Chancellor Jeremy Hunt is expected to announce that benefits and state pension rates will rise in line with inflation in his Autumn Statement on Thursday (November 17).
However, there is still to be 'eye-watering' spending cuts, and tax rises planned, reports StokeOnTrent Live. The Chancellor will deliver his Autumn Statement at 11:30am on Thursday morning, and he has stated that the government will "be asking everyone for sacrifices".
The report is expected to confirm about £21 billion of tax rises, and £33 billion of public spending cuts each year until 2027/28.
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State pension and benefits are now expected to rise with 10.1 per cent of inflation - but income tax and council tax may face a hike, while energy bills support will decrease drastically.
This news will add new struggle for families, as the Bank of England raised the base rate of interest to three per cent, making the cost of mortgages rise further. The Bank warned the UK was heading into the longest recession in 100 years.
Jeremy Hunt claims he is trying to "balance the books", but the Tory promise to borrow less than they raise in tax has already been postponed by a decade, and could be put back further.
As he plans to impose "austerity 2.0" on millions, the Chancellor joked: "I think eating testicles in the jungle is literally the only job in the world that's worse than mine."
One Treasury insider told the Sun on Sunday there'll be no "rabbits out of the hat", adding: "If there was, it would be one that's lost its eyes and all its teeth have fallen out."
The Chief Secretary to the Treasury has also vowed to "root out waste" and make government "more efficient" by accelerating the sale of under-used buildings. But the Chancellor has admitted already that the NHS is on the brink of collapse after 12 years of Tory rule.
So, here's what to expect from the information provided so far.
Universal Credit and other benefits
Sources have indicated benefits - including Universal Credit - will rise with 10.1 per cent inflation in April 2023. That is despite Downing Street repeatedly refusing to say they will - even for Carers’ Allowance, which is a measly £69.70 a week.
Raising Universal Credit by only 5.5 per cent instead would be a real-terms cut of £978 a year for a working couple with three kids, the Resolution Foundation said.
£35 billion stealth tax rise
The threshold when individuals begin paying the 20p Income Tax and 12p National Insurance will continue to be frozen at £12,570 until April 2026. The 40p Income Tax threshold will also be frozen at £50,270.
But now Jeremy Hunt is drawing up plans to freeze these thresholds for two more years, to April 2028. This huge stealth tax rise will net the Treasury £35 billion annually by 2028, according to the IFC thinktank.
This will drag more people into higher tax brackets as salaries rise with inflation. On top of this, the pension lifetime allowance will remain at £1,073,000, and the inheritance tax-free threshold will stay at £325,000, according to reports.
Energy bills to soar
Th Energy Price Guarantee is capping bills at an average of £2,500 between October 1 and March 31 - at a cost of £60billion to taxpayers.
However, the Chancellor plans to slash this, and reports claim he could spend £20 billion for the following six months. Officials have discussed a scenario where the average annual bills increase from £2,500 to between £2,850 and £3,100.
That'd mean a £600 a year rise on current bills - and a rise of nearly £2,000 a year since mid-2021, when the average bill was £1,277.
State Pension rise
Sources have suggested that the State Pension will rise by 10.1 per cent next year. The Tory manifesto in 2019 promised to raise pensions by the triple lock - the highest of earnings (5.5 per cent), inflation (10.1 per cent), or 2.5 per cent.
Rishi Sunak also backed the triple lock, then suspended it during the pandemic. He backed it once again in the summer, couldn't guarantee it, and sources have now said it will happen.
A 10.1 per cent rise will take the New State Pension from £185.15 to £203.85 a week. If it rose by only earnings of 5.5 per cent, that'd deprive pensioners of £443 a year.
But ministers are considering scrapping the triple lock altogether after 2025 and replacing it with a different formula, according to reports.
PIP and disability benefits to be means-tested?
In what would be a bombshell move, Work and Pensions Secretary Mel Stride did not rule out means testing some benefits. These would include personal independence payments, carers allowance, attendance allowance, and disability living allowance for children.
But the Mirror understands it'd be unlikely.
Income Tax relief changed
Millions of higher rate taxpayers could face paying more in income tax as Jeremy Hunt eyes reducing the relief on pension contributions. Ministers have said to have discussed slashing the rate income tax relief is applied to higher taxpayers from 40 pence to 20 pence.
The tax rules are designed to encourage workers to contribute more to their pensions.
Tax hike for highest earners
Rishi Sunak is looking to reduce the £150,000 threshold at which people start paying the 45p Income Tax rate - just weeks after former Prime Minister Liz Truss tried to abolish it completely.
Lowering it to £125,000 would drag more people into the top tax bracket - currently only 660,000 pay it - and cost £150,000 earners £1,250 extra per year.
Officials also discussed raising the top rate of income tax, which was 50 pence - until it was abolished by George Osborne in 2013, but this is thought to be less likely.
Minimum wage
The Autumn Budget is expected to spell out what the minimum wage - which the Tories call the National Living Wage - will be from April 2023. Minimum wage is currently £9.50 an hour for over-23's, £9.18 for those aged 21-22, £6.83 for those aged 18-20 and £4.81 for those under 18.
Alcohol duties - but not cigarettes
Alcohol duties are expected to rise with the Autumn Statement, but cigarette duties will see a rise next Spring instead.
Kwasi Kwarteng had promised to freeze alcohol duty rates from February 1, 2023 for a year but this is now being ditched. Abandoning the freeze will save £600 million a year.
Tax hikes for savers and businesses
Jeremy Hunt has also looked at raising tax on dividends and capital gains - which is charged on sales of shares and assets like a second home.
The Chancellor is looking at changes to headline rate, reliefs and allowances of CGT - including halving the tax-free allowance from £12,300 to just over £6,000. This will pull more people into paying the tax.
Mr Hunt also wants to cut the £2,000 tax-free dividend allowance, and increase dividend tax bands by 1.25 points. This would also hit savers and small business owners who pay themselves in dividends rather than taking a salary.
Public Spending cuts
The Chancellor has warned that no area of government will be exempt from efficiency savings - despite many lying in crisis after austerity.
Each area will need to draw up a plan for how it could make cut backs, as Jeremy looks to slash £33 billion a year from services by 2027/28. Even if there are promises to raise spending, due to inflation being so high, it can 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%per cent rather than 10.1 per cent consumer inflation.
NHS spending
The Chancellor has also warned that not even NHS spending will be safe from real-time cuts. Rishi Sunak has told his Cabinet the government “would always support the NHS and that they would continue to be prioritised as difficult decisions are taken on spending.”
However, 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.”
You can tune into the Autumn Statement from 11:30am on Thursday, November 17.
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