What is in the autumn statement 2022?

With inflation above 11 per cent, Thursday's statement imposed tax rises and spending cuts

Traders watch a broadcast of the autumn statement delivered to parliament. Bloomberg

UK Prime Minister Rishi Sunak and Chancellor Jeremy Hunt staked their future on a budget on Thursday that was all pain and only offered a glimpse of any gains.

With inflation above 11 per cent, the autumn statement was expected to impose tax rises and spending cuts to tackle the economic black hole facing the country. Mr Hunt said his main themes were stability, growth and public services. He said the country's woes were compounded by a rise in energy prices to eight times their historic average.

As people face skyrocketing bills, Mr Hunt said it was a “made in Russia energy crisis”. He said fiscal and monetary policy would work together, backing the Bank of England's independence and scope to raise interest rates.

He said the economy was now in recession and that growth would not return until 2024

Taxes

Income taxes

People will pay a 45p tax rate at £125,000, down from £150,000, and thresholds for all levels of income tax will be frozen until April 2028. One way to increase the tax paid is to push more people into higher tax brackets.

A freeze on the thresholds for income tax means more people fall above the tax threshold, as annual pay rises kick in over the next few months.

In this image made available by UK Parliament, Prime Minister Rishi Sunak, center left, and Chancellor of the Exchequer Jeremy Hunt, center right, after he delivered his autumn statement to lawmakers in the House of Commons, London, Thursday Nov. 17, 2022. (Jessica Taylor / UK Parliament via AP)

Windfall taxes

Electricity generation and exploration companies working in the North Sea also face higher taxes with the windfall rate raised to 35 per cent from 25 per cent. It is now expected to raise an average of £8.0 billion a year over four years, up from £5.5 billion a year

Profits this year have risen as energy have prices spiked on the back of the war in Ukraine and cost-of-living increases.

Mr Hunt is bringing in a 45 per cent tax on electricity generation from January 1.

The combined revenue increase is expected to be £14 billion.

Borrowing

The UK is to borrow 7.1 per cent of gross domestic product (GDP) this year, or £177 billion, up from the Office of Budget Responsibility (OBR) forecast of a deficit of 3.9 per cent of GDP, or about £98 billion.

Next year, the UK expects to borrow £140 billion or 5.5 per cent of GDP — again up from the 1.9 per cent or £50.4 billion predicted in March.

According to the Office of Budget Responsibility this has a substantial impact. "The Autumn Statement lowers borrowing by progressively larger amounts rising to £61.7 billion (2.1 per cent of GDP) in 2027-28. Net tax rises account for half of this tightening (£31.0 billion), with £19.4 billion coming from cuts to departmental current spending and £11.8 billion from cuts to departmental capital spending."

Capital gains tax

A tax that more often falls on the wealthier, it is the tax paid when an asset, such as shares or a second home, is sold.

Exemptions have been more than halved to £6,000 annually and will then drop again to £3,000 in successive years.

Dividend exemptions are also cut to £1,000 from next year and then will fall to £500 a year later.

Council tax

Council tax rules were changed, allowing local authorities the chance to make steeper increases.

For the average householder, council tax is expected to rise to more than £2,000. In the most expensive homes, it could be double that.

Current rules say councils need to hold a referendum if they want to raise the tax by more than 3 per cent, but that is expected to change and become as high as 5 per cent.

Spending cuts

The Chancellor is looking at filling about half of the £55 billion budget shortfall with a freeze in public spending for government departments.

It would set spending plans for three years that mean cuts in real terms and in services.

The Chancellor, Jeremy Hunt, works on his speech before the Autumn Statement in his office in No 11 Downing Street, London. All photos: Zara Farrar / HM Treasury

Mr Hunt is interviewed over details of his budget statement

The Chancellor faces anger from some Conservative Party members about the prospect of raising taxes to weather Britian's economic storm

Mr Hunt will insist to MPs that his financial plan puts the UK on a 'balanced path to stability'

Mr Hunt insists his strategy 'protects long-term economic growth' while showing compassion to the most vulnerable in society

Mr Hunt leaves TV studios after being interviewed

His package will stand in stark contrast to his predecessor Kwasi Kwarteng’s splurge of tax cuts, which further dented the UK’s finances

Health and social care

The introduction of a health and social care levy is postponed for two years despite a group of charities warning that the NHS and social care system are in the “most perilous position in memory”.

And a survey by the Association of Directors of Adult Social Services found 94 per cent of members said they did not have sufficient funding to meet the costs of care over the winter.

Council tax rises are likely to be the way social care is funded.

Education

The budget for schools is to rise by £2.3 billion in each of the next two years, taking total core spending to £58.8 billion every year.

Energy demand

The government announced energy efficiency plans and the launch of a task force to drive a 15 per cent reduction in demand by 2030. Mr Hunt said £6 billion in funding would be set aside to achieve this target.

Stamp duty

A reverse of the stamp duty cut was announced after 2025, unpicking one of the few measures in the Liz Truss-Kwasi Kwarteng mini-budget to survive.

There are new signs that the housing market is showing signs of weakness after the Bank of England raised interest rates and the number of mortgage approvals have reduced.

Defence

The defence budget is expected to rise but only after an Integrated Review overhaul is completed and delivered to the Chancellor. For now, the government remains committed to keeping defence spending at 2 per cent of GDP. On foreign aid, spending will not come back up to 0.7 per cent of national wealth but the government hopes to keep the level at 0.5 per cent.

Social support

Pensions

The triple lock, a guarantee that the state pension would rise by the highest out of inflation, earnings or by 2.5 per cent, was protected.

Mr Hunt said pension credits would increase by more than 10 per cent. There would be an £870 increase in the state pension from April.

Minimum wage

Expect a significant rise in the national living wage — potentially up nearly 10 per cent — but even that would be lower than inflation.

The national living wage rise could go from £9.50 an hour to about £10.42 an hour

The government is also looking at cost-of-living payments worth up to £900 to about eight million households.

Energy bills

Mr Hunt said the energy price guarantee would continue after April for a further 12 months at a higher household rate of £3000.