Autumn Budget: Jeremy Hunt unveils £24bn tax hikes with UK economy already in recession

Jeremy Hunt unveiled a brutal barrage tax hikes and spending cuts that will see everyone pay more today as he scrambles to shore up the government’s books. 

In a crucial Autumn Statement, the Chancellor warned Britons the country must make ‘sacrifices’ to weather turmoil at home and abroad. 

Mr Hunt said he was announcing a plan to ‘rebuild’ the finances and deal with ‘global’ problems, but would be ‘compassionate’ and show ‘British values’.  

The OBR watchdog is forecasting that the economy is already in recession and will shrink by 1.4 per cent next year, but Mr Hunt said taking ‘difficult decisions’ would mean a ‘shallower downturn’. 

All workers faces paying more in tax as a freeze on the personal allowance, basic and higher thresholds is extended to 2028, dragging people deeper into the system by ‘stealth’.  

Mr Hunt sought to show that the wealthy are being clobbered too, cutting the level at which the 45p top rate is due from £150,000 to £125,000 to catch another 250,000 people. In a blow to the property market, the Chancellor said previously-announced stamp duty cuts will be reversed in 2025.

Subsidies on energy bills are being downgraded to save money, with the average household bill likely to rise from £2,500 to £3,000 from April. Mr Hunt said the energy crisis was ‘made in Russia’. 

Town halls will be freed to increase council tax by up to 5 per cent without need for a referendum.

The windfall tax on energy firms will be increased to 35 per cent and kept in place until 2028. Together with a 40 per cent tax on profits of older renewable and nuclear electricity generation, that will raise £14billion next year. 

Mr Hunt said that foreign aid will not now return to 0.7 per cent of national income as planned, instead staying at 0.5 per cent until the ‘fiscal situation allows’ – potentially for the next five years.  

In another change bound to provoke a backlash, electric cars will be charged road tax for the first time. 

Although NHS budgets will be protected, other departments are facing another grim bout of austerity – potentially backloaded to after the general election.  

Altogether the package is expected to raise £24billion a year in revenues – on top of the £32billion in hikes announced last month – driving the burden to a new post-war high. Some £30billion will be slashed off spending, allowing Mr Hunt to claim that debt will be falling as a proportion of GDP in five years’ time.

Tories are already voicing fury at the scale of the measures, with former Cabinet minister Esther McVey threatening to rebel and others warning Mr Hunt is ‘throwing the baby out with the bathwater’.  

The stark backdrop to the Autumn Statement will be new forecasts from the OBR watchdog, likely to show that the UK is headed for one of the longest recessions on record. It will also make new predictions for inflation, which it was revealed yesterday has jumped to a 41-year high of 11.1 per cent.

Rishi Sunak rolled the pitch for the announcements in a post-G20 statement, saying the government was facing ‘the worst global economic crisis since 2008’   

While the tax raid will be skewed towards higher earners, Treasury sources said ‘all’ taxpayers will face higher bills.

The tax bomb – equivalent to £854 per household – will be accompanied by £30billion of real terms spending cuts, with rises of just 1 per cent pencilled in for the three years after the next election.

A string of immediate projects also look set to get axed or delayed, including the Government’s flagship cap on social care costs.

Mr Hunt will tell MPs that ministers have to take ‘difficult decisions’ now in order to tame inflation, which he describes as ‘the enemy of stability’.

‘It erodes savings, causes industrial unrest, and cuts funding for public services,’ he will say. ‘It hurts the poorest the most and eats away at the trust upon which a strong society is built.

‘It hurts the poorest the most and eats away at the trust upon which a strong society is built.’

He will warn that the UK faces ‘a global energy crisis, a global inflation crisis and a global economic crisis’.

‘But the British people are tough, inventive and resourceful,’ he will say. ‘We have risen to bigger challenges before.

‘We aren’t immune to these global headwinds, but with this plan for stability, growth and public services, we will face into the storm.’

The Chancellor will say that just as families ‘make sacrifices every day to live within their means, so too must governments because the UK will always pay its way’.

However, Mr Hunt will insist the package is ‘fair’ and ‘compassionate’ and pledge to ‘protect the vulnerable’.

Pensions and benefits will both rise in line with the September inflation figure of 10.1 per cent, raising the new state pension by £18.70 to £203.85 a week.

Despite the squeeze, the NHS will be handed billions more to get through this winter as part of plans to protect ‘core services’ like health, education and the police.

And Mr Hunt will pledge to continue energy bill support for all households next year, albeit at a much less generous rate. 

The Prime Minister has flown back from the G20 Summit in Bali ahead of today’s Autumn Statement, which is due to begin at 11.30am.

