Hunt’s opening remarks
Jeremy Hunt says the government will deliver a plan to tackle the cost of living crisis and rebuild the UK economy. The chancellor says his priorities are stability, growth and public services, and is providing “fair solutions” despite taking “difficult decisions”.
Aubrey Allegretti, political correspondent: The chancellor opens his autumn statement, which has been nicknamed the “memorial service for Trussonomics”, by seeking to pin the blame for the cost of living crisis on “unprecedented global headwinds”.
In a nod to the market chaos that plagued the last government, Hunt says his statement will deliver stability – but he wants to ensure the Conservatives are not just seen as a party of managed decline, stressing he will also seek to grow the economy.
Growth
The chancellor says forecasts from the Office for Budget Responsibility show the economy will grow by 4.2% this year.
Hunt says the economy is already in recession, with higher energy prices explaining the majority of the revision in growth forecasts.
GDP would then shrink by 1.4% next year, before rising by 1.3% in 2024, 2.6% in 2025 and 2.7% in 2026.
In March, the OBR had forecast growth of 3.8% for 2022 and 1.8% for 2023.
The economy grew by 7.5% in 2021, after a fall of 11% in 2020 – the biggest decline for 300 years – during the first wave of the pandemic.
Aubrey Allegretti: Hunt leans on the OBR, saying it has adjudicated that “higher energy prices” explain the majority of lower-than-expected growth forecasts.
And to calm jitters among MPs about fears of another recession, he says the International Monetary Fund expects one-third of the world economy to be in recession this year or next.
Hunt drops his first mention of “difficult decisions”, laying the ground for the harsh measures and stressing that those who believe they are unnecessary are “not being straight with the British people”.
Borrowing
Hunt says borrowing in the current financial year, 2022-23, will be 7.1% of GDP.
In cash terms, the OBR estimates the budget deficit – the gap between spending and income – is £177bn in 2022-23.
In its previous forecasts in March, the OBR had estimated borrowing would be 3.9% of GDP, or £99.1bn in cash terms, in 2022-23.
The chancellor says borrowing is “more than halved” by the actions in the autumn statement.
Public sector net debt is forecast to peak at 97.6% of GDP in 2025-26, and then to fall gradually to 97.3% of GDP by 2027-28.
Hunt announces two new fiscal rules: underlying debt must fall as a percentage of GDP within five years; and public sector borrowing must be below 3% of GDP.
Aubrey Allegretti: One of the key audiences Hunt must satisfy are the money markets, which will be hanging on his every word. Hunt’s new fiscal rules on borrowing are designed to be evidence of his claim that the UK “will always pay its way”.
Personal taxes
The chancellor announces a range of tax threshold freezes, including for income tax and inheritance tax for a further two years, on top of an existing four-year freeze, to April 2028.
Dividend allowances will be cut. The annual exempt allowance for capital gains tax will also be cut.
Hunt says the changes still leave Britain with more generous allowances than several other leading nations.
The threshold for the 45p additional rate of tax will be cut from £150,000 to £125,140.
Hunt says electric vehicles will no longer be exempt from vehicle excise duty from 2025.
Aubrey Allegretti: Though the news has left the Conservative benches behind him muted and looking glum, Hunt tries to set out the positives so they have reason to leave the Commons chamber with some lines of defence to take with the media and frustrated constituents.
He says the changes will still leave the UK with the most generous tax-free allowances of any G7 country, adding that tax take will increase by just 1% over the next five years.
Business taxes
Windfall taxes will raise £14bn, including a new temporary 45% levy on electricity producers.
Hunt says the government will soften a blow for businesses on business rates with an almost £14bn tax cut on business rates, this will benefit about 700,000 businesses.
Employment allowance will be retained at a higher level of £5,000.
Aubrey Allegretti: Hunt is wary of the Conservatives’ long-cherished mantle as the “party of business”, and stresses that 40% of all firms will continue to pay no national insurance contributions at all.
Seeking to head off a possible Labour attack line, he says the government will continue pursuing tax avoidance and evasion.
Many of the announcements he is making relate to years long after the next general election – so some of the pain will not be felt for years to come. (Or even ever, if the Conservatives end up being kicked out of government after 2025.)
Public spending
Hunt says government spending will continue to increase in real terms every year for the next five years but at a slower rate.
The chancellor says “public spending discipline” must be shown through a “challenging period”.
Existing departmental spending under the 2021 spending round will be kept. Then departmental spending will grow at 1% a year in the three years that follow.
He says departments will need to make efficiencies. However, overall spending will “continue to rise in real-terms” for the next five years.
Aubrey Allegretti: Voters might wear higher taxes, but they would probably expect better from languishing public services.
Hunt nods to that, saying he wants to “protect them as much as we can”.
Attempting to dispel any claims his autumn statement offers a return to austerity, Hunt insists public spending will grow – albeit more slowly than the growth in the economy.
Foreign aid and climate
Hunt says the government will not be able to return foreign aid spending to 0.7% of GDP until the economic conditions allow. It will remain at 0.5% for the remainder of the forecast period.
The chancellor says he confirms that, despite economic pressures, the government remains “fully committed” to Cop26, including 68% reduction in UK emissions by 2030.
Aubrey Allegretti: Two big concerns about more internationally focused spending have not been completely dampened down by Hunt. He says aid spending will not rise back to 0.7% of GDP target, and says defence spending will stay at at least 2%.
Education
Hunt says the Treasury will increase the schools budget, with an extra £2.3bn a year.
He says in difficult economic circumstances, a Conservative government is investing more in the public service that defines all of our futures.
Aubrey Allegretti: Having felt the heat over the weekend from two dozen Tory MPs – including a former education secretary – who demanded Hunt not cut education spending, he puts out that particular fire by saying it will grow by £2.3bn next year and the year after.
