As it happened and live reaction: Jeremy Hunt’s Autumn Budget 2022: UK is now in recession
Welcome to City PM’s live updates as the Chancellor of the Exchequer, Jeremy Hunt, delivers the government’s Autumn Budget for 2022.
Here the news team will bring you all the key points, policy changes, opinion, analysis, responses from experts, industry reaction and more.
Get in touch and let us know your views via [email protected] or @Cityam – Find more coverage here.
Chancellor Jeremy Hunt faced a daunting task, trying to balance the books in an historic Autumn statement. He found himself – and the country – gripped by weaker than expected economic growth, high inflation and a huge energy bill subsidy scheme has burnt an around £55bn hole in the public finances.
REACTION: How was the budget received?
Hospitality
Pubs and restaurant bosses have slammed the autumn statement as offering little comfort to the sector, particularly on vast hikes to energy bills.
The current energy business relief scheme presently offered some support but, for many firms, was having “a limited impact” in mitigating huge cost increases, the British Institute of Innkeeping said. “Energy price rises are crippling these vital and viable businesses, the industry group’s CEO Steve Alton said.
The government’s support scheme only addresses a discount on actual energy usage, meaning that costs such as management fees and standing charges have been lifted. Bills have risen in real terms by far more than 200 per cent and in some cases up to 700 per cent in comparison to 2021, Alton said. (By Emily Hawkins
National Insurance
The Institute of Directors welcomed the budget’s move to maintain a lower rate of employers’ national insurance and remove tariffs on key imports.
R&D
The Chancellor cut the rate of research and development (R&D) tax relief for small businesses, in a “hugely disappointing” move for startups.
IoD accused Jeremy Hunt of trying “deliberately to weaken R&D incentives for smaller companies in the name of efficiency”.
In his Autumn budget, Jeremy Hunt slashed the relief from 14.5 per cent to 10 per cent, which may see the UK’s SMEs struggle to secure enough funding for R&D, according to the legal director of law firm Pinsent Masons, Penny Simmons.
“The SME tax reliefs can provide a vital source of financing to start-ups,” said Simmons. “Without access to the cash repayment, many start-ups may struggle to secure adequate funding to progress R&D and ultimately new UK based innovations.”
Kitty Ussher, Chief Economist at the Institute of Directors, said: “Business leaders were so dismayed by the fall-out from September’s mini budget that the bar for judging today’s announcements was set pretty low. To that end it was good to see joined-up working between the OBR and the Treasury this time round.
Ussher added that “in the longer term, today’s Autumn Statement will be judged on whether it set the stage for a sustained period of growth once the current difficulties have eased.”
Tax rises slammed by small firms
The National Chair of the Federation of Small Businesses (FSB), Martin McTague, criticised measures in the budget as being “high on stealth-creation and low on wealth-creation”.
He said it means “piling more pressure on the UK’s 5.5 million small businesses, their employees and customers.”
On policies to tackle inflation, he called it a “missed opportunity to avoid further economic slowdown” adding that “small businesses, which account for more than 16 million jobs in the UK, were already facing an acute cost of doing business crisis through soaring costs, falling revenues, shrinking availability of affordable finance, and a rise in invoices being paid late.
“On top of all that, they now face even higher taxes, cuts to innovation, and a recipe for a longer and deeper recession.
Income tax
Hunt also came in for criticism after announcing a reduction in the threshold at which taxpayers start paying the top 45 per cent rate of income tax to £125,140, down from £150,000.
Neela Chauhan, partner at accountancy firm UHY Hacker Young said it was a “major attack by the Chancellor on higher earners. It’s going to bring in people into the upper rate who feel that they are far from being rich.”
“The £150,000 rate was only introduced in the first place as an emergency response to the Global Financial Crisis and HMRC soon came to rely on it for its normal income. Now it’s gone a major step further and dragged many more people into that tax band.”
Energy
With energy giants raking in record profits amid soaring oil and gas prices, Jeremy Hunt announced a massive £30bn-plus tax grab on domestic energy producers. It also committed further funding for a nationwide drive to boost the energy efficiency of people’s homes.
“The chancellor is asking people to wait another three years to get their home insulated when they urgently need help now. Promises for after the next election isn’t good enough”, said Sam Alvis, head of economy at Green Alliance.
“Today was more about raising money than spending it. It’s right that oil and gas companies are being asked to pay more, but it’s still unclear why the UK isn’t levying the same tax rate as Norway.”
Meanwhile RenewableUK’s CEO Dan McGrail said “this windfall tax on low carbon power risks deterring investment, at a time when the Chancellor should be incentivising clean energy. Unlike in oil and gas, under this levy companies which are making significant investments in renewables will get no tax relief and will be hit by a higher windfall rate.”
AUTUMN BUDGET – AS IT HAPPENED
12.25 – Labour’s shadow Chancellor Rachel Reeve steps up to the despatch box.
Rachel Reeves slamed Sunak’s plans, saying “Britain’s problems started well before the pandemic struck and Russia invaded Ukraine.
“We are the only G7 country that is still poorer than before the pandemic.
“As the Governor of the Bank of England told the Treasury Select Committee yesterday, the US has grown by 4.2 per cent since the pandemic.
“The GDP of Eurozone countries is 2.1% higher, and yet the UK economy is 0.7 per cent smaller than at the start of the pandemic.
“We aren’t recovering, we’re heading to recession.
“This government has forced our economy into a doom loop – where low growth leads to higher taxes, lower investment, squeezed wages and the running down of public services.
“All of which hit growth again. And instead of learning from the mistakes of the last decade, they’re simply repeating them.
“We need to break free from this vicious cycle of stagnation, with fairer choices and a proper plan for growth.”
