Autumn Statement: What's expected and how it could help or hinder you

Jeremy Hunt will deliver his autumn statement on Wednesday. Credit: HMT

By Lewis Denison, Westminster Producer

The chancellor is set to deliver his autumn statement on Wednesday, setting out his plans for government's finances across the next year.

It's Jeremy Hunt's chance to update the public on the state of the UK economy, announces changes to taxation and set out spending plans.

Ministers had been managing expectations ahead of the statement, warning the finances were too tight for any large giveaways, but an unexpected fall in the level of inflation means Rishi Sunak and the chancellor have more fiscal headroom to play with. 

Despite inflation - at 4.6% - being significantly higher than the Bank of England's 2% target, it has halved since the start of the year - meaning Mr Sunak has achieved his goal and wants to show that to the public with tax cuts.

He used a speech on Monday to promise tax cuts and pledged to “reward hard work” in what appeared a clear signal of intent on benefits and personal taxes.

What to expect

  • What is the autumn statement and when will it be?

There are usually two fiscal events in a parliamentary year, the first being the main budget, also known as the spring statement. The second is the autumn statement, which is meant to be an update but can still contain large announcements.

The chancellor will deliver the autumn statement on Wednesday at around 12:30pm. It will take place immediately after Prime Minister's Questions and it will last for around an hour.

There will then be a debate to follow.

  • National Living Wage and Minimum Wage to increase

The Treasury announced on Tuesday that the National Living Wage and the National Minimum Wage will rise next year.

The National Living Wage - currently the minimum hourly pay a person over the age of 23 earns when working - will increase by £1.02 per hour.

It will go up from £10.18 to £11.44 in April, marking the biggest increase in more than a decade. And for the first time, the age threshold will be reduced to 21-year-olds.

National Minimum Wage rates for 18-20 year olds will also get a wage boost to £8.60 per hour – a £1.11 hourly pay bump.  

ITV News Business and Economics Editor Joel Hills has the latest on what to expect in the Autumn Statement

  • Personal tax cuts

It's clear the government is planning to announce tax cuts on Wednesday, given Mr Sunak's speech in which he repeatedly mentioned them. What's less clear is who he will choose to help.

ITV News Political Editor Robert Peston, who was at the speech, believes there will "definitely" be personal tax cuts, most likely on income tax or national insurance.

"If he doesn’t the PM will look incredibly foolish for saying this morning, repeatedly, that the moment has come to start cutting taxes," he said.

Peston said he expects personal tax cuts because the PM "knows most voters don’t see the extension of capital allowances for business (though important and expensive) as tax cuts that matter to them".

Mr Sunak said on Monday: “I promised you we would have inflation. We took the difficult decisions and we have delivered on that promise. So now you can trust me when I say that we can start to responsibly cut taxes".

Given Mr Sunak said he was set to reward Britons after struggling through months of high inflation, Peston believes it is unlikely he would not do so through a personal giveaway.

However something else he said suggests there could be giveaways for business.

  • Business tax cuts

"We will prioritise, we will be disciplined and our focus is very much the supply side and growing the economy," said Mr Sunak when talking about tax cuts on Monday, suggesting business relief.

Mr Hunt has insisted he will be “responsible with the nation’s finances”, but his statement on Wednesday will “focus on how we boost business investment and get people back into work”.

While ministers are still refusing to give anything away, ITV News has had it confirmed that business tax cuts are being considered.

Mr Hunt made clear that his “priority is backing British business” after promising an “autumn statement for growth”.

Mr Hunt said: “We met our pledge to halve inflation, but we must keep on supporting the Bank of England to drive inflation down to 2%.

“That means being responsible with the nation’s finances.

“At my autumn statement tomorrow, I will focus on how we boost business investment and get people back into work to deliver the growth our country needs.”

  • Inheritance tax

Slashing inheritance tax – potentially by half – would be popular with the Tory right as Mr Sunak comes under growing pressure from that wing of his party, but would only directly benefit a small proportion of the public.

Only about 4% of deaths in 2020/21 resulted in inheritance tax being paid, with exemptions allowing many couples to pass on up to £1 million tax-free.

Inheritance tax is charged at 40% on estates of more than £325,000, with an extra £175,000 towards a main residence passed to direct descendants.

The Conservatives are said to be considering cutting it in half before a potential promise to abolish it entirely in the next Tory manifesto, which could cost £7 billion a year in the short term.

  • Benefits boost and pensions triple lock

Benefits payments will increase as planned in line with September's figure of 6.7% and the pension's triple lock will be protected.

Welfare payments are uprated each April in line with the inflation rate the previous September, however there had been talk of increasing benefits with October's lower rate of 4.6% - which would be equivalent to a £3bn cut according to the Institute for Fiscal Studies.

Mr Hunt has reportedly chosen not to make this saving, given the optics of rewarding workers while penalising those unable to work.

And the pensions triple lock will be linked to the normal earnings rate of 8.5%.

The Treasury has also ruled out a change to the winter fuel allowance in the autumn statement, with a spokesman saying: “This is not something we are going to do.”

  • Benefits overhaul to get more people working

The chancellor is expected to announce a benefits shake-up that would see those with mental health or mobility problems told to search for work which is possible to do from home.

Free prescriptions and legal aid will be cut off for benefit claimants who are deemed fit to work and do not seek employment, while the Treasury said digital tools will also be used to “track” attendance at job fairs and interviews under the toughened sanctions regime.

The Department for Work and Pensions put out a consultation on the proposals in September and would be the latest bid by the government to get hundreds of thousands of people back into work.

Mr Sunak said he also wants to tackle benefits cheats.

He said it was a “national scandal” that around two million working-age people were not in employment.

“We believe in the inherent dignity of a good job, and we believe that work, not welfare is the best route out of poverty,” he said.

“Yet right now around two million people of working age are not working at all. That is a national scandal, an enormous waste of human potential.

“So we must do more to support those who can work to do so, and we will clamp down on welfare fraudsters because the system must be fair for taxpayers who fund it.”

Summarising his plan, he said: “Work for those who can, a generous safety net for those who can’t and tougher penalties for fraudsters.

“That is what a compassionate Conservative welfare system looks like.”

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