Medium-term fiscal plans due on 31 October with spending cuts of tens of billions expected

The Government is due to publish its medium-term fiscal plans on 31 October, a date given by the Resolution Foundation, which says the Chancellor remains on track to announce public spending cuts "in order of tens of billions of pounds"¹. The same think tank says the plan is expected to set out how the Government will get debt falling as a percentage of GDP².

The plans follow a series of reversals by Jeremy Hunt, who on his fourth day as Chancellor announced a reversal of around 60 per cent of the tax measures in Kwasi Kwarteng's mini-Budget of 23 September¹. The Resolution Foundation lists measures the Government said it would no longer proceed with: repealing reforms to IR35 off-payroll working rules (around £2 billion a year), a VAT-free shopping scheme for tourists (£2 billion), a 1.25 percentage point cut to dividend tax from April 2023 (around £1 billion) and a freeze to alcohol duties from 1 February 2023 (£600 million)¹. On top of the reversal of the £19 billion cut to Corporation Tax, the Chancellor also scrapped Rishi Sunak's 1p cut to the basic rate of Income Tax, saving almost £6 billion a year¹. In total, the Government has announced £32.3 billion in tax-cut reversals, which the Resolution Foundation says would be the largest tax-raising fiscal announcement since 1993, narrowly beating Spring Budget 2021's around £29 billion a year of tax increases¹.

The Resolution Foundation also reports that the Energy Price Guarantee will end next April, 18 months earlier than originally planned, which it says could save the Treasury up to £40 billion next year, at the price of allowing typical annual bills to rise to £4,000 next April¹. It says a Treasury review is under pressure to produce a more targeted and cheaper successor¹.

On household incomes, the Resolution Foundation estimates that U-turns since 23 September have reduced the size of the personal tax cut next year for a typical household from £500 to £290, and for the richest 10 per cent of households from £5,380 to £1,650¹. It says the typical household in 2025-26 will see incomes fall by £1,000 as a result of personal tax and benefit changes announced during this parliament, compared with £780 at the time of the mini-Budget, and that the richest 5 per cent will see an average income loss of £4,330, compared with gains of £2,520 after the mini-Budget¹. It attributes most of the tax rise to the freezing of the Income Tax Personal Allowance for four years, first announced in March 2021, which it says will now cost the typical household £1,420 by 2025-26 rather than the £320 estimated at the time¹. Taxes as a share of GDP are projected to rise to around 36 per cent by the end of the parliament, up from 33 per cent at the start, which the Resolution Foundation says would be the UK's highest tax take since 1950-51¹.

A separate Resolution Foundation paper, published 13 October, examines the option of raising some benefits in line with earnings rather than inflation next April². It says uprating in line with recent earnings growth of 5.5 per cent, rather than CPI inflation of around 10.1 per cent, would permanently cut the real value of affected benefits by an estimated 4 per cent, and could save around £5 billion a year if applied broadly to all benefits except the State Pension and Pension Credit, or around £3 billion a year for working-age benefits excluding those protected in legislation². It says such cuts would affect 9 million households containing 30 million people, with losses ranging from around £50 a year for one-child families getting only Child Benefit to £1,000 or more for some parents on Universal Credit². The paper notes that in May 2022 Rishi Sunak, then Chancellor, said benefits would be uprated by that September's CPI, subject to a review². It says the Government has not confirmed what it will do².

Why it matters for households

The 31 October plans set out tax and spending decisions that feed into household budgets from April 2023 and beyond. The Resolution Foundation's estimates put the typical household £1,000 a year worse off by 2025-26 from personal tax and benefit changes announced in this parliament, with the richest 5 per cent losing £4,330 on average¹. The Energy Price Guarantee is now due to end next April rather than 18 months later, and the Resolution Foundation says typical annual bills could reach £4,000 then, based on current wholesale gas prices and the Ofgem price cap returning to effect¹. The £400 Energy Bills Support Scheme ends in March². If some working-age benefits are uprated by earnings rather than inflation, the Resolution Foundation estimates losses of £50 to £1,000 or more a year for affected households, with 7 million of the 9 million affected households containing someone in work². It says the real value of basic out-of-work support would be 16 per cent lower in 2023-24 than in 2010-11².

What happens next

The medium-term fiscal plans are due on 31 October¹. The Resolution Foundation says the size of the fiscal hole means the measures announced so far reduce rather than eliminate the spending cuts expected that day¹. It also says a decision on benefit uprating for April 2023 has to be made shortly².