12:10: “Energy efficiency is just as important. So today, we set our country a new ambition: by 2030, we want to reduce energy consumption from buildings and industry by 15 per cent.
“Today, I’m announcing new funding, from 2025, of a further £6bn – doubling our annual investment to deliver this new national ambition. Our commitment to the British people is, over time, to remove this single biggest driver of inflation and volatility facing British businesses and consumers.”
He added the government will “publish further details on our energy independence plans and launch a new Energy Efficiency Taskforce shortly.”
12.07: Jeremy Hunt says: “Putin’s weaponisation of international gas prices has helped drive up the cost of our national energy consumption. This year we will be spending an extra £150bn on energy compared to pre-pandemic levels, equivalent to paying for an entire second NHS through our energy bills.”
“In 2019, a third of global emissions came from the energy supply so unless we radically change our approach we will both bankrupt our economy and harm our planet.
On renewables, he said “last year nearly 40 per cent of our electricity came from offshore wind, solar and other renewable sources. ‘
“I can today announce that the government will proceed with the new plant at Sizewell C. Subject to final government approvals, the contracts for the initial investment will be signed with relevant parties, including EDF, in the coming weeks.
“It will create 10,000 highly skilled jobs and provide reliable, low-carbon, power to the equivalent of 6 million homes for over 50 years. Our £700 million investment is the first state backing for a nuclear project in over 30 years and represents the biggest step in our journey to energy independence.”
Midday: “The NHS: Its “budget has been increased to record levels to deal with the pandemic and today I am asking it to join all public services in tackling waste and inefficiency. We want Scandinavian quality alongside Singaporean efficiency, both better outcomes for citizens and better value for taxpayers.
“ I have asked former Health Secretary and Chair of the Norfolk and Waveney Integrated Care System Patricia Hewitt… …to help me and the Health Secretary achieve that by advising us on how to make sure the new Integrated Care Boards work properly with appropriate autonomy and accountability. I have also had discussions with NHS England about the inflationary pressures on their budget.
I recognize that efficiency savings alone will not be enough to deliver the services we all need. So because of difficult decisions taken elsewhere today I will increase the NHS budget, in each of the next two years, by an extra £3.3 bn.
the UK, like other countries, is now in recession. Overall this year, the economy is still forecast to grow by 4.2 per cent.
Jeremy Hunt
“The Chief Executive of the NHS, Amanda Pritchard, has said this should provide sufficient funding for the NHS to fulfil its key priorities and shows the government is serious about its commitment to prioritise the NHS. That is why today we commit to a record £8 bn package for our health and social care system – a Conservative government putting the NHS first.
11.48: “I have no objection to windfall taxes if they are genuinely about windfall profits caused by unexpected increases in energy prices. But any such tax should be temporary, not deter investment and recognise the cyclical nature of many energy businesses. Taking account of this, I have decided that from January 1st until March 2028 we will increase the Energy Profits Levy from 25 per cent to 35 per cent.”
” The structure of our energy market also creates windfall profits for low-carbon electricity generation so, from January 1st, we have also decided to introduce a new, temporary 45 per cent levy on electricity generators. Together these taxes raise £14bn next year. “
11.41: On personal taxes: “Asking more from those who have more means that the first difficult decision I take on tax is to reduce the threshold at which the 45p rate becomes payable from £150,000 to £125,140. Those earning £150,000 or more will pay just over £1200 more a year.”
“We are also taking difficult decisions on tax-free allowances. I am maintaining at current levels the income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds for a further two years taking us to April 2028. Even after that, we will still have the most generous set of tax-free allowances of any G7 country.”
On the OBR forecast, he added that “GDP falls in 2023 by 1.4 per cent, before rising by 1.3 per cent, 2.6 per cent, and 2.7 per cent in the following three years. The OBR says higher energy prices explain the majority of the downward revision in cumulative growth since March.
“They also expect a rise in unemployment from 3.6 per cent today to 4.9 per cent in 2024 before falling to 4.1 per cent.
11. 36: “Richard Hughes and his team at the OBR today lay out starkly the impact of global headwinds on the UK economy and I am enormously grateful to him and his team for their thorough work.”
“The OBR forecast the UK’s inflation rate to be 9.1 per cent this year and 7.4 per cent next year. They confirm that our actions today help inflation to fall sharply from the middle of next year.
“They also judge that the UK, like other countries, is now in recession. Overall this year, the economy is still forecast to grow by 4.2 per cent.
11.33: “The Office for Budget Responsibility confirms global factors are the primary cause of current inflation. Most countries are still dealing with the fallout from a once-in-a-century pandemic.”
“The furlough scheme, the vaccine rollout, and the response of the NHS did our country proud – but they all have to be paid for.
“The lasting impact on supply chains has made goods more expensive and fueled inflation. This has been worsened by a Made in Russia energy crisis.
11.32 : “Three priorities then today: stability, growth and public services.”
“I start with stability. High inflation is the enemy of stability. It means higher mortgage rates, more expensive food and fuel bills, businesses failing and unemployment rising. It erodes savings, causes industrial unrest, and cuts funding for public services. It hurts the poorest the most and eats away at the trust upon which a strong society is built.
11.31 – “In the face of unprecedented global headwinds, families, pensioners, businesses, teachers, nurses and many others are worried about the future. So today we deliver a plan to tackle the cost-of-living crisis and rebuild our economy. Our priorities are stability, growth, and public services.
“We also protect the vulnerable because to be British is to be compassionate and this is a compassionate Conservative government.”
11.30 – Jeremy Hunt arrives at the despatch box in Parliament for the Autumn budget
Today’s editorial can be read here: Autumn Statement: Jeremy Hunt’s bitter medicine may be too harsh
Where did we stand?
Economics and markets reporter Jack Barnett runs through where we stood ahead of the budget: