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The Guardian - UK
The Guardian - UK
Politics
Nadeem Badshah (now); Andrew Sparrow and Graeme Wearden (earlier)

Jeremy Hunt cuts national insurance but UK tax burden set to hit high amid plummeting living standards – as it happened

Jeremy Hunt Neil Henderson ​​Rishi Sunak Sir Keir Starmer Torsten Bell

The head of a childcare company backed by the prime minister’s wife has attacked the government following the autumn statement, accusing ministers of letting nurseries go bust, writes Kiran Stacey and Alexandra Topping.

Rachel Carrell, chief executive of Koru Kids, criticised a failure to allocate extra money for the childcare sector despite many providers saying that they could go out of business under reforms brought in earlier this year.

Jeremy Hunt announced at the budget in March that he would allow more parents to benefit from 30 free hours of childcare, extending the offer to children aged nine months and over. The chancellor allocated £4bn to pay for the expanded offer, but many providers have said this will not be enough to prevent them going bankrupt.

The chancellor, Jeremy Hunt, unveiled plans that could eventually give UK workers one pension pot for life – but there were warnings that it could be an administrative “nightmare”.

The shake-up is aimed at tackling the problem of millions of small pension pots being generated – which often then end up being forgotten about – as savers change jobs during their working lives.

The Treasury said it was launching a call for evidence on a “lifetime provider” model that would simplify the market by allowing savers to ask employers to pay into one portable pension pot. The pot could be moved from one job to the next.

The Treasury said the measure would provide savers with “greater agency and control over their pension”.

Responding to the announcement, Rachel Vahey, head of policy development at investment platform AJ Bell, said: “Some estimates suggest the average worker changes employer around 11 times during their career, with each job hop potentially creating a new pension with a new provider.”

Jeremy Hunt said he would look to cut income tax at the next budget “if it is responsible to do so”.

Asked whether taxes were going up or down under the current government, the Chancellor told Sky News: “We haven’t got to the end of the Parliament yet, so I can’t answer that question.

“But what I can say is that my commitment to voters is that, when I had a chance to lighten the tax burden… I’m a Conservative, I believe in doing so.

“We have made a start. I don’t pretend, I’ve never pretended that we were going to get there in one go.

“But what we can say is that, now we’ve halved inflation, the economy has turned a corner, we can focus on the long-term growth, raising incomes and salaries for families up and down the country.”

Asked whether income tax could be cut in the spring budget, Hunt said: “What I will do is exactly what I’ve done this time. If it is responsible to do so, if we can do so without increasing borrowing, then of course as a Conservative, I would like to bring down the tax burden.

“But I will only do so in a responsible way and one that doesn’t fuel inflation after the great success we’ve had in halving it.”

Jeremy Hunt has paved the way for a renewed period of “implausible austerity” after announcing deep real-terms cuts to public spending after the next election.

Hunt has projected day-to-day departmental expenditure increasing by an average of just 0.9% in real terms from 2025, with public investment spending fixed in cash terms, leaving a future government with a “stark choice” between further tax rises or making deep cuts to public services.

The Office for Budget Responsibility (OBR) appeared to cast doubt on the feasibility of the government’s tight post-election spending plans in its assessment of the chancellor’s autumn statement.

The OBR warned persistently high inflation would slash the real value of government departmental spending by £19.1bn by 2027-28, compared with its estimates from the spring.

The watchdog made clear that would “present challenges”, including for local councils. It pointed to the fact that demand for public services is expected to grow and warned that local authorities’ abilities to borrow and spend would be constrained.

Two thirds (67%) of UK adults support the National Insurance rate cut from 12% to 10% announced in today’s Autumn Statement, with just one in eight (12%) opposing it, according to a snap reactions poll from Savanta.

The poll, conducted in the wake of the Chancellor’s statement to the House of Commons, finds a majority (58%) broadly support the package of policies announced by the Chancellor today, including almost three-quarters (72%) of those that voted Conservative in 2019.

However, despite the popular package announced today, almost half (49%) of all UK adults disagree with the Chancellor’s assertion that the government’s economic plan for the country is working, including a third (35%) of 2019 Conservative voters.

Speaking in a pre-recorded interview on Peston, which airs on ITV1 at 10.45pm today, Chancellor Jeremy Hunt MP admitted his new measures for growth would take a long time to kick in.

“The supply side measures, the measures that will boost investment in the economy by businesses, which is the way we get productivity, salaries, living standards up, they will take a decade to happen.”

Asked about the OBR downgrading its prediction for the UK’s growth rate to 1.6 percent, Hunt implied it had been too optimistic previously, saying: “Well, in fairness, the OBR were the most optimistic of all the forecasters. They’ve just changed their growth rate to the average of other forecasts.”

Christine Espley, a self-employed 61-year-old chef and caterer from Cirencester, has been unable to work since the summer because of extreme mobility issues. She has been waiting 47 weeks for a hip operation and fears she may lose her small benefit income because of planned changes to the welfare system.

People with mobility and mental health problems will be asked to work from home or lose benefits as part of what a UK government minister described this week as doing “their duty”. The chancellor, Jeremy Hunt, doubled down on the controversial policy in his autumn statement on Wednesday, claiming that the government’s so-called back-to-work plan would help nearly 700,000 people with health conditions find work.

In December last year, Espley was referred to a consultant who agreed that hip replacement surgery was necessary. “I’ve been waiting for 47 weeks,” she said.

Jeremy Hunt says it will 'take time' to reduce overall tax burden

Chancellor Jeremy Hunt said he accepted it is “going to take time” to reduce the overall tax burden.

The senior Conservative made the comment when it was put to him that taxes for some people would still rise due to tax thresholds remaining frozen, despite national insurance being cut in the autumn statement.

He told Sky News: “If you’re trying to say that it is going to take time to get taxes down to the levels they were, then I agree.

“But what I said was that, when it was responsible to do so, when it wouldn’t affect inflation, I would make a start.

“We have done that today and we are a party that believes that, if we want to grow the economy, then we need to have a lightly taxed economy.

“And we have made a step which, by the way, for someone on average earnings is going to be about £450, so it is not insignificant.”

Updated

Jeremy Hunt has gone from “hero to zero on social care”, according to campaigners who branded the absence of any new funding commitments to the struggling sector “shameful”.

The only mention of social care in this week’s autumn statement was to “reaffirm” the commitments made at the 2022 statement, when the government pledged to make available up to £14.1 billion for the NHS and adult social care.

Age UK noted the 2019 pledge by then-prime minister Boris Johnson to “fix the crisis in social care once and for all” and said Wednesday’s statement was “a reminder of how desperately short the government has fallen”.

The Carers Trust said it was “shameful” than none of 110 measures announced by the Chancellor “gets anywhere near easing a social care crisis that is causing so much suffering for so many”.

Carers UK described it as “bitterly disappointing that the government has – yet again – failed to acknowledge the devastating impact the lack of funding for health and social care services is having on millions of unpaid carers supporting older and disabled family members”.

Meanwhile, the Children’s Charities Coalition, which includes Barnardo’s, The Children’s Society, National Children’s Bureau and NSPCC, said young people are being “left behind in the UK” as they urged a significant investment in children’s social care.

George Osborne says Hunt has now made it easier for Sunak to call election in May

George Osborne, the Conservative former chancellor, thinks Jeremy Hunt’s autumn statement is partly about making a May general election an option. But Osborne does not necessarily think it will happen. This is what he said today on his Political Currency podcast with Ed Balls.

A lot of people … are going to conclude that [this makes a May election more likely.] And for this reason, [Hunt has] delivered a tax cut and he’s insisted that it’s taking effect from January. In other words, you’re going to start to feel the effects by May.

He’s not cut income tax, which leaves open a cut in income tax in a spring budget, and the Conservatives now know, if the forecasts are right, that they’re not going to be fighting the election in the autumn against a backdrop of an improving economy and falling inflation. In fact, things are going to feel pretty stagnant next year.

I had already detected and picked up talk of potentially an earlier election. At least as an option. Because they’ve got other issues as well. The Rwanda judgments and all of that. The longer they leave it might make it worse.

Personally, I think any prime minister may think they might want to go to the country in May. But when they are 20-odd points behind in the polls and assuming that hasn’t changed dramatically by May, they’re going to go, ‘maybe I’ll wait till the autumn or maybe even wait till the beginning of 2025’ ….

But I’ll tell you what Jeremy Hunt is doing. He is following the Lynton Crosby law, which is: you can’t fatten the pig on market day. Lynton Crosby is the Tory election strategist of previous elections who told us as MPs – I remember I was a pretty young MP in 2005 – that you can’t just fire all your ammunition at the general election, you have to make your party attractive and you need to make people feel the benefits of your policies in the many, many months in the run up to that election.

So I think Jeremy Hunt is opening the door to a May election, even though I think it’s unlikely Rishi Sunak will walk through it.

That’s all from Graeme Wearden and me for today. Nadeem Badshah is now taking over.

The New Economics Foundation have calculated that the poorest quarter of households will be £210 per week short of an acceptable standard of living by April 2024.

NEF warns the measures announced by the Chancellor today fail to protect those who are struggling the most.

Since April 2022, they say, the gap to an acceptable standard of living will have grown by £40 per week for the poorest quarter of households.

