The UK is now officially in a recession, Jeremy Hunt said as he unveiled his autumn Budget – as the Treasury watchdog forecast living standards will crash as a result of rising prices.
The Office for Budget Responsibility also predicted more than half a million people would lose their jobs and inflation would erode real wages over 2023-24.
The chancellor announced a host of “difficult decisions” – including tax increases – in his plan to weather the economic “storm”.
He said public spending would grow more slowly than the economy, and the threshold for paying the top rate of income tax would drop from £150,000 to £125,000.
Mr Hunt also announced energy bills would rise to £3,000 a year from April under a government guarantee.
Benefits and state pensions will rise with inflation of 11.1 per cent, and the national living wage will get a boost to £10.42 next year of 9.7 per cent.
Shadow chancellor Rachel Reeves said: “This government has forced our economy into a doom loop where low growth leads to higher taxes, lower investments and squeezed wages, with the running down of public services – all of which hits economic growth again.”
Watch: Electric car owners to start paying road tax from 2025
Electric vehicles (EVs) will no longer be exempt from vehicle excise duty (VED) from April 2025.
Chancellor Jeremy Hunt announced that he wanted to make motoring taxes “fairer” as he revealed the policy in his autumn statement.
He said company car tax rates will remain lower for EVs than traditionally fuelled vehicles, but will increase by one percentage point for three years from 2025.
Council tax to rise 5%
Council tax is set to soar under Jeremy Hunt’s changes.
Local authorities will be allowed to raise council tax by 5% without holding referendums, an increase from the current 3%.
The new total will comprise 3% in general council tax and 2% for the adult social care precept.
The Treasury estimates that 95% of councils will hike rates by the maximum amount.
Critics say council tax should not be raised in a cost-of-living crisis.
Hunt picking pockets of British people, says shadow chancellor
The shadow chancellor accused Jeremy Hunt of having “picked the pockets” of the entire country by deploying a “raft of stealth taxes” in his autumn statement.
Rachel Reeves said Mr Hunt was trying to “take the British people for fools” by seeking to claim the Conservatives were not responsible for the “last 12 years of failure”.
She told the Commons: “In the last hour, the Conservatives have picked the pockets of purses and wallets of the entire country as the Chancellor has deployed a raft of stealth taxes taking billions of pounds from ordinary working people.
“A Conservative double whammy that sees frozen tax thresholds and double-digit inflation erode the real value of people’s wages.
“Just one of those freezes, in the personal allowance, will cost an average earner more than £600.”
Living standards will crash and 500,000 to lose jobs, says fiscal watchdog
Living standards will crash as a result of rising prices and more than half a million people will lose their jobs, the Treasury watchdog says.
The Office for Budget Responsibility said in its analysis that rising prices will erode real wages and reduce living standards by 7% in total over 2023-24 – wiping out the previous eight years’ growth – despite over £100 billion of additional Government support,
It said: “The squeeze on real incomes, rise in interest rates, and fall in house prices all weigh on consumption and investment, tipping the economy into a recession lasting just over a year from the third quarter of 2022, with a peak-to-trough fall in GDP of 2%.
“Unemployment rises by 505,000 from 3.5% to peak at 4.9% in the third quarter of 2024.”
Watch: Government will proceed with Sizewell C nuclear power station
The government is to press ahead with building a new nuclear power plant at Sizewell C in Suffolk, the chancellor announced.
Jeremy Hunt told MPs the project will create 10,000 highly skilled jobs as well as providing reliable, low-carbon energy to six million homes.
The autumn statement said that subject to final approvals, contracts will be signed with relevant parties, including EDF, by the end of this month.
Doubts were raised last month after reports that the multi billion pound project could be axed. But the Chancellor said the government would invest £700 million in Sizewell C.
Reaction to Autumn Budget
Let’s take a look at what people are saying about the Autumn Budget.
Alison Garnham from Child Poverty Action Group said: It’s a relief that benefits and the benefit cap will rise with inflation. But this is only the fourth time benefits have risen by inflation in the last ten years and as a result of austerity – that today the chancellor praised – there are almost 4 million kids living in poverty in the UK. Today’s package will not stop the ice from cracking under struggling families.”
Ben Harrison from the Work Foundation think tank: “Let’s be clear – inflation is already outstripping Universal Credit payments, and increases in benefit levels won’t arrive for another five months. Those least well off in the UK still face a hugely challenging winter.”
Geoff Barton from the Association of School and College Leaders said: “Today’s announcement sounds like positive news for education, and suggests the voice of school leaders, parents and communities about the desperate state of education funding has cut through and been listened to by the government. However, the devil tends to be in the detail and we’ll be closely looking at the figures to fully understand the implications. In particular, we’ll be looking at where this leaves special educational needs and post-16 provision which are both facing extraordinarily difficult financial circumstances.”
Public finances
Caroline Lucas from the Green Party:“Our government has chosen to pursue even more devastating austerity cuts in the name of political ideology, not economic necessity – all whilst refusing to admit that Brexit has made the situation so much harder.”
Gary Smith, GMB General Secretary, said: “The Tories have crashed the economy but it’s working people who are paying the bill. The Chancellor has decided to double down on the Conservatives’ recipe for recession, ushering in a new era of austerity in public services.”
Pound drops against US dollar
The pound fell against the US dollar as investors appeared concerned over the prospects of a lengthy recession and fears Jeremy Hunt’s austerity budget will compound economic woes.
Sterling dropped nearly 1% to $1.18 and was 0.3% lower at 1.14 euros.
On the London market, the FTSE-100 Index was 0.7% lower at 7300.4.
Brexit ‘significantly’ cuts UK trade with EU, watchdog says
Brexit has had a “significant adverse impact” on UK trade, according to the Budget watchdog’s assessment.
The Office for Budget Responsibility (OBR) said Brexit contributed to reducing trade volumes and business relationships between UK and EU firms.
Trade was also hit by slowing global economic growth, the OBR’s economic and fiscal outlook said.
“Near-term growth in exports and imports is lower than in our March forecast as slowing global GDP (gross domestic product) growth hits exports and a weaker outlook for consumption and investment weighs on imports,” the OBR said.
“Our trade forecast reflects our assumption that Brexit will result in the UK’s trade intensity being 15% lower in the long run than if the UK had remained in the EU.
“The latest evidence suggests that Brexit has had a significant adverse impact on UK trade, via reducing both overall trade volumes and the number of trading relationships between UK and EU firms.”
The OBR document also forecast payments of £18.9 billion to Brussels under the terms of the Brexit divorce deal between 2022-23 and 2027-28.
Hunt announced ‘council tax bombshell’, Labour says
Labour shadow chancellor Rachel Reeves said the Chancellor “seems to have confirmed today a council tax bombshell”.
She said: “The government is forcing local councils to put up council tax. Now the chancellor seems to have confirmed today a council tax bombshell worth £100 for a typical band D property, taking their council tax above £2,000 for the first time”.
She said people “will be forced to pay more because of the destruction that the Conservatives have reaped on our economy”.
All the key points
A summary of the main changes Jeremy Hunt announced. By Matt Mathers:
