Fri. Dec 2nd, 2022

Hunt confirms 45% income tax rate starting at 125,000; tax relief and threshold which are further frozen

Hunting now summarizes those tax changes. They are in line with expectations.

The threshold for the highest rate of income tax, 45%, will be reduced from £150,000 to £125,000.

Income tax, national insurance and inheritance tax reliefs and thresholds will be frozen for the next two years, until April 2028.

Hunt says even with this freeze, “we will still have the most generous set of tax-free allowances of any G7 country”.

The dividend fee will be reduced from £2,000 to £1,000 next year and then to £500 in April 2024.

And electric vehicles will no longer be exempt from vehicle excise duty, he says.

Key events

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Hunting it turns to spending on education.

He says some people (ie Labour) want to put VAT on private school fees. That would raise £1.7bn, he says.

But he says he will be practical, not ideological. It says it will invest an extra £2.3 billion in schools next year and the year after.

Economist at an economic think tank IFS, Ben Too earlysuggests that the impact of inflation could lead to another year of real wage cuts in the public sector.

That could amount to a 5% reduction, he suggests.

The OBR expects CPI inflation to be higher than 7% next year. The chancellor has confirmed that he is sticking to his spending plans for the next two years, which are based on wages of around 2% a year.

Another 5% real wage cut for public sector workers is on the way?

— Ben Zaranko (@BenZaranko) November 17, 2022

The difference between wage increases in the public and private sectors is already at a record level.

The DWP will receive an extra £280 million to fight fraud and error, Hunting he says.

On defense, he says the government remains committed to keeping defense spending at 2% of GDP.

As for aid, he says it is not yet possible to recover aid spending of up to 0.7% of national wealth. It will remain at 0.5 percent, he says.

Hunt: This is a £55 billion consolidation package

Today’s statement brings consolidation (ie tax increases and spending cuts) of £55 billion, says Hunt.

This means that inflation and interest rates will be ‘significantly lower’.

Hw explains that fiscal policy will support the economy in the short term while growth slows and unemployment rises.

The OBR confirms that because of our plan the recession is shallower and inflation is down, says Hunt.

Unemployment is also lower, with around 700,000 jobs saved, the chancellor adds.

Then the pace of consolidation increases as growth returns to reduce debt – this will reduce pressure on the Bank of England to raise interest rates.

Hunt confirms the total scale of the tax cuts/increases is £55 billion. That’s a lot of money.

— Ed Conway (@EdConwaySky) November 17, 2022

£55bn ‘consolidation’ @Jeremy_Hunt autumn statement. Those are tax cuts and increases in most people’s language. About half from higher taxes, half from budget cuts. #Autumn statement

— @petermacmahon (@petermacmahon) November 17, 2022

Hunt says government departments need to save to keep up with inflation

About spending Hunting says the government will protect the increase in departmental cash spending already outlined in existing plans.

But departments will need to increase efficiency to offset inflation, he realizes.

Hunting says the government will continue revaluation of property for business rates, but there will be compensation for businesses to soften the blow. He says two-thirds of properties will no longer pay.

A new transitional relief is being introduced, he says.

Businesses are struggling with rising prices and growing uncertainty.

This is why the government is providing a £13.6bn business price support package to help businesses through these difficult times.#Autumn statement pic.twitter.com/zuxalJ7RgF

— HM Treasury (@hmtreasury) November 17, 2022

Hunt says extending the windfall tax to energy companies will raise an extra £14bn

Hunting covers business tax changes, saying it will keep the VAT threshold.

And he confirms that he is extending the windfall tax. He says he’s in favor of taxes on real windfalls.

From January 1 to March 28, we will increase the tax on energy profits from 25% to 35%. The structure of our energy market also creates a windfall for low-carbon electricity generation. Therefore, from January 1, we decided to introduce a new temporary tax of 45% on electricity generators. Together, these measures raised £14 billion.

Core debt/GDP will peak in 2025-26

The UK is forecast to borrow 7.1% of GDP this financial year, or £177bn, says Hunt.

That’s a big jump – back in March, the OBR forecast a deficit of 3.9% of GDP, or around £98bn.

Next year, the UK expects to borrow £140bn, or 5.5% of GDP – again up from the 1.9%, or £50.4bn forecast in March.