But how much of that will be left for educating children after pay increases, energy bills and inflation may still worry some.
Health and social care
The chancellor says social care did an incredible job during the pandemic, but an ageing population is putting massive pressure on their services.
Hunt says he wants to free up hospital beds by investing in social care, and will allocate £1bn more next year and £1.7bn a year after, funded by savings from delayed reforms.
Patricia Hewitt, the former Labour health secretary, will advise the government on the efficiency of the NHS. Hunt says: “We want Scandinavian quality alongside Singaporean efficiency.”
The chancellor says there will be a £3.3bn increase in NHS funding. “That is a Conservative government putting the NHS first,” he says.
Aubrey Allegretti: Hunt reminds MPs he is a former health secretary – a role in which he was viewed as unpopular.
He seeks to grasp one of the big issues facing the NHS, saying a plan will be drawn up for the number of doctors and nurses needed up to 15 years into the future.
In a nod to the frustrations felt by many in the health service given looming strikes, Hunt says he will ensure there is “better retention and productivity improvements”.
Delaying the social care cap will disappoint those Tories loyal to Boris Johnson, who promised to “fix the crisis in social care once and for all with a clear plan we have prepared” over three years.
Economic growth
The chancellor says the government will focus on economic growth, despite having to find budget savings. Energy, infrastructure and innovation will be priorities.
“If we want to avoid a doom loop of ever higher taxes and ever lower dynamism, we need economic growth,” he says.
Hunt says the government will proceed with a new nuclear power plant at Sizewell C, helping to provide reliable low-carbon power. “It represents the first step on our journey towards energy independence,” he says.
The chancellor says he will double investment in energy efficiency of homes and industry by £6bn from 2025.
Aubrey Allegretti: “Growth” was Liz Truss and Kwasi Kwarteng’s watchword – and Hunt is keen to show he has not abandoned that ambition, even if it is being achieved in a manifestly different way.
To avoid a “doom loop” of higher taxes and public spending, Hunt says growth remains a priority.
The only real loud cheer of the statement comes when the chancellor fires a barb across the dispatch box saying Labour has never been interested in growth.
However, his follow-up that “sound money is the rock upon which long-term prosperity rests” sounds more aimed at Truss and Kwarteng.
While Hunt stresses the need for more energy resilience, he keeps stumm about the issue dividing many Tory MPs – growing onshore wind.
Infrastructure
The chancellor says he will not cut capital budgets for the next two years, but then maintain them in cash terms for the next three years. They will not grow as planned but it will still increase.
HS2 will be kept, alongside core “northern powerhouse” rail, and new hospitals.
Hunt says there will be £600bn of investment over the next five years.
He says there will be more devolution deals in England to boost levelling up..
Aubrey Allegretti: Not cutting capital budgets for two years simply takes the government up until the next election – so announcements about them being frozen thereafter essentially shunts the problem until after that point.
Off the back of the Tories’ 2019 promise of levelling up, many communities expected infrastructure projects to spring up in their constituencies – so cutting capital budgets would have seriously hampered marginal MPs’ (particularly in the “red wall”) chances of re-election.
Innovation
Hunt says it would be a “profound mistake” to cut the government’s research and development budget. He says funding will be protected, with an increase to £20bn by 2024-25.
The chancellor said he wants to turn Britain into “the world’s next Silicon Valley”.
Tariffs will be cut to support business supply chains.
Investment zones will be kept, centred on universities in “left behind areas” to help build growth clusters, with further announcements at the spring budget.
Hunt says Solvency II reforms, which apply to insurers, will be made to unlock “tens of billions of pounds” in investment.
Aubrey Allegretti: Reminding MPs he is a former entrepreneur, Hunt says the government will make the most of “Brexit freedoms” to push ahead with some supply-side reforms by the end of 2023.
This again is part of dispelling the doom and gloom around today’s statement – trying to show there is some sunshine despite the “storm” he warns Britain is facing.
Cost of living support
The chancellor says households and businesses will be provided with support next year.
The government’s energy price guarantee will be kept for a further 12 months at an average of £3,000 for a typical household, up from £2,500 at present.
The chancellor announces new one-off payments of £900 to households on means-tested benefits, £300 to pensioner households, and £150 for individuals on disability benefit.
There will be an additional £1bn funding to enable further extension to household support fund.
Hunt says social housing rents will be capped at 7% next year, to avoid rent hikes of up to 11%.
The “national living wage” will rise by 9.7% next year to £10.42 an hour.
Benefits will rise in line with September’s inflation rate, by 10.1%, costing the government £11bn.
The benefit cap will be increased with inflation next year.
The pensions triple lock will be kept.
Aubrey Allegretti: “Compassion” is the key word Hunt wants his statement to be known for.
The September mini-budget disproportionately benefiting the better off went down like a cup of cold sick among some Tory MPs and Truss famously made clear her disdain for “handouts”.
But Hunt says energy support payments will be targeted, to help the most vulnerable.
One of the biggest sighs of relief on the Tory benches is the chancellor’s promise that benefits will rise in line with inflation – given this had been far from certain.
Keeping pensioners happy by ensuring their payments rise at the same level given they cannot work to build their income will also assuage MPs worrying about a high-turnout and Tory-leaning demographic turning away from the party or staying home on election day.
Closing comments
Aubrey Allegretti: Besides the specific policy measures, there is one final message Hunt is keen to make stick.
He wants to avoid the Conservatives being blamed, as happened to Labour during the financial crisis, for the cost of living crisis.
“There may be a recession made in Russia but there is a recovery made in Britain,” claims the chancellor, to cries of disbelief from the opposition benches.
But as he sits down, the traditional calls for “more” from Tory backbenchers are muted.
