What did the chancellor announce and how was it received? iTV News Deputy Political Editor Anushka Asthana reports.
Chancellor Jeremy Hunt has confirmed the UK is now in a recession as he set out £55 billion of tax hikes and spending cuts in his highly-anticipated Autumn Budget.
Confirming increased energy bills, high inflation and tax increases, the chancellor warned: "Anyone who says there are easy answers are not being straight with the British people."
Following what was slammed as an "austerity" budget, the pound dropped sharply against the US dollar in the wake of the gloomy forecasts from the independent fiscal watchdog, the Office for Budget Responsibility (OBR).
Household disposable income will drop by more than 7% over the next two years, according to the OBR - the biggest fall since records began.
This cumulative fall is large enough to wipe out the past eight years of growth and would see disposable income back to the level it was in 2013/14, says the OBR.
It added the economy will shrink even further by 2% next year due to sky-high inflation, while government debt is set to balloon £400 billion higher than previously expected.
ITV News Economics Editor Joel Hills analyses the UK's economic outlook following the chancellor's budget.
Paul Johnson, director of the Institute for Fiscal Studies (IFS), told ITV News: "For people in work - really pretty grim times in terms of their living standards. It means we are all going to be worse off."
He said the government "is doing a fair bit to protect" the pensioners and those on benefits but for those on "average" earnings - a salary between £20,000 and £40,000 per year - it is going to be "a very tough couple of years".
'We're all going to be worse off' - Paul Johnson, IFS director
For those in lower-paid jobs who aren't on benefits, many of their earnings will not keep pace with increased mortgage interest rates and rents, Mr Johnson warned.
Mr Hunt had been under pressure to restore the UK's economic credibility and stability following the fallout from Liz Truss and Kwasi Kwarteng's disastrous mini-budget, which plunged the country into financial turmoil.
The fourth chancellor of the year said he was delivering a “balanced path to stability” which involves “taking difficult decisions” to fill what has been described as the UK's financial "black hole" to keep mortgage rates low and to tackle rocketing energy and food prices.
Mr Hunt promised his budget will prioritise “stability, growth and public services”, as inflation hit a 41-year high on Wednesday at 11.1%, with food rising at an annual rate of 16.5% - intensifying the cost of living crisis.
“High inflation is the enemy of stability. It means higher mortgage rates, more expensive food and fuel bills, businesses failing and unemployment rising," he told the Commons.
“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.”
He vowed to help the most vulnerable because “to be British is to be compassionate and this is a compassionate Conservative government" - a comment met with jeers and laughs from MPs.
But Labour's Rachel Reeves hit out at Mr Hunt saying "Scrooge" has cancelled Christmas for ordinary working people and “picked the pockets” of the entire country by deploying a “raft of stealth taxes”.
“The chancellor has even compared himself to Scrooge - he is asking working people to take the hit with less money in their pockets in the run-up to Christmas, but also for years to come," the shadow chancellor told the Commons.
"The mess we are in is the result of 12 weeks of Conservative chaos but also 12 years of Conservative economic failure," she said.
What was announced in the Autumn Budget?
Mr Hunt said his budget would “ask more from those who have more” as he announced the 45p income rate tax threshold will fall from £150,000 to £125,140. However, different rates apply in Scotland.
This means those earning £150,000 or more will pay just over £1,200 more a year, he said. The Treasury estimates an extra 232,000 people will be paying the top rate of income tax from April.
The chancellor also skimmed over a small-print change to council tax rules during his statement that could see council tax bills jump above a record £2,000 a year for the first time.
Although Mr Hunt did not directly address raising council tax in his statement, he said local authorities in England will be given "additional flexibility".
Local authorities will be able to increase council tax by up to 5% a year from April 2023 without a referendum - 3% for all local authorities and an additional 2% for local authorities with social care responsibilities.
The Treasury estimates that 95% of local authorities will hike rates by the maximum amount.
The shadow chancellor, Rachel Reeves, said the chancellor “seems to have confirmed today a council tax bombshell” and said people “will be forced to pay more because of the destruction that the Conservatives have reaped on our economy”.
Mr Hunt also announced that the income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds will be frozen until April 2028, something which will result in more people paying more tax as a result of “fiscal drag” as wages increase.