By the financial year 2027-28, the deficit falls to 2.4%. or £69 billion.

Core debt as a percentage of GDP will begin to fall from a peak of 97.6% in 2025-26 to 97.3% in 2027-28.

🟥 Borrowing will reach £177bn this year and fall to £140bn, Hunt confirms. That’s still £69 billion by 2027/28. In March, the OBR estimated that borrowing would fall to £31.6bn in 2026/27. A large reduction in GDP hurts revenues strongly

— Jack Barnett (@__JackBarnett) November 17, 2022

Hunt confirms 45% income tax rate starting at 125,000; tax relief and threshold which are further frozen

Hunting now summarizes those tax changes. They are in line with expectations.

The threshold for the highest rate of income tax, 45%, will be reduced from £150,000 to £125,000.

Income tax, national insurance and inheritance tax reliefs and thresholds will be frozen for the next two years, until April 2028.

Hunt says even with this freeze, “we will still have the most generous set of tax-free allowances of any G7 country”.

The dividend fee will be reduced from £2,000 to £1,000 next year and then to £500 in April 2024.

And electric vehicles will no longer be exempt from vehicle excise duty, he says.

Unemployment is projected to rise from 3.6% today to 4.9% in 2024, before falling to 4.1%, Hunt says.

UK now in recession

The OBR has estimated that the UK is now in recession, “as are other countries”, reveals Hunt.

He says GDP is forecast to fall by 1.4% next year, before returning to growth in 2024.

Here are the new forecasts:

  • 2022: GDP growth of 4.2% compared to 3.8% growth forecast in March

  • 2023: GDP falls by 1.4% compared to +1.8% growth forecast in March

  • 2024: GDP grows by 1.3% compared to 2.1% growth forecast in March

  • 2025: GDP grows by 2.6% compared to 1.8% growth forecast in March

  • 2026: GDP grows by 2.7% compared to 1.7% growth forecast in March

Higher energy prices are responsible for most of the reduction, Hunt adds.

Hunt says his plans will include ‘significant tax increases’

Hunt says the Conservatives disapprove of leaving debt to future generations.

He says this is a balance plan. Slightly more than half of the consolidation will come from spending cuts. And the rest will come from tax increases.

He says the plans will include “significant tax increases”.

But the headline tax rates will not change. And the total tax burden will increase by only 1%.

Hunting says he has two new fiscal rules.

First, core debt must be falling as a share of GDP at the end of the five-year rolling period.

And, secondly, public sector borrowing in the same period must be below 3% of GDP.

He says the plans announced today meet both rules.

Hunt says the OBR expects inflation of 9.1% this year and 7.4% next year

Hunting says the OBR expects inflation to be 9.1% this year and 7.4% next year.

The City will be convinced that Hunt says he has no plans to change the remit of the Bank of England – which is currently looking at inflation close to 2% over the medium term.

Liz Truss suggested last summer that she would review that mandate.

Jeremy Hunt confirms he has rejected Truss’ plan to rewrite the powers given to the Bank of England.

– Ben Riley-Smith (@benrileysmith) November 17, 2022

Hunting he says he understands the motivations behind the mini-budget.

But unfunded tax cuts are dangerous, which is why the mini-budget measures were overturned.

Hunt praises the Bank of England for an “outstanding job” in the fight against inflation

Hunting begins by emphasizing the need for stability.

He says the OBR confirms that global factors are the primary cause of inflation.

Most countries are still struggling with the consequences of the pandemic.

It has to be paid for. And this is exacerbated by the “made in Russia energy crisis”.

Energy prices have risen eight times compared to the historical average.

He names other countries where interest rates and inflation are higher.

The Bank of England has done a “remarkable job” in the fight against inflation, he says. He says that he will not change her jurisdiction.

Hunt says his plan will lead to less decline and more long-term growth.

Jeremy Hunt opens autumn statement by pointing out there are ‘unprecedented global headwinds’

Jeremy Hunt he begins by saying that, faced with “unprecedented global headwinds,” people are worried about the future.

It will therefore deliver a plan “to address the cost of living crisis and rebuild our economy”.

He says his priorities will be stability, growth and protecting public services – but he also wants his plans to be compassionate.