THE CHANCELLOR has unveiled a package of tax rises and spending cuts worth £55 billion – as he was accused of making working people pick up the tab for the chaos caused by his predecessors.
The Office for Budget Responsibility has confirmed the UK is now officially in a recession, said Jeremy Hunt, something he used as justification for a renewed programme of austerity as public spending slows and workers are faced with rocketing prices, a greater tax burden and increased bills.
Barnett consequentials from the Chancellor’s spending plans will see £1.5bn passed on to the Scottish Government, said Hunt – below the £1.7bn which has been wiped from the country’s budget because of the failed mini-Budget and rocketing inflation.
The SNP has said Scotland is being "short-changed" by the discrepancy.
Labour have said the UK is one of the only leading economies pursuing spending cuts in response to a global economic crisis.
Shadow Chancellor Rachel Reeves branded Hunt the "Scrooge Chancellor" as she told him the country were demanding: "We want our money back."
She added: "Never before have people paid so much in tax and got so little in return."
Alison Thewliss, the SNP's shadow chancellor, added: "The Chancellor should have made fairer choices - properly taxing non-doms, banks, share buybacks, and expanding the windfall tax to companies making excess profits - but instead the Tories have chosen to impose devastating cuts to family budgets and public services.
"Mr Hunt should have followed the lead of the SNP Scottish Government by matching progressive policies like the Scottish Child Payment - but instead he has cut household incomes by raising energy bills yet again and imposing stealth taxes on families."
Setting out his plan for “stability, growth and public services”, Hunt said, which including increasing taxes on millions while cutting public spending.
Public spending will grow “slower than the economy”, said the Chancellor, though increases in departmental budgets which have already been set out will increase.
Day-to-day spending will grow in real terms by 1% a year over the next three years while the Chancellor pledged the biggest public works programme “for 40 years”.
Benefits will increase in line with inflation in April, with a rise of 10.1%, costing £11 billion and additional cost of living payments “for the most vulnerable” will be introduced with £900 for those on benefits, £300 for pensioners and £150 for those on a disability benefit, Hunt said.
The Chancellor said the energy price guarantee scheme will increase from £2500 for the average household to £3000 for 12 months from April.
“Anyone who says there are easy answers is not being straight with the British people: some argue for spending cuts, but that would not be compatible with high-quality public services.
“Others say savings should be found by increasing taxes, but Conservatives know that high tax economies damage enterprise and erode freedom.
“We want low taxes and sound money. But sound money has to come first because inflation eats away at the pound in people’s pockets even more insidiously than taxes.
“So, with just under half of the £55bnconsolidation coming from tax, and just over half from spending, this is a balanced plan for stability.”
He announced:
- The threshold at which the 45p top rate of income tax is paid will be reduced from £150,000 to £125,140, although different rates apply in Scotland.
- The income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds will be frozen until April 2028, something which will result in more people paying more tax as a result of “fiscal drag” as wages increase.
- The windfall tax on oil and gas giants will increase from 25% to 35% and a 45% levy on electricity generators will help raise an estimated £14bn next year.
- Tax-free allowance for capital gains will reduce in 2023-24 from £12,300 to £6,000 and again to £3,000 in 2024-25.
- Electric vehicles will no longer be exempt from vehicle excise duty from April 2025, to make the motoring tax system “fairer”.
- Government spending will continue to increase in real terms every year for the next five years, but at a slower rate than previously planned.
- Stamp duty cuts announced in Kwasi Kwarteng’s mini-Budget will now be time-limited, ending on March 31 2025.
- The Government would protect the increases in departmental budgets already set out in cash terms for the next two years, meaning real-terms cuts due to inflation and pressure on public sector wages.
- The defence budget will keep meeting the Nato target of 2% of GDP but the overseas aid budget will not be returned to its goal of 0.7% of national income “until the fiscal system allows”.
- An extra £2.3bn per year will be invested in schools in England over the next two years.
- The implementation of social care reforms will be delayed for two years.
- The NHS budget in England will increase by an extra £3.3bn in each of the next two years.