Tax-free allowance for capital gains will reduce in 2023-24 from £12,300 to £6,000 and again to £3,000 in 2024-25.
Mr Hunt further announced that electric vehicles will no longer be exempt from Vehicle Excise Duty from April 2025 to make the motoring tax system “fairer”.
Elsewhere on energy taxes, the chancellor said he will increase the Energy Profits Levy from 25% to 35% from January 1 to March 2028, and imposed a 45% levy on electricity generators to raise an estimated £14 billion next year.
Mr Hunt told the Commons: “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."
Shadow Chancellor Ms Reeves accused the government of still leaving “billions of pounds on the table”.
“Because they have failed to close a huge loophole that they created that hands out massive tax breaks to those oil and gas giants for doing the things that they were going to do anyway," she told the Commons.
NHS and social care
The NHS budget will be increased by an extra £3.3 billion in each of the next two years, he announced as part of a "record £8 billion package" for the health and social care system.
Mr Hunt said the NHS would publish an independently-verified plan for the number of doctors, nurses and other professionals needed in five, ten and 15 years’ time.
Devolved nations will also receive a cash boost for the NHS and schools - an extra £1.5 billion for the Scottish Government, £1.2 billion for the Welsh Government, and £650 million for the Northern Ireland Executive.
On social care, Mr Hunt said the increasing number of over 80s is putting “massive pressure” on services and he will delay the implementation of the Dilnot reforms for two years.
In a bid to free up some of the 13,500 hospital beds occupied by those who should be at home, Mr Hunt allocated for adult social care additional grant funding of £1 billion next year and £1.7 billion the year after.
Work, pensions and benefits
Mr Hunt confirmed he accepted a recommendation to increase the national living wage by 9.7%, making the hourly rate £10.42 from April 2023.
The government has also fulfilled its promise to protect the pensions triple-lock and confirmed that state pensions will rise in line with inflation.
For the poorest pensioners, the pension credit will increase by 10.1%. The Treasury calculates this would be worth up to £1,470 for a couple and £960 for a single pensioner.
A much called for review of the state pension age will be published in early 2023, it was confirmed.
The Treasury will also increase benefits. On average, a family on universal credit will benefit next year by around £600, he said.
"And to increase the number of households who can benefit from this decision I will also increase the benefit cap with inflation next year," he added.
However, 600,000 more people on Universal Credit will be asked to meet with a work coach to help increase their hours or earnings.
Mr Hunt also announced the government will invest an extra £2.3 billion per annum in British schools for the next two years.
However, he rejected calls to put VAT on independent school fees and said some estimates believe it could result in up to 90,000 children from the independent sector switching to state schools, adding: “Giving with one hand and taking away with another.”
The chancellor said he will cap the increase in social rents at a maximum of 7% in 2023/24, saving the average tenant £200 next year.
The stamp duty cuts announced in his predecessor's mini-budget will remain in place - but only until March 31, 2025, as he said the OBR expects housing activity to slow over the next two years.
Cost of living help
The cap on average household energy bills will increase from £2,500 to £3,000 from April.
But Mr Hunt said “this still means an average of £500 support for every household”.
The government will introduce additional cost-of-living payments for the “most vulnerable” with £900 for those on benefits, £300 for pensioners and £150 for those on a disability benefit, Mr Hunt said.
Mr Hunt said Vladimir Putin's "weaponisation" of international gas prices has helped "drive the cost of our national energy consumption right up".
"This year we'll be spending an extra £150 billion on energy... equivalent to paying for an entire second NHS through our energy bills," he said.
The chancellor unveiled plans for a new nuclear power plant which will create 10,000 jobs, while providing cheap, low carbon.
“It represents the biggest step to our journey in energy independence," he said.
Mr Hunt said he would continue to maintain the defence budget at “at least 2% of GDP” in line with the Nato target.
But the overseas aid budget will not be returned to its goal of 0.7% of national income “until the fiscal system allows”.
The chancellor told the Commons that he and the prime minister “both recognise the need to increase defence spending”, adding: “But before we make that commitment it is necessary to revise and update the Integrated Review, written as it was before the Ukraine invasion.
“I have asked for that vital work to be completed ahead of the next Budget and today confirm we will continue to maintain the defence budget at least 2% of GDP to be consistent with our Nato commitment.”
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