This is based on the minimum income standard (MIS), a measure of what people consider to be an acceptable standard of living.

Updated

Jeremy Hunt did not announce the removal of VAT on period pants in his speech. But it’s in the autumn statement. “The government will extend the scope of the current VAT zero rate relief on women’s sanitary products to include reusable period underwear from 1 January 2024,” the Treasury says.

Here are some of the key charts from today’s autumn statement:

Today’s autumn statement was the Conservative government’s first major attempt to claw back a 20% deficit with Labour in the polls, say analysts at Investec, the financial services firm, as “a probable General Election looms in October next year”.

But they warn that Hunt may have little extra firepower left for the next budget in March.

In a note titled Autumn Statement reaction - The Hunt for a blue October, they say:

In a somewhat different version of Groundhog Day, Mr Hunt will have to go through this all again in the spring when he presents his main Budget.

How much pressure he comes under to cut taxes again is of course unknown, but it is difficult to envisage him with much more firepower.

Overall the Chancellor and the Conservative benches were looking ebullient in parliament today. Time will tell if today’s Autumn Statement and any other policy measures help regain the initiative ahead of the next election.

Rishi Sunak and Mel Stride offered Jeremy Hunt congratulations as he sat down.

Rishi Sunak and Mel Stride congratulating Jeremy Hunt after he delivered his autumn statement in the Commons.
Rishi Sunak and Mel Stride congratulating Jeremy Hunt after he delivered his autumn statement in the Commons.
 Photograph: Jessica Taylor/UK PARLIAMENT/AFP/Getty Images

Updated

The City of London has reacted much more calmly to today’s autumn statement than it did after Kwasi Kwarteng’s mini-budget of September 2022.

Bond prices have fallen a little today, after traders learned that Jeremy Hunt was spending most of the fiscal windfall he received from lower borrowing this year.

The Debt Management Office said today it planned to sell £237.3bn of gilts (UK debt) this year, higher than the £222.8bn expected by traders.

That has pushed up bond yields (the interest rate on the debt), as investors anticipated more gilts hitting the market than expected.

The pound has dropped by around half a cent against the US dollar to $1.2483, and has also slipped against the euro.

Richest 20% of households will gain almost half money spent on Hunt's tax cuts, IPPR thinktank says

The rich will benefit most from the cuts to national insurance announced today, the IPPR thinktank says. That also mean people in London and the south-east of England will gain most.

The left-leaning thinktank has issued a briefing illustrating this with three charts.

This one shows which households gain the most. It says the richest 20% will get almost half of the money available. Or, as it puts it, “for every £100 Hunt spent on personal tax cuts, £46 will benefit the richest fifth of households. Only £3 of every £100 of tax cuts will go to the worst-off families.”

Distributional impact of tax cuts
Distributional impact of tax cuts Photograph: IPPR

This one shows how much workers on different salaries will gain, both in cash terms per week and as a proportion of their post-tax income. The best paid people gain most in cash terms, and people in the top half for earnings, but not at the very top, gain most proportionally.

Distributional impact of tax cuts
Distributional impact of tax cuts Photograph: IPPR

And this chart shows how gains are spread geographically. It says:

London and the south-east of England are the biggest winners with an average annual gain per working age person of £316 and £290 respectively. Those in the north-east, Yorkshire and the Humber, and Wales see the smallest benefit, with average gains of £192, £214, and £211 respectively.

How tax gains in autumn statement are spread geographically
How tax gains in autumn statement are spread geographically Photograph: IPPR

Commenting on the findings, Henry Parkes, principal economist and head of quantitative research at IPPR, said:

There are many reasons why now is not the time for tax cuts; but even less so when the principal beneficiaries of today’s changes will be the best off households, rather than those worst hit by the continuing cost-of-living crisis. They also disproportionately benefit the richest areas of the country most – the opposite of levelling up.

More broadly these tax cuts are accompanied by plans to make deep cuts in public services and investment in the future - an approach that commands very little support from the public and will make it harder, not easier, for the UK economy to grow as it needs to.

Hunt thanks Tory MPs pledging not to vote for tax rises that increase overall tax burden

More than 30 Conservative MPs have backed a campaign led by Sir Jake Berry, a former party chair, which involves them signing a pledge not to vote for new taxes that increase the overall tax burden.

Jeremy Hunt has now written to Berry assuring him that there is nothing in the autumn statement that goes against this. He says the OBR has confirmed that the measures in it will lower the tax burden. The Sun’s Harry Cole has posted the letter on X.

Hunt letter to Jake Berry over “tax pledge” signed by 20+ MPs threatening to vote against new taxes:

“I can confirm that AS contains no new taxes that raise tax burden and indeed the OBR has confirmed that the package of measures will lower tax burden by 0.7 ppt in 28-29.”

By “lower the tax burden”, Hunt means stop it going up even by ever more than it is already going up. (See 1.45pm.)

In his letter, Hunt also thanks Berry for his campaigning “on this important issue”. Normally a chancellor would not be happy about backbench MPs giving pledges to voters that could in theory lead to them refusing to support a government budget. But Hunt and Rishi Sunak are not strong enough to pick a fight with the many Tories backing the campaign. They also want the overall tax burden to fall (although they have not themselves committed the government to never again putting taxes up).

UPDATE: Cole subsequently posted this on X about Berry’s reaction.

Berry to the 36 tax pledge MPs on Whatsapp:

“note that the tax burden will (sadly) rise, however, that was voted on in the last budget. The value of the pledge is it says ‘never again! ... I think we can all afford a gentle pat on our own back for having stopped the rot! Jake”

Updated

Hunt accused of prioritising pints over childcare

The rabbit out of the hat in the last budget was the surprise announcement of a £4bn funding boost to fund subsidised childcare for parents struggling to pay some of the highest costs in the OECD.

But today, early years providers said today’s budget “prioritised pints over childcare” – referencing the fact that pubs and other smaller hospitality, leisure and retail businesses were given a tax break, but not 60,000 early years providers – and undermined the stability of the sector.

Sarah Ronan, director of the Early Education and Childcare Coalition, said the uplift in the minimum wage was welcome for low-paid staff in the sector but would endanger providers unless the hourly rate they are paid by the government to provide “free” childcare hours to parents were significantly increased.

Ronan said:

“Failing to do that is placing providers in a perilous financial position and is likely to lead to more closures at a time when the government should be shoring up the sector,”

Joeli Brearley, CEO of the campaign group Pregnant Then Screwed, said:

“The irony of an autumn statement on Equal Pay Day which prioritises pints over childcare was not lost on us. The government clearly thinks the crumbs they offered parents during the Spring Statement is enough - it is not.

Unfortunately, we won’t see the impact until April when parents struggle to access the childcare funding they were promised, because there are no places available.“

Updated

OBR says almost half of Hunt's autumn statement 'headroom' explained by fuel duty rise that's unlikely to happen

The autumn statement assumes that, at the end of the forecast period (2028-29), the Treasury will have “headroom” (spare cash) worth £13bn, or 0.4% of GDP. Jeremy Hunt boasted about this in his speech, saying:

We therefore meet our fiscal rule to have underlying debt falling as a percentage of GDP in the final year of the forecast, with double the headroom compared to the OBR’s March forecast.

But the OBR in its report says that almost half of this “headroom” is explained by a forecast rise in fuel duty that will probably never happen.

It also suggests that £13bn is not much to boast about anyway and that, without the proposed spending cuts deemed unrealistic (see 3.02pm), Hunt would not have any headroom at all. It says:

Headroom of £13bn is considerably lower than the average of £29.7bn that chancellors have held against their fiscal rules since 2010. Our forecast again incorporates £6.2bn of extra revenue in 2028-29 from the government’s stated policy of increasing fuel duty rates in line with RPI inflation and the reversal of the ‘temporary’ 5p cut. If, like all chancellors since 2011, rates are instead held at the current rate then more than 43% of the headroom in 2028-29 would be removed and debt would no longer be falling in 2027-28. The current headroom is also less than it would have cost to maintain the real value of departmental spending at the same level as in our March forecast.

Updated

The alcohol and pubs industries have toasted measures in the autumn statement aimed at providing some relief to the struggling sector.

The chancellor, Jeremy Hunt, froze alcohol duty and extended 75% business rates relief for hospitality and leisure firms, prolonging a measure initially introduced to help an industry that was hit harder than most by social distancing and lockdowns during the pandemic.

The tax break was due to end on 1 August, fuelling fears of a sudden increase in costs that would have been nearly £13,000 a year for the average pub against a backdrop of rising closure rates. Relief will now last for another year.

Hunt also froze the small business rates multiplier, the methodology used to calculate bills for the tax.

The British Beer & Pubs Association said the measures would save the sector £350m a year, while the Wine & Spirits Trade Association called the duty freeze in particular a “huge relief”.

Nick Mackenzie, chief executive of pubs and brewing company Greene King, said the measures would “help provide vital respite’ to pubs struggling with high costs in other areas.

However, he and others in the pub industry highlighted concerns about rising staff costs and the ongoing pain caused by inflation.

Updated

Jeremy Hunt has handed “implausible plans to cut public spending” (see earlier post) to the winner of the next election, says the Resolution Foundation.

In their rapid analysis of the autumn statement, Resolution say that pre-election giveaways have arrived early with the biggest tax cuts since 1988 (if you ignore Liz Truss’s proposals, which were largely abandoned).

But even so, tax as a share of GDP is still set to rise by 4.5 percentage points (or £4,300 per household) between 2019-20 and 2028-29, they calculate.

Torsten Bell, chief executive at the Resolution Foundation, said:

“Today the chancellor used an inflation-driven surge in tax receipts to go early on pre-election giveaways – announcing the biggest package of tax cuts since 1988. In doing so, the chancellor has rightly prioritised workers’ earnings and firms’ investment plans. Raising the local housing allowance will also help 1.6 million households struggling with surging rents.

“But the truth is taxes are up not down. Today’s cuts are dwarfed by tax rises already under way. By the end of this decade taxes are set to be up by the equivalent of £4,300 per household compared to 2019.

“Worse, the giveaways announced today are funded by handing whoever wins the next election implausibly large spending cuts. Tax cuts to boost business investment are welcome, but undermined by plans to cut public investment by over a third – it’s hard to think of a more anti-growth policy.”

Updated

Growth in take-up of electric cars slashed

The OBR has radically reduced its expectations for the take-up of electric vehicles in the UK over the next seven years, and warned that the government’s decision to delay the ban on new petrol and diesel car sales from 2030 to 2035 may dissuade car buyers to go electric.

The OBR also points to the increased cost of financing purchases and the smaller difference in EV running costs compared with fossil fuel cars.

Its latest forecast says just 38% of new vehicles sold in the UK in 2027 will be electric, down from the 67% it forecast in March.

Growth in EV sales has already slowed, partly due to higher electricity prices and lower pump prices for petrol cars, as well as higher interest rates.

The OBR now expects uptake to track the ZEV mandate, which forces manufacturers to sell a certain proportion of zero-emission vehicles, rising to 80% in 2030.

The prolonged used of dirtier cars will bring in slightly more fuel duty to the government – an average £700m extra a year on the new forecast.

Updated

Hunt today pledged £520m for “transformational manufacturing investments” in the life sciences sector from 2025-26.

Two research & development tax relief schemes will be merged next April to simplify the system, and within this the rate at which lossmaking companies get taxed will be reduced from 25% to 19% .

This was welcomed by businesses, although subcontractors hiring R&D staff could lose out.

James Sheppard, UK & Ireland managing director at the lab and office provider Kadans Science Partner, said:

“We welcome the announcement from the chancellor that the government plans to progress its proposed Mansion House Reforms to pension funds announced earlier this year hoping to unlock £25bn for innovative companies in the UK by 2030. The historic lack of investment in life sciences infrastructure in the UK has meant that the industry hasn’t been sufficiently supported to reach its growth potential.

These new measures, including further tax reform for loss making SMEs, are a welcome step-change if the UK is to reach its goal of becoming a life sciences superpower.

IFS: this is not a recipe for good management of the public finances

Paul Johnson, the director of the IFS, has just issued his early analysis of the autumn statement.

Johnson starts by “getting a few things straight”:

The public finances haven’t meaningfully improved. The growth outlook has weakened. Inflation is expected to stay higher for longer.

Higher inflation pushes up tax receipts by more than it pushes up spending on debt interest or social security benefits; but rather than use the proceeds to ease the ongoing ‘fiscal drag’ effects of threshold freezes, or to compensate public services for higher costs, the chancellor opted to cut other taxes.

His immediate cut to national insurance will put more money into workers’ pockets when it comes in but won’t be enough to prevent this from being the biggest tax-raising parliament in modern times.

Johnson then warns that announcing immediate and certain tax cuts in response to highly uncertain changes in assumptions about the UK’s medium-term economic prospects is “does not feel like a recipe for good management of the public finances”.

He says:

His [the chancellor’s] so called “headroom” against a rather loose fiscal target is minuscule and the OBR could easily take it away in the Spring Budget with some very small changes to forecasts. What will he do then?

Certainly, whoever is Chancellor after the next general election is going to have very little room for manoeuvre.

Having said all that, Johnson concludes, Hunt has chosen a “pretty sensible set of taxes to cut”.

Making full expensing permanent rather than temporary is welcome.

Cutting rates of national insurance is preferable to cutting rates of income tax and may help boost employment. But these tax cuts have been ‘paid for’, in effect, by letting fiscal drag become even more of a tax rise than previously expected and through a bigger squeeze on the real-terms value of public service budgets and an even bigger squeeze on public investment, which is frozen in cash terms.

There’s a material risk that those plans prove undeliverable and today’s tax cuts will not prove to be sustainable.”

Updated

Home secretary described Stockton as ‘shithole’ during PMQs, MP claims

The Labour MP Alex Cunningham has claimed that his constituency was described as a “shithole” by the home secretary, James Cleverly, during prime minister’s questions. Ben Quinn has the story.

Lib Dems claim fiscal drag 'stealth tax' makes autumn statement a 'Hunt hoax'

The Liberal Democrats have described the autumn statement as a “Hunt hoax”. In a statement, Ed Davey said the government was implementing a £200bn stealth tax raid and he said the amount people would gain from the national insurance cut announced today would not compensate for the extra tax they were paying because of allowances and thresholds being frozen. Davey said:

This autumn statement was a Hunt hoax. Buried in the small print is a massive stealth tax raid that will drag millions into paying a higher rate in the coming years.

The British people will rightly be furious at this deception, as they are forced to pay the price for Conservative chaos through years of unfair tax hikes.

It is high time that this Conservative government came clean about just how much money they are taking out of hard-working families’ pockets.

The Lib Dems says that, even after the national insurance cut announced today, someone earning £35,000 a year will still be paying an extra £400 in tax in 2024-25. And a higher rate taxpayer will still be paying an extra £1,200 a year, the Lib Dems says.

To justify calling it a £200bn stealth tax, the Lib Dems aren’t looking at the extra revenue raised annually (the standard methodology), but are instead adding together all the annual figures for stealth tax revenue in the chart published by the OBR. See 2.30pm.

UK still facing largest fall in real living standards since records began in the 1950s

Living standards are still heading for the worst fall in at least seven decades, despite the cut to national insurance rates announced today, the Office for Budget Responsibility says.

Living standards, as measured by real household disposable income (RHDI) per person, are forecast to be 3.5% lower in 2024-25 than their pre-pandemic level.

While this is half the peak-to-trough fall the fiscal watchdog expected in March, it still represents the largest reduction in real living standards since ONS records began in the 1950s.

The OBR explains:

RHDI per person recovers its pre-pandemic level in 2027-28, something not achieved in our March forecast, as resilient labour incomes begin to steadily outmatch slowing inflation.

We estimate that the reduction in the rate of NICs announced in the autumn statement will boost real household incomes by around 0.5% at the end of the forecast.

Resolution Foundation’s Torsten Bell says Conservative MPs should be worried….

Updated

Q: How responsible was it of Jeremy Hunt to spend the windfall from higher inflation [which has lifted tax revenues]?

OBR chief Richard Hughes points out that the chancellor’s headroom to avoid breaching his fiscal rule [to have public sector net debt falling at the end of the forecast horizon] has risen to £13bn, from £6.5bn in March.

But, that’s partly because the target has now moved forward a year, to 2028-29.

Overall, Hughes says, the health of the public finances are broadly unchanged compared with March.

Updated

Q: With the UK’s national debt nearly 100% of GDP, could it cope with another crisis such as the Covid-19 pandemic?

OBR chief Richard Hughes tells today’s press conference that it all depends how interest rates reacted to a crisis – that would determine the government’s room for manoeuvre.

Hughes explains that when shocks hit everybody, rates on government borrowing tend to fall, which gives ministers some space to fund stimulus measures.

A worry would be a crisis that pushed up interest rates – such as one which resulted in higher energy costs, as that is inflationary.

Updated

The autumn statement amounts to be biggest “giveaway” package in a budget or autumn statement since 2010, excluding the Covid-related one, the OBR says. This chart from the OBR report illustrates this point.

Size of fiscal packages since 2010
Size of fiscal packages since 2010 Photograph: OBR

“Fiscal loosening” means, overall, the measure involves the Treasury “giving money away”, by cutting taxes or raising spending. “Fiscal tightening” is the opposite.

The March 2020 budget came before the Covid lockdown, but it included Covid-related stimulus measures worth £30bn.

The impact of the national insurance tax break will unfairly benefit men rather than women, Dr Mary-Ann Stephenson, director of the Women’s Budget Group (WBG) has warned.

The WBG has calculated that single mothers will gain an extra £76 a year from the changes to NICs compared to £248 a year for lone fathers and £437 a year for households with two parents.

They argue that with the number of single parent households living destitution tripling since 2019, single parents are the most likely to be hit by the benefit cap and in need of local services like childcare and health services.

“We are heading into a winter that will be even tougher than last year,” said Stephenson, who added:

Cost of living payments are ending, but prices – in particular food, energy and housing costs – remain very high. Women are the shock absorbers of poverty and continue to bear the brunt of the cost of living crisis.

A chart showing the impact of changes to national insurance

Updated

Q: Is the chancellor getting as big a ‘bang for his buck’ as he’d like from his measures, asks our colleague Phillip Inman at the OBR’s press conference.

Professor David Miles, a member of the OBR’s budget responsibility committee, replies that increasing the underlying supply potential of the economy is very hard. You need to push very hard, just to move it a little bit.

