Autumn statement 2022 live: OBR says living standards to fall 7% as Hunt confirms millions to pay more taxes | Politics

Hunt has delivered “a budget that boils the frog”, says Genevieve Morris, head of tax at Blick Rothenberg.

That’s because the decision to freeze tax thresholds, rather than lift them in line with inflation, means millions of people will pay more tax due to “fiscal drag”.

Morris says:

The continued freezing of tax thresholds means most people won’t notice it directly as the temperature increases, and so won’t leap out of the water.

They’ll simply discover years down the line that they boiled.

Smaller companies are also getting the scalded-amphibian treatment, because Hunt froze the VAT registration threshold at its current level until March 2026.

Martin McTague, chair of the Federation of Small Businesses, has criticised Hunt’s announcement, saying:

“Today’s Budget is high on stealth-creation and low on wealth-creation, piling more pressure on the UK’s 5.5 million small businesses, their employees and customers.

He adds:

Stealthily freezing the VAT threshold at a time of sky-high inflation will both drag more struggling small firms into scope for the tax, while disincentivising others from growing.

FSB’s research shows one-in-four (24%) of small firms and the self-employed are held back by the VAT threshold.

McTague also warns that Hunt has pushed up the cost of employing people – at a time when unemployment is already expected to rise by 505,000:

Freezing the threshold for employer national insurance at a time of such high inflation is a stealthy hike in the jobs tax, just as recessionary pressures threaten an increase in unemployment.

Alongside the understandable rise in the Living Wage, this budget will ramp up the costs of employment without offsetting that with measures to reduce other business costs

As Paul Johnson, the head of the Institute for Fiscal Studies thinktank points out, the figures in the Office for Budget Responsibility report show that the reason why the chancellor is needing to cut spending and put up taxes so drastically is because the cost of government debt interest – the amount it has to pay to service its borrowing – has gone up enormously this year.

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Referring to the graph in Johnson’s first tweet, the OBR says:

Debt interest spending (net of asset purchase facility, or APF, flows) more than doubles in cash terms from £56.4bn (2.4 per cent of GDP) last year to peak at £120.4bn this year (4.8 per cent of GDP), the highest since immediately following the second world war both as a share of GDP and as a share of revenue (12.0 per cent).

Johnson says this explains the background to the autumn statement.

UK house prices are expected to have fallen by 9% in two years’ time.

The Office for Budget Responsibility predicts that the jump in mortgage rates will cool the market, while the recession will also hit demand.

The OBR says:

House prices are forecast to fall by 9.0% between the fourth quarter of 2022 and the third quarter of 2024, largely driven by significantly higher mortgage rates as well as the wider economic downturn

That means the house price correction will be well under way when the next election could be taking place in 2024.

Prices are then expected to recover slowly, and “remain below their current level for the next five years”, the OBR adds:

Both Nationwide and Halifax have reported that house prices fell in October, as the mini-budget spooked buyers.

Looking further ahead, property agent Emma Fildes of Brickweaver predicts a jump in sales in 2025, when Jeremy Hunt has announced the stamp duty cuts from the mini-budget will end.

Bulb bailout cost hits £6.5bn

Alex Lawson

The cost of bailing out failed energy supplier Bulb has ballooned to £6.5bn, it has emerged.

Documents released alongside the autumn statement show that £4.6bn will be spent on handling the company in 2022-23. In March, the Office for Budget Responsibility said the rescue would cost £2.2bn over two years.

Bulb, which has around 1.5 million customers, collapsed in November last year and was put into a special government-handled administration.

The government has faced criticism for not allowing the company to buy power ahead, exposing it to volatile gas prices.

Bulb was bought by rival Octopus Energy late last month in a deal that founder Greg Jackson vowed would be a “fair deal” for taxpayers.

However, it is still awaiting court approval after rival suppliers complained over a lack of transparency over the terms of the acquisition.

Unemployment is set to rise by more than half a million, as the UK falls into recession.

The OBR predicts that the jobless total will rise by 505,000 from 1.2 million at present to 1.7 million at its peak.

The fiscal watchdog says:

We expect the rise in unemployment to lag the fall in GDP as vacancies are likely to fall first before workers are laid off.

What autumn statement means for climate crisis challenge – analysis

Damian Carrington

Ramping up energy efficiency is a no-brainer when it comes to cutting energy bills, ensuring security of supply and reducing climate-heating emissions. In Jeremy Hunt, the Conservatives appear to have found a brain. In the autumn statement, he pledged to double annual energy efficiency investment with new funding of £6bn.

That is the good news. The bad news is that doubling does not happen until 2025, when the energy bills crisis may well be over and the climate crisis will be even worse. Hunt is the fourth chancellor of 2022 and the chaos in the Tory party has meant unnecessary delays in making people’s homes warmer and cheaper to heat.

The trouble goes back almost a decade in fact, when David Cameron’s ditching of “green crap” resulted in insulation rates falling by 95%, a decision that has cost billpayers billions. Details of the new efficiency plans are yet to be published but will include a new “energy efficiency taskforce”. Its goal will be to reduce the UK’s energy use in buildings and industry by 15% by 2030, a fairly modest ambition.

On the supply of low-carbon energy, Hunt backed expensive nuclear power as well as offshore wind, but said nothing on the fastest and by far the cheapest sources – onshore wind and solar. With blocks on the latter, the Tories continue to be wildly out of tune with voters.

Hunt increased the windfall tax on soaring oil and gas profits from 25% to 35%, making the total tax rate 75%. That may look high, but remember that the oil and gas belongs to the nation – you and me – not the fossil fuel companies, and other nations like Norway have higher rates. A windfall tax on electricity producers of 45%, including wind, solar and nuclear, was also announced by Hunt. Depending on how that is implemented, the green energy companies could end up being taxed more than the fossil fuel producers. That would be mad when green energy is the solution to the energy and climate crisis, and while oil and gas firms can get 91% tax rebates by investing in more oil and gas.

Electric car sales are in the fast lane and Hunt announced that from 2025 owners will need to start paying vehicle excise duty, also known as road tax. That is a disincentive to go electric but by that date electric cars will not only be cheaper to run, as they already are, but also very probably cheaper to buy than petrol or diesel models.

On climate change, Hunt said: “With the existential vulnerability we face, now would be the wrong time to step back from our international climate responsibilities. So I can confirm that, despite the economic pressures, we remain fully committed to the historic Glasgow climate pact agreed at Cop26, including a 68% reduction in our own emissions by 2030.” The government is not currently on track to meet this target.

The autumn statement’s purpose was to find £55bn in tax rises and spending cuts to stabilise the UK economy. To put that in context, that’s about 18 days’ worth of the pure profit the global oil and gas industry has been banking for the last 50 years.

Rachel Reeves, the shadow chancellor, told MPs that the Tories had put the economy into a “doom loop” in her speech responding to Jeremy Hunt. She said:

Nobody doubts that the Covid pandemic and the war in Ukraine have had profound implications and the whole house is united in its condemnation of Russia’s aggression.

But Britain’s problems started before the Covid pandemic and they started before Russia’s illegal invasion of Ukraine. The UK has grown by an average of 1.4% a year under the Conservatives compared to 2.1% a year in the Labour years before that.

We are the only G7 economy that is still poorer than before the pandemic.

The chancellor is saying today he will be honest, so let’s be honest: no one was talking about cuts to public spending two months ago and no other advanced economy is cutting spending or increasing taxes on working people as they head into recession.

This government has forced our economy into a doom loop where low growth leads to higher taxes, lower investments and squeezed wages, with the running down of public services – all of which hits economic growth again.

She joked that police around Westminster were warning people about pickpockets. Pickpockets managed to trick people by appearing to be friendly, the police say. Reeves went on:

In the last hour, the Conservatives have picked the pockets and purses and wallets of the entire country as the chancellor has deployed a raft of stealth taxes taking billions of pounds from ordinary working people. A Conservative double whammy that sees frozen tax thresholds and double-digit inflation erode the real value of people’s wages. Just one of those freezes, in the personal allowance, will cost an average earner more than £600.

She also said the Tories were treating people like fools by claiming not to be responsible for the events of the past 12 years.

The chancellor and prime minister are trying to convince us that Britain faces problems that are nothing to do with them, that the mini-budget – which imposed a Tory mortgage premium, put pensions in peril and trashed our reputation around the world – was all just a bad dream.

It’s their Bobby Ewing strategy. Downing Street as Dallas. Old cast members return as if nothing has happened, with tangled plotlines to keep the audience.

But the truth is it has lost all credibility and everyone knows it is long past time that this series was cancelled.

And the problem for the British people is this: this is not a dream, this is the everyday nightmare of Tory Britain.

The Conservatives would have us believe that they are not responsible for the last 12 years of failure. In doing so they take the British people for fools.

The UK national debt is on track to be £400bn higher than forecast in March, the OBR says.

The OBR predicts that the UK’s recession will last about a year, with GDP falling about 2%.

That’s a relatively shallow recession, and shorter than the Bank of England warned of this month.

But it’s dire enough – and it will mean that the UK economy will not reach its pre-pandemic size until 2024.

That means an entire parliament of lost growth.

In comparison, the US economy reached its pre-pandemic size last summer.

Other G7 nations are also larger than before the pandemic – although some also face the risk of recession.

As Hunt sat down, the Office for Budget Responsibility released its latest economic and fiscal outlook.

It’s grim.

The OBR says that despite the new support with energy bills, living standards are going to fall by 7% over the next two years.

That’s a dire outcome, wiping out eight years of growth.

The OBR says:

Over £100bn of additional fiscal support over the next two years cushions the blow of higher energy prices – but the economy still falls into recession and living standards fall 7% over two years, wiping out eight years’ growth.

Over the medium term, around £40bn in tax rises and spending cuts – in roughly equal measure – offsets higher debt interest and welfare costs and gets debt falling as a share of GDP.

The fall in living standards next year will be the biggest on record, so since at least the mid-1950s, the OBR adds:

On a fiscal year basis, RHDI per person (a measure of living standards) falls by 4.3% in 2022-23, which would be the largest since ONS records began in 1956-57.

That is followed by the second largest fall in 2023-24 at 2.8%.

This would be only the third time since 1956-57 that RHDI per person has fallen for two consecutive fiscal years – the last time this happened was in the aftermath of the global financial crisis.

This chart shows the scale of the hit to living standards, as inflation hammers households.

Hunt ends by confirming that benefits and pensions will rise in line with inflation.

Benefits will go up in line with the inflation rate in September, 10.1%, he says. He says this will cost £11bn, but an average family on universal credit will gain by £600, he says.

Mr Speaker, there have also been some representations to keep the uplift to working age and disability benefits below the level of inflation given the financial constraints we face, but that would not be consistent with our commitments to protect the most vulnerable. So today I also commit to upgrade such benefits by inflation with an increase of 10.1%.

And pensions, and pension credit, will also rise by 10.1%, he says. The triple lock is being protected, he says.

He ends by saying:

This is a balanced plan for stability, a plan for growth and a plan for public services.

It shows that you don’t need to choose either a strong economy or good public services.

With Conservatives, and only with Conservatives, you get both.

Hunt says he is accepting a recommendation from the Low Pay Commission and increasing the national living wage by 9.7% next year.

That means from April 23, the hourly rate will be £10.42 which represents an annual pay rise worth over £1,600 pounds to a full time worker.