Jeremy Hunt maintained today that authorities are doing ‘everything’ to assist households with the impending decline in living standards, following a £24 billion tax raid.
The morning following his unusual Autumn Statement, in a series of interviews, the Chancellor said he had to be “honest” about the “difficult” circumstances the country faces.
However, he maintained that voters support the Conservatives because they make “tough” judgments. He told Sky News, “None of this is easy, but it is the right thing to do.”
Mr. Hunt unveiled a last-ditch plan to stabilize the public finances yesterday, sending the tax take soaring above £1trillion this year and putting the burden on track to be the highest since World War II.
But despite the Chancellor’s assertion that he was sharing the pain, an analysis by the Resolution Foundation warned that he is putting additional pressure on the “squeezed middle.”
According to the report, real earnings are not anticipated to return to 2008 levels until 2027, resulting in two “lost decades” of stagnant living standards. If wages had continued to increase at the same rate as before the financial crunch, they would be £15,000 higher by the end of the period.
According to the estimate, the announced increases in personal taxes will result in a permanent 3.7% income reduction for the average family.
A freeze on the personal allowance, basic and higher thresholds will be extended until 2028, resulting in a’stealth’ increase in taxation for all workers. Consequently, 3.2 million people will be taxed for the first time, and 2.6 million more will be taxed at the higher rate within five years.
Mr. Hunt wished to demonstrate that the wealthy are also being punished by lowering the threshold at which the 45p top rate applies from £150,000 to £125,000 in order to catch an additional 250,000 individuals.
In an effort to save money, energy bill subsidies are being reduced, with the average household energy bill increasing from £2,500 to £3,000 in April. Mr. Hunt argued that Russia was responsible for the energy crisis.
Without requiring a referendum, local governments will be able to raise council taxes by up to 5%.
The gloomy backdrop to the Autumn Statement was the OBR’s projection that the economy is already in recession and will contract by 1.4% in 2019.
It is anticipated that this year and next will see the worst declines in living standards since records began in 1956, erasing eight years of progress as unemployment increases from 1.2 million to 1.7 million.
The tax burden will increase from 33.1% of GDP in 2019-2020 to 37.1% of GDP in 2027-28, which is one percentage point more than anticipated in March and its “highest sustained level since World War II.”
This year, not next, is expected to be the first time that tax receipts surpass £1trillion, largely due to the windfall tax.
According to a distributional analysis conducted by the Treasury, all single-adult households earning more than £25,000 will be worse off next year as a result of the measures announced today, while the figure for families of four is $59,000.
Mr. Hunt stated in his statement to the House of Commons yesterday that making “difficult decisions” would result in a “deeper recession.”
However, he was immediately questioned about his plans when it became clear that the vast majority of the £24 billion in tax increases and £30 billion in spending cuts would not be felt until after the expected 2024 election.
In 2023-24, spending is projected to increase by £9.5 billion, while tax revenue will only increase by £7.4 billion.
Among the few bits of good news in the statement, state pensions and benefits will be increased in April by the same amount as the September inflation rate of 10.1%.
The windfall tax on energy companies will be raised to 35% and maintained until 2028. In conjunction with a 40% profit tax on older renewable and nuclear electricity generation, this will generate £14 billion next year.
Mr. Hunt stated that foreign aid will not return to 0.7% of national income as originally planned, but will instead remain at 0.5% until the “fiscal situation allows” – potentially for the next five years.
In a blow to the real estate market, the Chancellor announced in 2025 that previously announced stamp duty cuts will be reversed. As mortgage rates rise, it is anticipated that house prices will decline by 9 percent by summer 2024.
Electric cars will be taxed on the road for the first time, a move that is certain to provoke opposition.
Although NHS budgets will be protected, other departments will be subjected to another harsh round of austerity, albeit postponed for the most part. The OBR assumed that defense spending will remain at 2% of GDP in 2024, rather than increasing to 3% as proposed by Defense Secretary Ben Wallace.
The delicate balance allowed Mr. Hunt to assert that the debt-to-GDP ratio will decline in five years.
In stark contrast to the aftermath of Liz Truss’ mini-Budget, markets remained tranquil as the package was digested.
According to businesses, it ‘delivers stability’ but growth requires’more work’
Conservative veteran Richard Drax has warned that increasing taxes on businesses and hard-working individuals could’stifle’ economic growth and productivity.
Former Cabinet minister Esther McVey has threatened to resign, and others have expressed concern that Mr. Hunt is “throwing out the baby with the bathwater.”
New OBR projections indicating that the United Kingdom is already in recession provided a stark backdrop to the Autumn Statement.
It also provided updated forecasts for inflation, which has reached a 41-year high of 11.1%.
According to the OBR, the CPI has peaked and will average 9.1% this year and 7.4% next year.