Miles says the changes to capital allowances, and the national insurance rate cuts, add “a fraction of 1%”.

You could look at that and think it’s not a lot, Miles says, but it’s partly because the full impact of making full expensing permanent falls beyond the OBR’s forecast horizon.

Miles warns:

It’s actually very difficult for governments to – in a relatively short period like a few years – make a meaningful impact on growth.

Updated

Hunt's big tax cuts only possible because future government spending held down, explains OBR

Jeremy Hunt’s controversial decision not to announce any major departmental spending increases to reflect higher inflation has given him the firepower for today’s tax cuts, the Office for Budget Responsibility shows.

The head of the OBR, Richard Hughes, has explained to reporters that Departmental Expenditure Limits (DELs) make up 40% of public spending.

They are set periodically, and the next review is not until after the general election.

This means that for the years beyond 2024-25, the Treasury has simply told the OBR that departmental spending will rise by £5bn per year.

That, Hughes explains, means that departmental real spending power has been eroded by £19bn compared with the March forecast.

Speaking at a press conference now, Hughes says:

The eagle-eyed amongst you will recognise that is roughly equal to the amount the chancellor spent on the two big tax cuts in this fiscal event.

Had he sought to preserve the real spending power of public services, in the face of higher inflation over the next five years, that would have left him with relatively little to spend on other measures.

As we flagged in the previous post, economists say the Treasury’s spending assumption is simply unrealistic.

Hughes says that the pressures on departmental spending are rising, due to rising inflation and policy changes such as the NHS workforce plan, or the aim to raise defence spending as a share of GDP.

Updated

Experts claim Hunt's plan for £19bn real terms cut in proposed government spending 'implausible'

The OBR says that Jeremy Hunt’s plans for the future assume that, in real terms, annual govenrment spending by 2027-28 will be £19.1bn lower than it was assumed at the time of the March budget. Economists say this is not realistic.

The Treasury has not said exactly how much each department will be getting that far ahead. But the OBR says that, given some departmental spending is in effect protected, in unprotected departments day-to-day spending will fall by 2.3% in real terms in 2025-26. If defence spending goes up to 2.5% of GDP, as the government has promised, and if aid spending returns to 0.7% of national income, unprotected spending would have to fall by 4.1%, the OBR says.

This chart from the OBR report illustrates these numbers.

Breakdown of planned future government day to day spending
Breakdown of planned future government day to day spending Photograph: OBR

The OBR says, diplomatically, that this would “present challenges”. It says:

Delivering a 2.3% a year real terms fall in day-to-day spending would present challenges. Performance indicators for public services continue to show signs of strain, for example the backlog in crown courts reached a record high of 65,000 in August 2023 and eleven ‘section 114s’ notices have been issued by local authorities since 2018, compared to two in the preceding 18 years. The Institute for Government’s recent report found that performance in eight out of nine major public services has declined since 2010, with schools the exception. Longer-term pressures on public spending, such as from climate change and an ageing population, are also building.

Ian Mulheirn, an economist at the Resolution Foundation thinktank, is a lot blunter. He says these spending plans are implausible.

OBR draws out completely implausible implications -real terms cuts of 2.3-4.1%/yr after 2025 for unprotected departments 🤯

What’s the plan here? Abolish the criminal justice system and public transport maybe?

This should be the debate, not ‘have they really cut taxes?’

Central story of the #Autumnstatement is that a (nominal) £21bn/yr tax cut has been funded from (real) £19bn/yr cut in public services

This isn’t sustainable and whoever wins the election will have to raise those taxes again – and then some – just to keep the wheels on

This is from Daniel Tomlinson from the Joseph Rowntree Foundation thinktank.

The government has cut spending plans by £19bn a year compared to the previous forecast, even as pressures on public spending mount.

Not a serious way to run a budget.

And this is from Chris Giles from the Financial Times.

The key point of the autumn statement from @OBR_UK

Public finances better because public spending is not rising with higher inflation

These proposed spending figures suggest Hunt doesn’t expect his party to be winning the next election. They also support the argument made by Rafael Behr in his column today about Hunt setting a trap for Labour.

Updated

OBR: inflation to remain higher for longer

The OBR’s verdict on inflation is blunt: it expects inflation to remain higher for longer.

It now takes until the second quarter of 2025 for the CPI inflation rate to return to the 2% target, more than a year later than forecast in March.

Inflation is also more domestically fuelled, the OBR says. Although gas prices have fallen faster than expected, stronger nominal wage growth means people have more money to spend.

From a peak of 10.7% in the last quarter of last year, CPI inflation is now expected to fall to 4.8% in the final quarter of 2023.

A chart showing the latest inflation forecasts
A chart showing the latest inflation forecasts Photograph: OBR

This higher inflation means that the financial markets expect interest rates to be around 1 percentage point higher than they did in March.

The OBR says:

Bank rate reached a 15-year high of 5.25% in August 2023, around 100 basis points above our previous forecast. And markets now expect bank rate to settle at 4% by the end of the forecast, rather than fall to 3% as we assumed in March.

Updated

Frozen tax allowances will lead to almost 4m more people paying tax by 2028-29, OBR says

The OBR report contains fresh figures on the impact of “fiscal drag”. It is well known that the government’s decision to freeze tax allowances and thresholds for six years means that large numbers of people are being brought into higher tax brackets, or into paying tax in the first place, but the latest figures are still quite striking.

The OBR says:

Between 2022-23 and 2028-29, this set of threshold freezes means nearly 4 million additional individuals will be expected to pay income tax, 3 million more will have moved to the higher rate, and 400,000 more onto the additional rate. This represents an increase in the number of taxpayers in each band of income tax – 11% for the basic rate band, 68% for the higher rate and 49% for the additional rate. Relative to our March forecast, this is a respective increase in 2027-28 of 830,000, 900,000, and 43,000.

The OBR also says that, by 2028-29, these policies will have raised an extra £44.6bn for the Treasury.

Impact of fiscal drag
Impact of fiscal drag Photograph: OBR

Updated

Chancellor’s business rates measures are ‘smoke and mirrors’

Retailers and hospitality businesses were disappointed by the chancellor’s plans to increase business rates for larger businesses, which will add almost £1.7bn to bills next year according to analysts.

There was relief that the rates discount of 75% for smaller hospitality, leisure and retail businesses operating in premises with a rateable value of less than £51,000 is to be extended by one year, benefiting about 1m businesses. A further 740,000 will continue to benefit from 100% small business rates relief.

However, around 220,000 ratepayers will see their bills rise in line with September’s CPI figure of 6.7%, according to analysts at Gerald Eve, costing them £1.66bn next year and £8bn over the next five years.

The British Retail Consortium trade body described the business rates decision as a “disappointing announcement”.

Kate Nicholls, the head of UK Hospitality, which represents thousands of pubs, restaurants and cafes, said many small businesses operated from larger standard rated premises and so would not benefit from the relief.

Simon Green, head of business rates at Gerald Eve, said:

“The Chancellor’s business rates measures are ‘smoke and mirrors’. They are designed to win him plaudits for protecting businesses from rates increases whilst still raking in an extra £8bn in rates revenue.

“Around 89% of all properties will indeed benefit from the freeze announced, but it is larger businesses – paying rates for some 220,000 properties – which pay over 75% of all rates next year, upon which this stealth tax will fall.”

Updated

Britain’s biggest green energy investors have enjoyed a share price bounce after the chancellor’s autumn statement, which has promised to accelerate £90bn in business investment over the next 10 years by making it easier to move ahead with multibillion-pound projects.

Shares in SSE, National Grid and the Copenhagen-listed Ørsted climbed as Jeremy Hunt set out plans to speed up planning consents, cut the wait for new grid connections and offer some of the most generous tax breaks of any developed economy for investors.

The companies, which are planning to make multibillion-pound investments in the UK’s green energy transition, are expected to benefit from the Treasury’s promise to make “full expensing” permanent in what Hunt described as “the largest business tax cut in modern British history”.

Shares in National Grid and SSE, which plans to invest £40bn in clean energy over the next 10 years, climbed to four-month highs after Hunt set out his plans. SSE’s share price climbed by almost 1% to 1,806p a share while National Grid’s share price climbed by nearly 0.5% to 1,043p a share.

For Denmark’s Ørsted the tax breaks could tip the balance in its decision on whether to move ahead with its £8bn plan to build the world’s biggest offshore windfarm off the Yorkshire coast.

Its plan to develop the Hornsea 3 project was plunged into doubt due to a recent surge in offshore wind supply chain costs which led the company to cancel two major offshore wind projects off the US coast. Ørsted is expected to make a final decision on the project before the end of the year.

Updated

Unemployment is expected to rise by more than forecast at the March budget.

The Office for Budget Responsibility’s central forecast is that unemployment rises to 1.6 million people (4.6% of the labour force) and peaks in the second quarter of 2025.

That peak is 85,000 higher than expected in March – when it was expected to be 4.4% –and comes a year later than expected.

The OBR predicts that demand for labour will weaken, due to slower growth and the rise in interest rates.

Unemployment then falls back to its assumed structural rate of 4.1% by the forecast horizon, as the bank rate falls and the spare capacity in the economy is taken up, the OBR adds.

Updated

You can read all the Treasury autumn statement documents on its website here.

Here is the main autumn statement green book. The key table, the scorecard showing how much all the measures will raise or cost the Treasury in the years going ahead, starts on page 81.

And here is the Office for Budget Responsibility’s assessment – its economic and fiscal outlook report.

Disappointing economic news: the OBR has revised down its estimate of the medium-term potential growth rate of the economy to 1.6%, from 1.8% at the March budget.

The revision is largely driven by a weaker forecast for the average hours an employee will work, which is now forecast to fall rather than remain static.

The OBR says:

This largely reflects our reassessment of the effect of demographic shifts in the composition of the working population toward younger and older age groups who work shorter hours on average.

The TUC say it’s a ‘damning judgement’ on the autumn statement:

Small print alert: UK house prices to fall in 2024

UK house prices are forecast to fall by 4.7% next year, the Office for Budget Responsibility’s new economic and fiscal outlook shows.

That follows an estimated 0.9% rise this year, with the OBR lifting its forecast for mortgage rates over the next few years.

The OBR says:

This would be consistent with the price of the average UK home reaching a low of around £266,000 at its trough in the final quarter of 2024.

All in all, from their high in the fourth quarter of 2022 to their low in the final quarter of 2024, nominal house prices are expected to decline by 7.6%.

As this chart shows, that’s a smaller fall than forecast in March.

A chart showing house price forecasts

The OBR then expects a slow recovery in house prices, but it will take until the second half of 2027 for them to reach their 2022 peak, they estimate.

Updated

Reeves says things might look fine to Sunak 10,000ft up in his helicopter. But on the ground people know the reality is different, she says.

She says 1.6 million families will have to remortage this year.

People are having to pay on average more than £200 a month, she says.

And in Hunt’s constituency the average increase will be £420 a month, she says.

Working people do not have that sort of money hanging around, she says.

Tory economic recklessness is not a thing of the past, she says. People are still paying the price.

She says the Tories voted against an amendment to the king’s speech last week which would have prevented a repeat of the mini-budget horror show (by banning fiscal announcements like that without an OBR assessment). They have not learned their lessons, she says.

At the election, the question will be simple. Do people feel better off? Do services work better? Does anything work better? Working people are worse off under the Tories.

Taxes are up, debt is up – and their time is up too, she says.

Updated

Sir Nicholas Macpherson, the former top civil servant at the Treasury, has posted that chancellor Hunt is funding his national insurance cut by raising more money through income tax – in a reversal of decades of fiscal policy.

UK tax burden still heading to postwar high

For all the talk of tax cutting from Jeremy Hunt, the UK’s tax burden is still forecast to increase to a postwar high!

The Office for Budget Responsibility says that the tax changes in this autumn statement reduce the tax burden by 0.7% of GDP.

However, that burden rises in every year to a postwar high of 37.7% of GDP by 2028-29.

The OBR says that income tax increases explain most of the increase in this forecast, rising from 10.2% of GDP this year, to 11.3% in 2028-29.

That is driven by the freezing of income tax thresholds – which means fiscal drag will put more people into higher bands as their nominal wages increase.

The OBR says:

By 2028-29, frozen thresholds result in nearly 4 million additional workers paying income tax, 3 million more moved to the higher rate, and 400,000 more paying the additional rate.

VAT and corporation tax also rise from 6.4% and 3.4% of GDP this year to 6.5% and 3.6% of GDP in 2028-29.

The OBR says this is because “consumption shifts back towards standard VAT-rated goods and companies face the full-year effects of the rise in the main corporation tax rate”.

Updated

Reeves welcomes the extra money for tackling antisemitism.

She says Hunt calls this an autumn statement for growth. But Labour has led the way on this, she says. She says Hunt’s plan is just a “cover version” of hers.

She says Labour would go further on pension fund reform.

And she says Hunt is copying plans already announced by Labour on planning reform.

She also says Labour said full expensing should be made permanent.

Reeves says some NHS trusts are still using fax machines. The Tories have failed to invest in the health service, she says.

Reeves says, to grow the economy, more people need to be in work.

She says Labour believes that, if people can work, they should work.

It has called for reform of the work capability assessment, she says.

Too many people are out of work because of long-term health isssues, she says.

OBR: Chancellor has spent almost all his windfall

As Jeremy Hunt sits down, the Office for Budget Responsibility releases its assessment of the autumn statement.

And the topline is that chancellor Hunt has received a windfall of £27bn – and spent almost all of it.

That windfall comes because borrowing so far this financial year has been lower than expected, partly because high inflation has lifted tax receipts. But departmental spending budgets are not inflation-linked, so did not automatically rise in response.

The OBR says:

The economy has proved more resilient to the shocks of the pandemic and energy crisis than we anticipated. But inflation has also been more persistent and interest rates higher than in March.

Higher inflation boosts tax revenues but also welfare benefits while higher interest rates push up debt servicing. But because departmental spending is left largely unchanged, this delivers a net fiscal windfall of £27 billion.

The Chancellor spends virtually all of this on a 2p cut in NICs, permanent tax relief for business investment, and further welfare reforms, leaving debt falling by a narrow margin in five years.

Reeves says 177 economies are expected to grow more quickly than the UK over the next few years.

And next year the UK is forecast to have the slowest growth in the G7.

The UK is more world-following than world-beating.

Under Labour, the economy grew by 2% on average every year, she says. Under the Tories growth has been 1.5%, she says.

Updated

Labour's Rachel Reeves says NI cut will 'not remotely' compensate for tax increases already imposed by Tories

Rachel Reeves, the shadow chancellor, is speaking now.

She says the government’s plans are not working and people are “still worse off”.

She says she can remember when Rishi Sunak was arguing for an increase in national insurance. Labour opposed that plan then. Now Sunak is implementing a cut – which means he is arguing with himself, she says.

She says the public knows that today’s announcements are about a party wanting to hold on to power.

Ahead of today, the government had implemented tax increases equivalent to a 10% increase in national insurance.

So today’s 2% cut will “not remotely” compensate for those, she says.

Updated

Hunt says his decision to lower the main national insurance rate from 12% to 10% will save a worker on the average salary of £35,000 over £450 per year.

The average nurse will save £520, the chancellor says, while a typical police officer would save £630.

Hunt announces 2 percentage point cut to national insurance, coming into effect from January, worth £450 for average worker

Hunt turns to tax cuts.

He says he promised to only cut taxes when that was affordable, and possible without putting up inflation.

Today the OBR says that is possible, he says.

High taxes disencourage work, he adds, and taking into account national insurance, people pay a 32% marginal tax rate.

National insurance will be cut, he announces.

He is going to cut the main rate for employee national insurance from 12% to 10%. He says 27 million people will benefit.

He says that is worth £450 for someone on average earnings.

Hunt says normally this could come in at the start of the tax year, in April. But instead he will introduce emergency legislation to bring this in from 6 January.

He says the OBR says this will lead to the workforce going up by 94,000.

The Treasury says:

From January employee national insurance contributions will drop from 12% to 10%.

That’s a £450 tax cut for the average worker earning £35,400.

Helping people keep more of the money they earn & making work pay.

Part of our plan to grow the economy.

Updated

Hunt confirms the increases to the national living wage announced yesterday.

Hunt claims Labour wanted to address poverty by tinkering with tax credits. But his party believes in getting people into work, he says.

Hunt says new welfare support and sanction measures will get 200,000 more people into workforce

Hunt says the government needs to back workers as well as businesses.

He says he wants to increase incentives to work.

He praises Mel Stride, the work and pensions secretary. He says Stride’s reforms build on universal credit. Those measures were opposed by Labour, he says.

He says 30 hours of free childcare for one- and two-year-olds was announced in the spring budget.

Today he is announcing measure for the long-term unemployed, and people who do not work due to sickness or disability.

Under the back-to-work plan, the sick note system will be changed, to assume that people can work. The work capability assessment will be changed. And more support will be offered of people going into work.

The government will ask for something in return, he says. If after 18 months of help, there will be mandatory work experience. And if people do not participate, the government will close the case and stop their benefits.

He says the OBR thinks this will get another 200,000 people into the workforce.

Labour wants to expand the workforce by immigration, he claims. He says his party wants to use workers from Britain.

Updated

Hunt says these measure will increase business investment by £20bn a year – almost 1% of GDP.

Hunt announces £11bn 'full expensing' tax cut for businesses

Hunt is now on full expensing. (See 10.36am.)

This will cost £11bn a year, he says.

But today it is affordable. Full expensing will be made permanent. It is “the largest business tax cut in modern British history”.

The Treasury says:

NEWS: Due to the success of full expensing we are making it permanent. This means that companies that invest in the UK will reduce their tax by up to 25p for every £1 they spend on plant and machinery.

Updated

Shares in NatWest have dropped, after Hunt said he would explore options to sell some of the government’s stake in the bank through a “retail share offer”.

The government is currently the largest shareholder in NatWest, holding 39.39% of its shares.

That stake dates back to the bailout of Royal Bank of Scotland (which rebranded as NatWest) after the 2008 financial crisis.

NatWest’s shares are down 1% at 205p, as City traders anticipate some of the government’s stake hitting the market.

Hunt joked that it was “time to get Sid investing again”, a reference to the 1980s campaign to persuade the public to take part in the privatisation of British Gas, as the Thatcher government flogged off much of the UK’s “family silver”.