Speaking at a summit press conference, he said that the UK’s ‘insidious’ inflation had to be ‘gripped’ and was now his ‘absolute number one priority’.

‘It makes people poorer, that’s what inflation does,’ he said. ‘And it’s the enemy that we need to face down. I want to make sure that we do that and we do it as quickly as possible.

‘I want to limit the increase in mortgage rates because that’s also causing anxiety for millions of homeowners.

In a brutal Autumn Statement , the Chancellor warned Britons there is no choice about ‘facing into the storm’ and said the country must make ‘sacrifices’ to weather turmoil at home and abroad

Britain must ‘face into the storm’ of a global downturn, Jeremy Hunt will warn this morning as he prepares to deliver one of the most brutal fiscal packages in modern history

Extending the freeze on tax thresholds to 2028 will drag all workers deeper in the system, meaning they pay more 

Rishi Sunak and Mr Hunt have been painstakingly drawing up the Autumn Statement, having delayed it when the new PM took over from Liz Truss 

Inflation in the UK hit 11.1% in October – the highest level in more than 40 years

‘And given that we’re facing these global economic shocks, we are going to have to take some difficult decisions at home to protect ourselves against those and to start getting a grip on inflation.’

Mr Hunt’s massive package of ‘fiscal tightening’ is designed to ensure he can show that Britain’s debts will begin to fall as a proportion of GDP in five years’ time.

To achieve this he will hike taxes to a record post-war high, hitting workers on all incomes.

Income tax thresholds will be frozen for six years, dragging millions of workers into higher tax bands.

Thresholds for national insurance, inheritance tax and tax-free pension savings will also be frozen.

Many more families will lose some or all child benefit, as their wages rise while the £50,000 taper level stays fixed. 

High earners will see the starting point for paying the 45p rate slashed from £150,000 to £125,000, dragging another 250,000 people into the top rate. On average it will cost them £580 a year.

Savers, investors and second home owners will also be hit, with capital gains tax and dividend tax both rising.

Mr Hunt will also unveil plans for a major increase in the windfall tax on the energy companies to help pay for a pared-back package of energy bills support.

And he will give local authorities the flexibility to increase council tax by 5 per cent without the need for a local referendum, a move that could cause bills to rise by more than £100.

The scale of the package is causing concern among some Tory MPs and ministers who fear the Chancellor risks choking off any hopes of growth and deepening the recession.

Among the Tory critics, former cabinet minister Esther McVey has warned she will not support tax rises without the scrapping of the ‘unnecessary vanity project’ of HS2.

Former business secretary Jacob Rees-Mogg told ITV’s Peston he would vote for the budget so as to not bring the Government down, but warned he opposes tax cuts which he believes ‘risks making a recession worse’.

Simon Clarke, who served as Mr Sunak’s deputy before joining Liz Truss’s Cabinet, urged Mr Hunt not to ‘throw the baby out with the bathwater’.

He accepted that ‘mistakes were made’ in the handling of the mini-Budget.

But he said the aim of cutting taxes to boost growth was ‘important and valid’.

Asked if he would vote for the Budget measures, he told BBC Radio 4’s PM programme: ‘We have to see what the package is but I always do my best to support the Government, and I very much hope I can.

‘I hope they will strike a balance which leans much more to spending reductions than tax rises to balance the books.’ 

Business Secretary Grant Shapps and Health Secretary Steve Barclay were briefed on the Autumn Statement contents at Cabinet this morning 

Deputy PM Dominic Raab was also at the Cabinet meeting before the Chancellor’s crunch statement

Mr Hunt is thought to be facing a huge upgrade in OBR borrowing forecasts when he unveils his Autumn Statement today

The Bank of England has forecast the longest recession in modern history, although provisional GDP figures last week were better than its predictions  

A Treasury source said Mr Hunt would preserve core measures to promote growth, but added: ‘You cannot have economic growth with inflation at 11 per cent.’

The Bank of England warned of more interest rate hikes to come yesterday after the headline CPI rate of inflation topped 11 per cent.

Governor Andrew Bailey told MPs that the UK labour market is still ‘tight’ and more increases in interest rates are ‘likely’ to try to get a grip on prices.

He also warned that Britain has not yet entirely shaken off the ‘risk premium’ on government borrowing that was built in by the markets following Liz Truss’s disastrous mini-Budget. 

Soaring food and energy costs were the main drivers of the latest surge, with the Office for National Statistics estimating that the average UK household is now paying 88.9 per cent more for heating and lighting than a year ago.

Deputy governor Ben Broadbent told MPs yesterday afternoon that CPI was likely to stay around this level for the next three months.

Mr Bailey stressed that food costs will dictate whether prices have peaked. 

Mr Broadbent also said there was no certainty about the length of the record-breaking recession the Bank predicted earlier this month.