After Liz Truss' disastrous time as Prime Minister left the UK's economy in serious trouble, the last fortnight has been comparatively quiet.
But this won't last. This year's Autumn Statement - delayed since October 31 - is set for November 17 and the Chancellor Jeremy Hunt is expected to outline "eye-watering" tax rises and spending cuts to fill a black hole of up to £50billion left by the previous Prime Minister Liz Truss crashing the economy.
The Autumn Statement - which doesn’t have the status of a Budget, but is similar - will feature a slate of dramatic tax rises and spending cuts, with public services expected to take a serious hit and even state pensions and benefits up potentially slashed.
Read more: Fenwick Newcastle reveals its 2022 Christmas window theme as 'Clarice Bean: Think Like an Elf'
The Autumn Statement will come at a worrying time for millions across the UK. Last week the Bank of England raised interest rates by 3%. This means mortgages will be hundreds of pounds more expensive for many, while with the longest recession in a century forecast the outlook is far from rosy.
Ahead of the measures, a Treasury source told MirrorOnline : “It is going to be rough. The truth is that everybody will need to contribute more in tax if we are to maintain public services."
Think tank the Resolution Foundation has warned of a shocking spike in unemployment for 2023 - half a million more people will be unemployed next year.
The Government will need to find ways to fill a £40bn black hole if they want to "balance the books", but critics of the grave plans say some of the warnings briefed by Whitehall are "expectation management". Others have warned against making swingeing cuts when public services are already stretched - with the NHS and local councils among organisations already struggling for cash.
This is a comprehensive guide to what we are expecting to see in the Autumn Statement.
Stealth Income Tax and National Insurance rise
The threshold where you start paying 20p Income Tax and 12p National Insurance - £12,570 - is already being frozen for four years until April 2026. Now the Chancellor is drawing up plans to freeze it for two more years, to April 2028.
He would also freeze the £50,270 threshold at which you start paying 40p Income Tax.
By freezing these thresholds rather than raising them in line with inflation and this amounts to a massive stealth tax rise that will raise £4bn a year. That's because millions will end up in a higher income tax bracket.
The four-year freeze was already due to hit 27.1million basic rate taxpayers, who would lose on average and in real-terms, £196 a year. 4.3million higher-rate taxpayers would face a hit of £734 a year while 591,000 additional rate taxpayers lose an average of £324.
But these figures, which date from March 2021, underestimate the impact as inflation has skyrocketed to 10% since.
State pension rise in doubt
The pensions "triple lock" has long been a point of contention in political circles. It proved so in the final days of Liz Truss's premiership, too. A day before she resigned, the then-PM overruled her new Chancellor Jeremy Hunt and said the state pension WOULD rise by 10.1% in April 2023.
But since Rishi Sunak took power, this issue has again been thrown into doubt. The 2019 Tory manifesto promised to raise pensions by the triple lock - the highest of earnings, inflation, or 2.5%.
Raising pensions only by earnings of 5.5%, instead of inflation of 10.1%, would deprive people on the New State Pension of £443 a year.
Meanwhile, ministers are considering scrapping the triple lock altogether after 2025 and replacing it with a different formula, according to the Daily Mail. Mr Sunak failed to rule out the idea in an interview with The Times.
No10 said: "We do recognise that uncertainty is difficult for pensioners and other groups of people. Given the very challenging economic circumstances the country and indeed the world faces, it is right that we take that time so that we put place measures that can last."
Income tax relief
There could be another hit for higher-rate taxpayers too, with Jeremy Hunt looking at reducing the tax relief on pension contributions. The plan ministers are said to be discussing would see the rate at which relief is applied drop from 40p to 20, the Telegraph reports
The tax rules are designed to encourage workers to contribute more to their pensions.
Universal Credit and UK benefits
No10 has refused to say benefits will rise with inflation in April 2023 - despite Rishi Sunak previously saying they would. Not even Carers’ Allowance, which is a measly £69.70 a week, has a promise to rise by 10.1%.
Campaigners say a 10.1% rise for 5.6million Universal Credit claimants would be long overdue, given the benefit only rose 3.1% in April. But despite the new Work and Pensions Secretary and Chief Secretary to the Treasury backing a rise with inflation, this is not guaranteed.
If Universal Credit was to only raise by 5.5% in line with earnings instead, that would equal a real-terms cut of £978 a year for a working couple with three kids, according to the Resolution Foundation. Work and Pensions Secretary Mel Stride did not even rule out a bombshell change that would see some benefits - like personal independence payments, carers allowance, attendance allowance, and disability living allowance for children - become means tested.
Tax hikes for savers and businesses
Jeremy Hunt is also, the Telegraph reports, considering an astonishing tax raid on the wealthy by bringing in rises to taxes on dividends and capital gains. Capital gains tax is levied on sales of shares and assets like property.
The Chancellor is eying changes to the headline rate, reliefs and allowances on capital gains tax. He is also looking at a cut to the £2,000 tax-free dividend allowance and a 1.25 percentage point increase to all dividend tax bands..
Hikes to taxes on dividends would hit savers and small business owners who pay themselves in dividends rather than taking a salary. A Government source confirmed to the Mirror that the ideas were being considered but no decisions have been made.
2% public sector pay rises
While public sector workers including doctors, nurses and teachers are considering strike action, patience could be stretched even further by a plan to limit pay rises next year to just 2%. With inflation topping 10% this could inflame tensions further.
It would come after far below inflation rises worth as little as 4% for millions of NHS staff and other public sector workers this year. Nurses at the Royal College of Nursing union have already voted in favour of striking - with colleagues at Unison, and GMB unions also balloting over industrial action.