Updated

Hunt announces tax cuts for self-employed worth £350 per year

Hunt says he is abolishing class 2 national insurance, which is paid by the self-employed. This will save them £192 per year.

Nearly 2 million self-employed people will benefit, he says.

And he says the self-employed also pay class 4 national insurance at 9%. That will go down to 8%.

Taken together, these measures will save self-employed workers £350.

Updated

Hunt announces further business rates discount for hospitality, retail and leisure, worth £4.3bn

Hunt turns to small businesses. He says he ran one once. Every big business started as a small one, he says.

He says SMEs want bills paid on time. The government will ensure firms bidding for government contracts have to pay their bills on time – with 55 days at first, and then within 30 days.

He says the 75% business rates discount for hospitality, retail and leisure is being extended for another year, at a cost of £4.3bn.

Hunt says £1bn of extra levelling up money was announced on Monday.

And there is £80m for projects in Scotland, Wales and Northern Ireland, he says.

Hunt says he announced plans for 12 investment zones – mini Canary Wharfs – in the spring.

He says tax reliefs for freeports and investment zones are being extended from five years to 10 years.

And he says he is announcing three more investment zones today in the West Midlands, the east Midlands and Greater Manchester.

These should bring in private investment of £3bn, and 65,000 jobs.

And there will be a new investment zone in Wrexham and Flintshire, he says.

Updated

UK growth forecasts downgraded for 2024, 2025 and 2026

The new GDP forecasts show that UK growth is stronger than expected this year, but weaker than previously expected in 2024, 2025 and 2026.

Here are the new forecasts, compared to the OBR’s forecasts at the March budget:

  • 2023: growth of 0.6%, up from a GDP fall of 0.2% forecast in March

  • 2024: growth of 0.7%, down from 1.8% growth forecast in March

  • 2025: growth of 1.4%, down from 2.5% growth forecast in March

  • 2026: growth of 1.9%: down from 2.1% growth forecast in March

  • 2027: growth of 2%, up from 1.9% growth forecast in March

  • 2028: growth of 1.7%

Although downgraded, these forecasts are still more optimistic than the Bank of England, though; it fears there is a 50-50 chance of a recession by the middle of next year.

Updated

Hunt says he is publishing plans to make available £4.5bn over five years to attract investment into strategic manufacturing sectors.

This will include money for electric cars and life sciences.

He says these investments will ensure the UK remains competitive in sectors where it already leads, and innovative in areas where it does not.

Hunt says the Barbie movie was filmed in Watford. He says he wants to ensure more films are made in the UK. The Treasury says on X.

Our creative sector is worth £126bn a year to the economy.

To boost global competitiveness, we will work with the industry to provide additional tax relief for visual effects expenditure - helping to attract more investment into the UK.

He announces changes to R&D tax relief.

Hunt says, based on the success of supercomputing centres in Edinburgh and Bristol, he will invest in more of these to make the UK an AI powerhouse.

Hunt says he will explore the options for selling off the government’s remaining shares in NatWest.

Hunt announces changes to the rules for pension funds.

And he says he will give workers the right to require new employers to pay pension money into an existing pension pot.

Hunt says the government is accepting all the recommendations in Lord Harrington’s report into foreign direct investment

Hunt says planning laws to be changed to make it easier to turn home into two flats

Hunt says it takes too long to improve infrastructure projects.

From next year, councils will be able to recover the full costs of planning applications – provided they meet prompt deadlines.

He says Starmer said he wanted to be a builder, not a blocker. But Labour blocked reform of nutrient neutrality (river pollution) rules, which, Hunt claims, will stop 100,000 extra homes being built.

He says plans are being announced to bust the planning backlog.

And the government will consult on a law to allow any house to be converted into two flats, provided the exterior is respected.

Here are the new estimates for the UK’s budget deficit, which Hunt rattled off briskly.

As you can see, borrowing is lower for most years than expected back at the March budget, and is hitting the second fiscal rule (that debt is below 3% of the economy) most years.

  • 2023-24: 4.5% of GDP, lower than the 5.1% of GDP ( £131.6bn) forecast in March

  • 2024-25: 3% of GDP, lower than the 3.2% of GDP (£85.4bn) forecast in March

  • 2025-26: 2.7% of GDP, lower than the 2.8% of GDP (£76.7bn) forecast in March

  • 2026-27: 2.3% of GDP, higher than the 2.2% of GDP (£63.5bn) forecast in March

  • 2027-28: 1.6% of GDP, lower than the 1.7% of GDP (£49.3bn) forecast in March

  • 2027-28: 1.1% of GDP

Updated

Hunt turns to skills.

The government has reformed schools, he says.

But 9 million adults still have low literacy or numeracy skills.

That is why the government has announced plans to reform A-levels, he says, introducing the Advanced British Standard.

Hunt says the UK has grown faster than many European economies since 2010.

Last year the OBR forecast a recession this year.

But the economy has grown instead, he says. It is 1.8% larger than it was pre-pandemic.

He reads out the growth forecasts.

To make those numbers higher, higher productivity is needed, he says.

He claims the 110 measures being announced today will boost business investment by £20bn a year.

Hunt says he expects to raise an extra £5bn over the forecast period by making sure everyone pays the tax they owe.

Hunt says he wants a more productive state. He wants public sector productivity to rise by at least 0.5% per year.

Over time the growth in public spending will be lower than the growth in the economy, he says.

Hunt announces new money for veterans. This is from the Treasury’s tweet.

Members of the armed forces put their lives on the line to safeguard British freedoms every day.

This is why we’re confirming an additional £10m to support veterans – helping to fund vital mental health services for veterans in their communities across the United Kingdom.

Updated

Hunt rattles through the debt figures.

He says debt will be falling, not just at the end of the forecast period, as the target says, but in most years too.

Updated

Hunt turns to borrowing, and says Labour will increase it by £28bn a year.

But borrowing is just a deferred tax on future generations, as Nigel Lawson says, he says.

He says Keir Starmer disagrees. He and Starmer have something in common, he says. They both wanted to make a Jeremy prime minister, he says.

Hunt says debt has been due to rise to almost 100% of GDP.

But now it is predicted to be 94% of GDP by the end of the forecast.

He reads out the precise figures.

The UK will continue to have the second lowest debt in the G7, he says.

Hunt: Inflation to hit 2% target in 2025

Hunt says that inflation is forecast to drop to 2.8% by the end of 2024, down from 4.6% recorded in October.

And it will drop to 2% (the Bank of England’s inflation target) in 2025, Hunt says.

But back in March, the Office for Budget Responsibility had estimated that inflation would fall to just 0.9% in 2024.

So this suggests inflation is more persistent than the OBR had expected back in the spring.

Updated

Hunt says the triple lock has been a lifeline for pensioners.

There have been reports that it might be uprated by a lower amount, ignoring the impact of bonuses on wage figures.

But from April next year the state pension will go up by 8.5% – which will be worth up to £900 a year, he says.

Hunt confirms he has frozen all alcohol duty until 1 August next year.

Hunt confirms housing allowance being increased

Hunt says he is increasing the housing allowance.

This will give 1.6 million people an extra £800 next year, he says.

Updated

Hunt says benefits will be uprated next year by 6.7%

Hunt says benefits will be increased by 6.7%, in line with September’s inflation figure.

He says he chose not to use the lower October figure, as some people speculated he might.

Hunt is now on the OBR forecasts.

He says the government is delivering on halving inflation, growing the economy and reducing debt.

He says the shadow chancellor did not mention inflation in her conference speech. His came first. So all she had to do was a bit of copy and pasting, he jokes.

Hunt expresses his horror at the murderous attack on Israelis on 7 October, and the subsequent loss of life on both sides.

He says he is giving up to £7m over the next three years to organisations like the Community Security Trust to tackle antisemitism.

Hunt says statement containes 110 measures to promote growth

Hunt says there are 110 growth measures in the autumn statement.

He will not go through them all, he says.

He says the OBR says these measure will raise investment, increase employment and raise GDP.

Updated

Jeremy Hunt claims economy 'back on track' as he starts autumn statement

Jeremy Hunt is making his statement now.

He starts by saying he comes with good news – it is his wife’s birthday, and she is looking younger every year.

He is turning to the statement, he says.

The government has taken difficult decision to put the economy “back on track”.

The economy has grown, and real incomes are working, he says.

He says others proposed a more short-term approach. But the government has not given the public sector unaffordable pay rises, it has not banned new oil exploration, and it has not promised £28bn extra annual borrowing.

Updated

Jeremy Hunt is about to start his autumn statement.

This, from ITV’s Robert Peston, illustrates the challenge he faces.

Daniel Zeichner (Lab) says people are cringing from Elon Musk’s latest outburst. What did the PM think he would learn from someone who took over a once-successful organisation and put it into a death spiral?

Sunak says it is surprising to see an MP for Cambridge disparaging technology. He defends the AI summit he organised.

Sunak claims government did take advice from scientists on eat out to help out scheme

Gareth Thomas (Lab) asks if Sunak was telling the truth when he told the Covid inquiry that he had taken advice from scientists about the eat out to help out scheme – when Sir Patrick Vallance told the inquiry that this was not the case.

