from the Office for Budget Responsibility (OBR) which will be delivered this afternoon. Unlike Kwarteng, Hunt has consulted the OBR in regard to today’s Autumn Statement.
