UK Autumn Statement: What to expect in today's budget

With inflation above 10 per cent, Thursday’s autumn statement is a chance for the government to impose a succession of tax rises and spending cuts

Prime Minister Rishi Sunak, left, and Chancellor Jeremy Hunt have warned the new budget will be tough. AFP
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UK Prime Minister Rishi Sunak and Chancellor Jeremy Hunt are putting the final touches on a budget that promises to be all pain and hardly any gain.

With inflation above 10 per cent, Thursday’s autumn statement is a chance for the government to impose a succession of tax rises and spending cuts to tackle the economic black hole facing the country.

As people face skyrocketing bills, rising Bank of England interest rates and an economy teetering on the edge of recession, Mr Sunak’s administration has blamed the chaos on the short-lived Liz Truss premiership — but the problems date back longer that.

Here are some of the measures expected to be announced.

Taxes

Council tax

Council tax rules are expected to change, allowing local authorities the chance to make steeper increases, the BBC reported.

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.

The money could be earmarked for social care, The Telegraph reported.

Windfall taxes

Electricity generation and exploration companies working in the North Sea can also expect higher taxes.

They have received huge profits this year as energy prices spiked on the back of the war in Ukraine and cost-of-living increases.

Mr Hunt is looking at a 40 per cent tax on “excess returns”.

He is also planning to raise another tax on oil and gas companies working in the North Sea from 25 per cent to 35 per cent and extend its expiration date from 2026 to 2028, The Guardian said.

Stealth taxes

One way to increase the tax paid is to push more people into higher tax brackets.

An expected 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.

The same could happen with national insurance, value added tax (VAT), inheritance tax and pensions savings.

The Times has reported a planned lowering of one threshold, so that people pay a 45p tax rate at £125,000, down from £150,000.

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.

The BBC suggested exemptions are likely to be dropped, making a wider base of tax — another change to threshold levels that garners more tax income.

Spending cuts

The chancellor is looking at filling about half of the budget shortfall with a freeze in public spending for government departments, The Financial Times has reported.

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

Health and social care

It is likely that the introduction of a health and social care levy will be postponed, the BBC reported.

A group of charities has warned 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.

Pensions

To see how badly pensioners might be affected, watch for the fate of the triple lock.

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

Mr Hunt has not promised that the lock is exempt from changes but Mr Sunak has hinted he is aware of the problems for pensioners.

“I am someone who understands the particular challenge of pensioners. They will always be at the forefront of my mind,” Mr Sunak said.

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 £10.40 an hour, The Times reported.

The government is also looking at cost-of-living payments worth up to £1,100 to about eight million households.

Energy bills

Mr Hunt clarified on Tuesday that “the energy price support that we give to families will not end from next April”.

Stamp duty

A permanent stamp duty cut was one of the few measures in the Liz Truss-Kwasi Kwarteng 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 in cash terms from £47.9 billion this year to £48 billion in 2023 and £48.6 billion in 2024, The Daily Mail reported.

Updated: November 17, 2022, 11:56 AM
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