Jeremy Hunt is announcing his financial update – here are the main points, with political analysis
Jeremy Hunt says the government will 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 is providing “fair solutions” despite taking “difficult decisions”.
The chancellor says forecasts from the Office for Budget Responsibility show the economy will grow by 4.2% this year.
Hunt says the economy is already in recession, with higher energy prices explaining the majority of the revision in growth forecasts.
GDP would then shrink by 1.4% next year, before rising by 1.3% in 2024, 2.6% in 2025 and 2.7% in 2026.
In March, the OBR had forecast growth of 3.8% for 2022 and 1.8% f0r 2023.
The economy grew by 7.5% in 2021, after a fall of 11% in 2020 – the biggest decline for 300 years – during the first wave of the pandemic.
Hunt says borrowing in the current financial year, 2022-23, will be 7.1% of GDP.
In cash terms, the OBR estimates the budget deficit – the gap between spending and income – is £177bn in 2022-23.
In its previous forecasts in March, the OBR had estimated borrowing would be 3.9% of GDP, or £99.1bn in cash terms, in 2022-23.
The chancellor says borrowing is “more than halved” by the actions in the autumn statement.
Public sector net debt is forecast to peak at 97.6% of GDP in 2025-26, and then to fall gradually to 97.3% of GDP by 2027-28.
Hunt announces two new fiscal rules: underlying debt must fall as a percentage of GDP within five years; and public sector borrowing must be below 3% of GDP.
The chancellor announces a range of tax threshold freezes, including for income tax and inheritance tax for a further two years, on top of an existing four-year freeze, to April 2028
Dividend allowances will be cut. The annual exempt allowance for capital gains tax will also be cut
Hunt says the changes still leave Britain with more generous allowances than several other leading nations
The threshold for the 45p additional rate of tax will be cut from £150,000 to £125,140
Hunt says electric vehicles will no longer be exempt from vehicle excise duty from 2025
Windfall taxes will raise £14bn, including a new temporary 45% levy on electricity producers.
Hunt says the government will soften a blow for businesses on business rates with an almost £14bn tax cut on business rates, this will benefit about 700,000 businesses.
Employment allowance will be retained at a higher level of £5,000.
Hunt says government spending will continue to increase in real terms every year for the next five years but at a slower rate.
The chancellor says “public spending discipline” must be shown through a “challenging period”.
Existing departmental spending under the 2021 spending round will be kept. Then departmental spending will grow at 1% a year in the three years that follow.
He says departments will need to make efficiencies. However, overall spending will “continue to rise in real-terms” for the next five years.
Hunt says the government will not be able to return foreign aid spending to a 0.7% of GDP until the economic conditions allow. It will remain at 0.5% for the remainder of the forecast period.
The chancellor says he confirms that, despite economic pressures, the government remains “fully committed” to Cop26, including 68% reduction in UK emissions by 2030.
Hunt says the chancellor will increase the schools budget, with an extra £2.3bn a year.
He says in difficult economic circumstances, a Conservative government is investing more in the public service that defines all of our futures.
The chancellor says social care did an incredible job during the pandemic, but an ageing population is putting massive pressure on their services.
Hunt says he wants to free up hospital beds by investing in social care, and will allocate £1bn more next year and £1.7bn a year after, funded by savings from delayed reforms.
Patricia Hewitt, the former Labour health secretary, will advise the government on the efficiency of the NHS. Hunt says: “We want Scandinavian quality alongside Singaporean efficiency”.
The chancellor says there will be a £3.3bn increase in NHS funding. “That is a Conservative government putting the NHS first.”