Sunak says he will be giving evidence himself. But he claims the government did take advice on this from scientific advisers.

Updated

Andrew Western (Lab) says the government does not have a functioning asylum system. Will the PM disapply human rights laws to implement the Rwanda policy?

Sunak says small boat arrivals are down 33% this year.

Updated

Sunak claims 1.7 million fewer people are living in poverty.

(He seems to be referring to absolute poverty, not relative poverty – which makes this a misleading claim.)

Updated

Kevin Foster (Con) asks what the govenrment is doing about homelessness.

Sunak says the government is investing £2bn in this area.

Liam Fox, the former Tory international trade secretary, says peace requires freedom from fear and terror. Does the PM agree that only when all the people in the Middle East have these can we talk about peace in the region?

Sunak does agree.

Liz Saville Roberts, the Plaid Cymru leader at Westminster, expresses her condolences to the families of the four young men killed in the accident in Wales.

Will the government do something about unfair standing charges on energy bills?

Sunak says the government has already offered people help with energy bills.

Stephen Flynn, the SNP’s leader at Westminster, asks what will happen after the pause in fighting in Gaza is over. He suggests MPs should back a permanent ceasefire.

Sunak says the pause is a crucial first step. The government wants to see hostages released, he says. He thanks Qatar for its interventions.

Flynn says it is not a pause in the killing of children that is needed, but an end to their killing. Sunak should push for a permanent ceasefire, he says. And if he won’t, will he recognise the state of Palestine.

Sunak say the agreement shows it was not right to push for a unilateral ceasefire. That would have emboldened Hamas, he says. And he says the government supports a process leading to a two-state solution. And it wants the Palestinians to be strengthened. The government will recognise the state of Palestine “when it best serves the interests of peace”.

Updated

Starmer says Sunak is trying to blame the opposition for his own failures. He quotes the mum he spoke to this morning whose son is waiting for treatment. The suicide rate for 15 to 19-year-olds has doubled since 2010, he says. Politics can turn this around. Scrapping tax loopholes could fund thousands more staff, he says. He says that would give people their lives back, and enable people to go back to work. That’s Labour’s plan. Will Sunak back it?

Sunak says his is the first government to publish a long-term NHS workforce plan. He says Labour’s record was a “disastrous failure of workforce planning”. That was what the Labour-chaired health committee said, he says.

Starmer says that, on Sunak’s watch, 2.5 million people are now too sick to work, “with the majority also suffering from mental health issues”.

Can the PM tell us how many people are now waiting for mental health treatment, Starmer asks.

Sunak says “record funds” have been invested in services. But, he adds, NHS strikes have led to thousands of cancelled appointments.

In response to Sunak’s next claim that waiting lists have come down in England, Starmer says we are “through the looking glass”.

Earlier this week, it was revealed that one in three people have missed work in the last year because of delays in accessing NHS care.

The Observer, meanwhile, reported over the weekend that Sunak’s pledge to slash NHS waiting lists has effectively been downgraded amid an increase in the number of patients in England waiting longer than 18 months for treatment.

Starmer says Sunak is taking no responsibility for the state of the NHS. Sunak would not accept those waits for his family, and nor should anyone else. He refers to a family waiting for treatment. How do they feel when they see the PM boasting that everything is fine?

Sunak says the government is doing all it can to put money into the NHS. People deserve treatment. But it is galling to hear Starmer complain when his party does not condemn NHS strikes. And he won’t back the legislation to guarantee people get treatment.

Updated

Starmer says 1.2 million people are waiting for mental health treatment, including 200,000 children. Would Sunak accept that for family or friends?

Sunak says he will expand patient choice. Labour’s policy on this has been a muddle, he says.

Starmer says more than double the entire population of Wales are on a waiting list in England. How many people are waiting for mental health treatment?

Sunak says the union action that Labour fails to condemn has led to several hundred thousand cancelled appointments, making waiting lists worse.

In England 18-month waits have virtually been eliminated, but not in Wales, he says.

Next, Rishi Sunak is pressed on comments yesterday by Laura Trott, chief secretary to the Treasury, who said people with mobility and mental health problems will be asked to work from home or lose benefits as part of “their duty”.

Sunak is asked how many job vacancies are currently available for people who can only work from home.

The PM replies that he doesn’t want to pre-empt anything that might appear in the chancellor’s upcoming autumn statement.

Starmer asks how workers can grow the economy if they have to wait a year for an operation.

Sunak says he hopes the Welsh NHS is listening.

Updated

Keir Starmer welcomes the pause announced in the Middle East. He says he wants both sides to make progress to a full cessation of hostilities. He says in the past the international community has treated the two-state solution as a formality. That must change, he says.

He asks if Sunak forget to include the NHS in his latest five pledges.

Rishi Sunak says he has put record funding into the NHS, and announced a workforce plan. On the pledges, he says he has halved inflation and he claims he has reduced debt.

UPDATE: This is from Bloomberg’s Alex Wickham.

Sunak in the House claims his govt has “reduced debt”

IFS to @Joe_Mayes earlier this month: “Public sector debt is currently rising in cash terms, real terms, and, most importantly, as a percent of national income.

Updated

Rishi Sunak begins by offering his condolences to the families of the four teenagers who died in Wales.

He also welcomes the announcement of the “humanitarian pause” between Israel and Gaza.

The Labour leader, Sir Keir Starmer, in his opening statement, echoes both these sentiments.

On the four teenagers, he says he can “hardly imagine” the pain the families are experiencing.

Updated

Rishi Sunak is taking PMQs. Jeremy Hunt delivers the autumn statement when PMQs ends, soon after 12.30pm.

Whitty says talking about behavioural fatigue was his biggest communications error during Covid

Here are some more lines from what Prof Sir Chris Whitty has been telling the Covid inquiry this morning.

  • Whitty, chief medical officer for England and chief medical adviser for the UK, said that his biggest communications error was to talk about “behavioural fatigue”. This was the theory that people would not be willing to keep complying with Covid restrictions for a long period of time. Before lockdown was announced, Whitty cited this in public as one reason why restrictions should not be imposed too early. Whitty told the inquiry:

This is one where my communications were really poor, frankly, and I said in my statement, this is probably my most prominent, at least in my view, communications error.

Whitty also said he was “told off” by his behavioural science colleagues for his phrasing and subsequently no longer spoke about the issue publicly.

  • He said “herd immunity” was never a policy goal at any point during the pandemic and the references to this by some officials in public were unhelpful. He said:

I don’t think I ever saw anybody on the record, or anybody sensible, aiming for it [herd immunity] as a goal. I think some people tried to explain it as ‘this is what would happen over time’, I think frankly, unhelpfully …

If we were to go back in terms of our communication errors along the way – and there were a lot – this is firmly one of the ones where I think we didn’t help the public by having a debate that I think, quite rightly, upset and confused a lot of people.

He also said the term meant different things to different people.

Some people were meaning the herd immunity threshold – this is the point at which, for practical purposes, further waves are unlikely, which is very high.

The modellers were using it in the sense of a gradual increase – gradually increasing levels of immunity – meaning that the effective force of transmission gradually decreases but not to the point where there are no waves.

And I think there was, muddled up between those two completely different uses of the term.

Chris Whitty on the Great Barrington Declaration: “I thought it was flawed at multiple levels”. It was implicitly based on the idea of lifelong post-infection immunity, he says, which turned out to be incorrect.

  • Whitty said he and Sir Patrick Vallance, the government’s chief scientific adviser, were not consulted about the “eat out to help out” scheme – even though Boris Johnson, in his witness statement to the inquiry, claims that health officials were consulted. Peter reports:

Inquiry hears that Boris Johnson’s witness statement says ‘eat out to help out’ was “properly discussed” with health/science officials. Whitty says he and Vallance were not consulted: “I think we should have been.”

Speculation about the autumn statement mostly focuses on the measures that Jeremy Hunt will announce, but budgets and autumn statements coincide with the Office for Budget Responsibility publishing its latest “economic and fiscal outlook” – a long report with forecasts that serve as a healthcheck on the state of the economy – and by the end of the day it is often the OBR that produces the most startling news lines.

The Financial Times says the OBR might have bad news for Rishi Sunak and Hunt on growth. In a preview it says:

The measures [Hunt] announces are unlikely to forestall some unflattering growth forecasts from the Office for Budget Responsibility, the fiscal watchdog. While GDP growth is likely to be upgraded this year, the picture is less optimistic thereafter. In March the OBR said the UK economy would expand by 1.8% in 2024 and 2.5% in 2025. The Bank of England, by contrast, has predicted near-zero growth for both years.

The OBR’s 1.7% estimate of the UK’s sustainable growth rate, which is how fast the economy can grow without driving excess inflation, is also more optimistic than those of other forecasters. One of Hunt’s goals will be to convince the OBR to give him some economic credit for pro-business policies in its forecasts.

Updated

Keir Starmer has said that a pause in hostilities between Israel and Hamas must be used to tackle the “urgent and unacceptable humanitarian catastrophe” in Gaza.

Welcoming the deal, which is expected to involve the release of 50 hostages being held by Hamas and a number of women and teenagers from Israeli jails, the Labour leader said his party had been calling for “a substantial humanitarian pause”. He said:

There must be immediate access to aid, food, water, fuel and medicine to ensure hospitals function and lives are saved. Aid and fuel need to not just get in but be distributed widely and safely.