Any pay rise offer would only be decided next year, rather than next week. But the Chancellor is able to give a broad outline of what departments can afford.
General Secretary of the Royal College of Nursing Pat Cullen said: “This would be bad politics and bad economics. Our members have had a decade of this, they've paid the price and enough is enough… Experienced nurses effectively are working one day a week for free because of a decade of real-terms pay cuts.
“One solution to the nursing workforce crisis, which is making care unsafe, is to recruit and retain more staff by paying them fairly.”
Public spending cuts
The main reason the Autumn Statement was delayed by 17 days was so new Cabinet ministers would have time to look at spending cuts in response to the economic crisis. Jeremy Hunt has warned no area of government will be exempt from so-called efficiency savings.
This is even despite a decade of cuts under Conservative-led Governments. Each department is having to draw up a plan for how it could make cutbacks.
Even if there are vows to raise spending, the rate of inflation means that rising costs could well outstrip any increases. This could see spending rise in cash terms but still fall in real terms. And even a “real-terms rise” isn’t always what it seems, as the government uses a “GDP deflator” of 3.7% rather than 10.1% consumer inflation.
NHS spending
Chancellor Jeremy Hunt has warned not even NHS spending will be exempt from cuts. But in his time on the back benches and leading the Health Select Committee he has been vocal in his support for properly funding the health service.
And with huge backlogs and ambulance waiting times causing extreme pressure, calls to boost spending won't go away any time soon. At Cabinet today, Rishi Sunak said the government “would always support the NHS and that they would continue to be prioritised as difficult decisions are taken on spending.”
But he added “in return it was right to look at further ways to improve the service the public receive and that he was confident this could be achieved.”
Foreign aid
Aid to the world’s poorest was slashed from 0.7% of national income to 0.5% due to Covid, and never restored. That was despite it being a Tory manifesto promise, and the cut being opposed by campaigners, MPs and former Prime Ministers.
Currently the 0.7% will only be restored once experts say the government is not borrowing for day-to-day spending and debt is falling. But Andrew Mitchell, who has campaigned on the matter, is now Aid Minister. Has he sold out, or did he, perhaps, cut a deal to get the funding - a symbol of Britain's "soft power" abroad - restored?
OBR forecasts
Alongside the Autumn Statement, the Office for Budget Responsibility will issue forecasts of debt, borrowing and growth. These were missing from Liz Truss' notorious mini-Budget, and played a role in the subsequent turmoil in the financial markets.
When published now, the OBR predictions will show the depth of the trouble we’re in. According to the Resolution Foundation they could project we’re heading for recession next year.
Big projects like HS2 rail line and Northern Powerhouse Rail
Cabinet minister Michael Gove has suggested investment could be slashed - including in the HS2 rail line. High Speed 2 was already cut back under ex-Transport Secretary Grant Shapps, with the Eastern Leg no longer going to Leeds.
But hinting it could be slashed again, the Levelling-Up Secretary warned: “I’m sure that some capital spending will be cut. I am sure everything will be reviewed" he went on, before adding: "I do think HS2 is a significant investment."
Infrastructure spending in the North could be cut - and we await confirmation of what will happen to long-term projects such as the long-promised scheme to complete the dualling of the A1 in Northumberland.
Meanwhile, Rishi Sunak has ripped up Liz Truss's pledge to build Northern Powerhouse Rail, including a station in Bradford, in full. Grant Shapps - now Business Secretary, said this week there "wasn't much point" in the scheme. Instead it'll revert to Boris Johnson's pledge to re-use a lot of existing track on the east-west line, No10 confirmed.
Cap on social care costs
A cap on care costs could be delayed. The plan had been to institute an £86,000 limit on what someone can pay for care during their lifetime from October 2023. However this could be delayed for a year.
This would hit thousands of frail Brits - but Government sources have said local councils had already pleaded for a delay because they were not ready. But the Local Government Association in England hit back - suggesting it needed a delay due to a lack of Government cash.
A survey of council chiefs by the LGA in June found 86% thought some or all care reforms should be delayed - and 98% were not confident government funding would be enough.
Windfall tax on oil and gas profits
Liz Truss opposed a new windfall tax on excess oil and gas profits. But as BP reported global profits of over £7billion in a quarter, more than double a year ago, the new PM is said to be pursuing the policy again - with a plan to to raise £40billion over five years.
Options include extending the temporary 25% levy to 2027/28, raising it to 30%, and extending it to electricity suppliers - and Rishi Sunak is planning to do all three at once, according to The Times.
Defence spending
Liz Truss had promised defence spending would hit 2.5% of GDP by 2026 and 3% by 2030, but Rishi Sunak hasn't committed to this yet. Defence Secretary Ben Wallace said he will have a meeting with Jeremy Hunt this week to discuss what may happen.
Mr Wallace said: "Obviously, we're having to take... account of the economic challenges at the moment, and we'll wait to see what the Chancellor's budget produces. I myself will have a meeting with the Chancellor this week around what that means for my department."
While in office, ex-PM Liz Truss commissioned an update to the Integrated Review (IR) of defence and security, which was published in March 2021. Unveiled by her predecessor Boris Johnson, it had seen the size of the Army reduced by 9,500 and a third of its ranks scrapped. The update was expected to be published by the end of 2022.
READ NEXT:
-
Celebrations to remove Bounty bars from chocolate tubs in Christmas trial
-
M&S 2022 Christmas advert reunites Dawn French and Jennifer Saunders
-
Greggs confirms when Festive Bakes will be back in stores ahead of Christmas 2022
-
Man says daughter reported to police for singing Christmas song in the street
-
Fenwick's 2022 Newcastle Christmas Window launch will be closed to the public
