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A Plan for Stability, Growth and Public Services? - The Autumn Statement, November 2022
On 17th November 2022 the new Chancellor of the Exchequer, Jeremy Hunt, announced his Autumn Statement in the House of Commons.The Chancellor stated that this plan would consider stability, growth, and public services at its core base, and provides fair solutions whilst having to take difficult decisions.
Below are some of the highlights from the Autumn Statement:
Growth
As reported previously, The Chancellor announced that forecasts from the Office for Budget Responsibility (OBR) showed the economy is expected to grow by 4.2% this year.
However, with a majority of the forecast having to be revised mainly because of the rise in energy prices, this would suggest that the economy is already in recession.
As a result, GDP - the measure of the value added when making UK goods or offering services – would then shrink by over 1% next year, but then recover slightly by 2024, increasing in 2025 and 2026.
Borrowing
The Chancellor stated that borrowing for this 2022-23 financial year will be 7.1% of GDP.
This means based on estimates from the OBR, the budget deficit this year (the gap between spending and income) is said to be £177 Billion:
However, the amount that the Government would borrow is set to fall next year and in following years because of proposed tax rises and reduced public borrowing.
Personal Taxes
The Chancellor announced a range of tax thresholds which were to remain at their current rates, this included income tax and inheritance tax to stay as they are for another two years till April 2028.
The Chancellor announced Dividend allowances will also be cut, and the annual exempt allowance for capital gains tax is also to be cut.
The Chancellor stated that these changes still leave the country with more generous allowances than several other leading nations.
The Chancellor also said that, as of April 2023, the threshold for the 45p additional rate of tax is to be cut
from £150,000 to £125,140.
The Chancellor also announced electric vehicles will no longer be exempt from vehicle excise duty - This means electric cars, electric vans, and motorcycles will be expected to pay road taxes from April 2025.
Business Taxes
A Windfall tax is an extra charge issued by Government on a company. The aim is to target firms which benefit from something they were not responsible for.
And so, The Chancellor advised in his Autumn Statement that Windfall taxes are being planned which will raise £14 Billion for the economy. This is to include a temporary 45% levy on electricity producers.
The Chancellor also advised the Government will provide relief for businesses with nearly £14 Billion tax cut on their business rates; and this is expected to benefit about 700,000 UK businesses.
Employment allowance will also be retained at a higher level of £5,000.
Public Spending
The Chancellor did state in his announcement that Government spending will continue to go up each year for the next five years, but it will be at a slower rate advising public spending discipline must be shown through this challenging period.
Existing spending within Governmental departments is said to remain at current levels but will then grow at 1% a year in the three years that follow.
The Chancellor advised departments will need to make efficiencies. However, overall spending will continue to rise in real-terms for the next five years.
Education, Health, and Social Care
The chancellor advised given the difficult economic circumstances, the Government is investing more in the public service that defines everyone’s futures.
It was also announced by the Chancellor that the NHS England budget is to increase by £3.3 Billion every year for the next two years, with spending on schools increased by £2.3 Billion.
This is said to also allow for larger payments to devolved Governments in Scotland, Wales, and Northern Ireland.
The chancellor said in his statement that Social Care services did an incredible job during the pandemic, but advised an ageing population is putting massive pressure on them.
Looking to create Scandinavian quality alongside Singaporean efficiency (and In order to free up hospital beds) The Chancellor is to invest in social care by giving £1 Billion more next year, with a further £1.7 Billion the next year.
Cost of Living Support
The Chancellor declared households and businesses will be provided with support next year.
The Chancellor announced the Government’s energy price guarantee is to be kept for another 12 months but will go up to an average of £3,000 for a typical household (previously from £2,500.)
The chancellor also announced new one-off payments of £900 to households on means-tested benefits, with £300 to pensioners and £150 for individuals on disability benefit.
The Chancellor also announced an additional £1bn funding would be made available to enable further extension to the Household Support Fund.
The Chancellor also confirmed social housing rents are to be capped at 7% next year. This is to avoid rent hikes of up to 11%.
The National Living Wage is to also go up by 9.7% next year from £9.50 to £10.42 an hour.
Benefits will rise in line with September’s inflation rate by 10.1%. This will cost The Government £11 Billion. The benefit cap will also be increased with inflation next year.
The Chancellor also confirmed The Pensions Triple Lock is also to be maintained.
Other highlights from The Chancellor’s Autumn Statement included the continuation of HS2, and the plans to create a new nuclear power plant at Sizewell C - the first state-backed power station for 30 years.
The Response from Charity Sector
In the run-up to The Autumn Statement, The Chancellor Jeremy Hunt was keen to point out that tough choices lay ahead for the public finances, and he made some of them in the fiscal statement.
Through his Autumn Statement, The Chancellor was aiming to restore stability to the economy, protect high-quality public services and build long-term prosperity for the country.
The reaction from the Charity Sector was collectively mixed, where groups accepted some of the plans outlined by the Government, many suggested they did not go far enough to help charities deal with the Cost-of-Living crisis and high inflation.
The response from The Charity Finance Group (CFG) was mildly optimistic, welcoming the rise in benefits to help vulnerable households, as well as the investment in Health and Social care.
But CFG did state with the reduction in living standards, the nation still faces hard times ahead, and whilst The Chancellor has ‘ticked some boxes’, it’s not certain this plan for stability and growth will work.
The National Council for Voluntary Organisations (NCVO) pointed out there was a lack of investment at community level, which can lead to poorer outcomes and widening inequalities.
The NCVO also stated The Voluntary Sector would always be a critical part of social infrastructure supporting society through recent crises, but needs continued investment to carry on this work.
This viewpoint that was also suggested by the Charities Aid Foundation (CAF) advising that Charities must be at the centre of any continued energy support from April and need to know where they stand.
The Pro Bono Economics group also pointed this out, saying demand for charity support during these times will be substantial, and the (Charity) Sector will need investment to continue helping the most vulnerable.
The response from New Philanthropy Capital (NPC) requested more clarity about the Energy Price Guarantee to end the worry and uncertainty only six months of support is causing people.
The response from Big Society Capital suggested The Government needs to be more creative in how it responds if it wants the stability, growth and support for public services that talks about.
National charity The King’s Fund recognised the investment for the NHS, advising this would help services plan to train, recruit and retain the staff they need for the future.
But they also pointed out hikes in energy prices (and ongoing pressures) would add to social care providers costs, and that it was not made clear if the additional funding would come from already exhausted finances
from local authority.
The Joseph Rowntree Foundation (JRF) recognised the efforts being made by the Government, with the rise in State Benefits a possible welcome announcement for those currently struggling.
But the Foundation did argue families are still facing the worst winter many will remember, and that they need the help now to get through a (period) of soaring costs.
For more information, or to read The Autumn Statement in full, visit the UK Government website.
MVA continues its efforts to provide reliable and trustworthy guidance and advice during these challenging times for us all.
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