We must also use the space this pause creates to take more steps on a path towards a full cessation of hostilities rather than an escalation of violence.

Updated

Jeremy Hunt outside No 11 with the autumn statement document this morning.
Jeremy Hunt on Downing Street with the autumn statement document this morning. Photograph: Reuters

Updated

In his Guardian column today Rafael Behr argues the “headroom” being used by Jeremy Hunt to justify tax cuts (see 10.14am) is predicated on future spending cuts which the Conservatives, were they to win the next election, would never actually implement. He says it’s a trap for Labour. Here is an extract.

The real function of the projected spending squeeze is as a trap for Labour. If the opposition rejects the Tory trajectory, it will be accused of planning a profligate spree with public money. And if it pledges adherence to impossible targets, it will enter government with its hands bound too tight to deliver prompt satisfaction to the people who voted for it.

Keir Starmer and Rachel Reeves have so far operated a sensible policy of not walking into traps of this kind. That approach restored swing voters’ trust in Labour as stewards of the economy. But it tests the patience of an activist base that sees reversal of austerity as a moral imperative and can smell the incipient disappointment in promises of fiscal discipline.

The immediate challenge for Labour after the autumn statement is to avoid getting ensnared in a game of saying whether it would accept or reverse various specific measures. This is a balancing act that involves rejecting the premise of the question without sounding too evasive; refusing to dance to a Tory tune when the whole event is choreographed by the government.

And here is Rafael’s column in full.

And Jeremy Hunt will freeze alcohol duty in the autumn statement, the Sun has been told.

The Financial Times has splashed this morning on a report saying Jeremy Hunt will make the “full expensing” tax relief system for businesses permanent in the autumn statement. It says:

The scheme, which was due to expire in 2026, allows a company to immediately deduct all of its spending on IT equipment, plant or machinery from taxable profits. Extending it was a crucial demand of business groups.

Officials claimed Hunt’s permanent extension would give the UK one of the world’s most generous capital allowance regimes. One said the move would be the “biggest business tax cut in modern British history”.

The independent Office for Budget Responsibility in March said the temporary version of the £9bn-a-year full expensing policy would boost business investment by as much as 3 per cent a year during its initial three-year period.

Here is Phillip Inman’s guide to what to expect in the autumn statement.

Harriet Baldwin, the Conservative MP who chairs the Commons Treasury committee, told GB News that she thinks Jeremy Hunt has “headroom” of around £20bn to use for tax cuts. She said:

If you look at the numbers that the Office for Budget Responsibility has been publishing each month, we think that there’s probably about £20bn of headroom and that’s because you and I, through those frozen tax levels and also businesses, we have actually ended up paying more tax this year than was planned in last year’s budget.

So I think that today gives the chancellor an opportunity to give some of that back to the hard-working businesses and people of this country so that we can grow the economy more rapidly next year.

For an alternative take on headroom, this is from the journalist James Ball.

The “headroom” you’re hearing about – the one to allow for tax cuts – is almost entirely fictional.

It’ll be predicated on real-terms cuts to services in the next parliamentary term that no-one thinks are deliverable, at all.

It’s a stunt.

Whitty tells Covid inquiry it would have been 'inconceivable' to have had herd immunity as policy goal

Prof Sir Chris Whitty, the chief medical officer for England and chief medical adviser for the UK, is still giving evidence to the Covid inquiry this morning. I’m mostly focused on the autumn statement, but my colleague Peter Walker is following the Whitty evidence, and he has posted these on X.

We’re back with Chris Whitty at the Covid inquiry, and still in mid-March 2020. Even then with 500+ UK cases, Whitty says, many in No 10 still did not realise how fast things would move: “This was a lot of people really not getting what exponential growth was going to mean.”

We’re now onto the idea of herd immunity, which Whitty says was misunderstood by many. It would be “inconceivable” to have it as a policy goal, and would have brought “extraordinarily high loss of life”, while v possibly not even doing what it was meant to.

Whitty on herd immunity: “My view is it was clearly a ridiculous goal of policy, and a dangerous one, and lots of what was said [about it] could have led to considerable confusion, and did.”

Chris Whitty says he sent WhatsApps to a group including Boris Johnson, Matt Hancock and officials urging people to not discuss herd immunity: “Frankly there was a lot of chatter by people who at best half understood the issues.”

Updated

Cabinet ministers were told what would be in the autumn statement when they met at Downing Street this morning. They don’t talk to journalists as they leave, but judging by the pictures, they seemed rather pleased by what they had heard. Government ministers don’t normally look this cheerful.

Left to right: Victoria Prentis, the attorney general; Laura Trott, the chief secretary to the Treasury; and Alex Chalk, the justice secretary, leaving cabinet.
Left to right: Victoria Prentis, the attorney general; Laura Trott, the chief secretary to the Treasury; and Alex Chalk, the justice secretary, leaving cabinet.
 Photograph: Hannah McKay/Reuters
James Cleverly, the home secretary, leaving cabinet.
James Cleverly, the home secretary, leaving cabinet. Photograph: Hannah McKay/Reuters
Chris Heaton-Harris, Northern Ireland secretary, and Gillian Keegan, education secretary, leaving cabinet.
Chris Heaton-Harris, the Northern Ireland secretary; and Gillian Keegan, the education secretary, leaving cabinet. Photograph: Yui Mok/PA
David Cameron, foreign secretary (left), and Andrew Mitchell, development minister, leaving cabinet.
David Cameron, the foreign secretary (left); and Andrew Mitchell, development minister, leaving cabinet. Photograph: Stefan Rousseau/PA
Michelle Donelan, the science secretary, leaving cabinet.
Michelle Donelan, the science secretary, leaving cabinet. Photograph: Yui Mok/PA
Victoria Atkins, health secretary, leaving cabinet.
Victoria Atkins, the health secretary, leaving cabinet. Photograph: Hannah McKay/Reuters

Updated

Jeremy Hunt to unveil autumn statement as Labour says nothing can change Tories’ ‘appalling’ economic record

Good morning. Today Jeremy Hunt will deliver his second autumn statement since (like his old boss David Cameron) he made a totally unexpected return to cabinet, appointed chancellor as Liz Truss’s premiership was in its death throes. After he delivered his first one just over a year ago, the Guardian’s report led on Britain facing the biggest hit to living standards on record after Hunt announced £30bn of delayed spending cuts and £25bn of backdated tax increases. The Tory papers gave it probably the most negative coverage for any fiscal statement from a Conservative chancellor in modern times. Almost anything today would get a better reception.

But in fact, if the advance briefing is reliable, Hunt is on course to deliver a statement that will get a dramatically better reception. As Larry Elliott and Pippa Crerar report in their preview, he will announce cuts to personal taxes, and a significant raft of pro-business measures.

Here are some of the front pages.

Rishi Sunak and Conservative MPs hope that this will be a turning point in his party’s fortunes. In a speech on Monday, he in effect announced his party’s election strategy, saying it would be a choice between “a Conservative party that is delivering lower taxes because we have now halved inflation and control spending, or a Labour party that’s just going to borrow an enormous amount more, not having learned the lessons at all of not just the last 10 years, but of the last two years, and continue with the same failed prescription, which is more government, more borrowing, more spending”.

But one autumn statement cannot undo the impact of decisions taken over one year, or four years, or 13 years. And, as Torsten Bell, head of the Resolution Foundation thinktank has pointed out, you should never talk about tax cuts without explaining the context.

Short version: you’re not ‘cutting taxes’ if you raise people’s taxes a lot and then given them back a little

This is a point Labour will be making. In a statement released overnight, Rachel Reeves, the shadow chancellor, said:

After 13 years of economic failure under the Conservatives, working people are worse off. Prices are still rising in the shops, energy bills are up and mortgage payments are higher after the Conservatives crashed the economy.

The 25 Tory tax rises since 2019 are the clearest sign of economic failure, with households paying £4,000 more in tax each year than they did in 2010. The Conservatives have become the party of high tax because they are the party of low growth. Nothing the chancellor says or does in his autumn statement can change their appalling record.

Under Keir Starmer’s leadership, the Labour party has changed. Labour is now the party of fiscal responsibility, we are the party of business and we are the only party with a plan to make working people better off.

Today we will be focusing almost exclusively on the autumn statement. Graeme Wearden will be joining me on the blog later and we will be covering the statement in full, and providing reaction and analysis.

Here is the agenda.

8.30am: Rishi Sunak chairs cabinet, where Jeremy Hunt, the chancellor, briefs colleagues on the autumn statement.

12pm: Sunak faces Keir Starmer at PMQs.

12.30pm: Hunt presents his autumn statement to the Commons.

2.30pm: Richard Hughes, chair of the Office for Budget Responsibility, holds a press conference on the OBR’s forecasts.

If you want to contact me, do try the “send us a message” feature. You’ll see it just below the byline – on the left of the screen, if you are reading on a laptop or a desktop. This is for people who want to message me directly. I find it very useful when people message to point out errors (even typos – no mistake is too small to correct). Often I find your questions very interesting, too. I can’t promise to reply to them all, but I will try to reply to as many as I can, either in the comments below the line; privately (if you leave an email address and that seems more appropriate); or in the main blog, if I think it is a topic of wide interest.

Updated

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