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UK Financial Adviser

Autumn Statement 2022 Summary

 

At 11:30 on the 17th of November 2022, Chancellor Jeremy Hunt presented his Autumn Budget to parliament.

It was a comprehensive Budget that, at times, sounded like a ‘State of the Union’ address covering policy in all areas.

These are the key changes.

*Source: Sky News, The Guardian, Bloomberg, The Telegraph

Economy & Fiscal Commentary

  • OBR forecasts: The Office for Budget Responsibility (OBR) says it predicts that the UK’s inflation rate will be 9.1% this year and 7.4% next year. Inflation peaks at 11% this quarter.
  • The OBR has ruled that the UK is in recession: GDP is to grow by 4.2% this year then will fall 1.4% in 2023, before rising again by 1.3%, 2.6% and 2.7% in the following three years.
  • Unemployment will rise from the current 3.6% to 4.9% in 2024, falling to 4.1% over the longer term.
  • Borrowing to hit 7.1% of GDP, or £177bn, in 2022/23 and 5.5% of GDP, or £140bn, next year and predict a fall in 2027/28 to 2.4% or £69bnDebt is expected to hit a peak of 97.6pc of GDP in 2025-26, a 63-year high, before falling to 97.3pc in 2027-28.
  • New fiscal rules: Underlying debt must fall as a percentage of GDP by the fifth year of a rolling five-year period. Public Sector borrowing over the same period must be lower than 3% of GDP. The new budget meets both rules. This means a consolidation of £55bn and means inflation remains significantly lower.

Taxes & Reliefs

  • Income tax thresholds frozen: Freezes to tax thresholds will mean millions of people will be paying more tax on their incomes over time. The point at which the highest earners start paying the top rate of tax will be lowered from £150,000 to £125,140, dragging hundreds of thousands of workers into the highest tax band.
  • Tax-free allowances:
  1. Dividend allowance cut from £2,000 to £1,000 next year and £500 in 2024
  2. CGT allowance cut from £12,300 to £6,000 then to £3,000 from April 2024
  • Inheritance tax: A freeze on rates will be extended until 2027-28, meaning a rate of 40% will be paid on estates worth more than £325,000 for an individual and £650,000 for a couple
  • Vehicle tax: Electric vehicle exemption to be removed
  • Stamp Duty: Cuts remain in place until 2025
  • Windfall taxes: Targeting the profits of energy companies is being extended. The profits levy will rise from 25% to 35%

Public Spending

  • NHS Budget: Increase in NHS budget by £3.3bn to assist with inflationary pressures
  • Schools will be given an extra £2.3bn in both 2023/24 and 2024/25
  • International aid: Not possible to restore the aid budget to 0.7% of GDP in current circumstances
  • Infrastructure Spending: Northern Powerhouse rail & HS2 to continue. Sizewell C nuclear power plant construction to go ahead
  • Research and development spending has also been protected and will hit £20bn by 2024/25

Cost of Living

  • National Living Wage: There will be an increase in the National Living Wage from the current level of £9.50 an hour for those over 23s to £10.42 from April 2023
  • Energy Price Guarantee will reduce in generosity. Increasing the cost of annual gas & electricity an average household spends to £3,000 from £2,500 in April 2023. This will run for 12 months from April. Without continuing Gov support, analysts believe this figure would have hit £3,700
  • Cost of Living Support: Additional £900 one-off support to be paid to those on means-tested benefits, £300 to pensioner households & £150 to those on disability benefits
  • Benefits (inc. State Pensions): to rise in line with September inflation (10.1%)
  • Rent Controls: rises in the social sector (Council Houses etc.) capped at 7% for the next financial year, saving the average tenant £200 next year

Written by: Shaun Pearce & Sam Hallett

Date: 17 November 2022

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