Autumn Statement 2022 delivered by Jeremy Hunt

Jeremy Hunt delivered his Autumn Statement on 17 November 2022, announcing tax rises, a £55 billion a year fiscal tightening, reduced energy bill support and benefit uprating in line with inflation¹. The Resolution Foundation, an independent think tank, published its analysis the following day, describing the statement as combining "the 'tough choices' rhetoric of George Osborne and the policies of Gordon Brown"¹.

The Office for Budget Responsibility's forecasts point to unemployment rising by 500,000 and the economy being no bigger at the end of this parliament than at its start, the first time that has happened in 40 years². Rising interest rates cost the Treasury an extra £43 billion a year on average over the next four years, and borrowing is £270 billion cumulatively higher over the coming five years than expected in March². The Chancellor announced a £55 billion a year fiscal tightening to meet his fiscal target of getting debt falling as a share of GDP by 2027-28¹. Chancellors since the pandemic have raised taxes by 2.3 per cent of GDP, or £68 billion, equivalent to £2,300 per household in 2027-28, with tax as a share of GDP reaching 37.5 per cent by 2024-25, its highest level since the Second World War².

On energy, the Energy Price Guarantee will cap the typical bill at £3,000 from next April, a less generous form of the scheme announced under Liz Truss². Support falls 61 per cent next year, though two thirds of it goes to the poorest half of households, against half this year². Around one in eight families, 3.3 million, will pay over £2,000 more for energy next year than in 2021-22, and almost one quarter of households face bills over £4,000².

On tax, the main revenue raiser is a freeze on almost every threshold in the tax system². A typical household faces a permanent 3.7 per cent income hit, the same as the top fifth of households and bigger than the 3 per cent hit on the very top twentieth². Someone on £62,000 loses as much from threshold freezes as someone on £124,000 in cash terms, £1,600, but twice as much as a share of income, 2.6 per cent against 1.3 per cent². The threshold for the 45p rate falls to £125,000, and 70 per cent of the new taxes for individuals will be paid by the richest fifth of households². The decision to raise almost £5 billion through higher Council Tax is described as poorly targeted at higher incomes¹.

Benefits will rise by 10.1 per cent in April, the biggest uprating since 1991, and the benefit cap is also being increased by 10.1 per cent². The National Living Wage rises from £9.50 to £10.42 next April, a 9.7 per cent increase².

Why it matters for households

The OBR expects household incomes to fall by just over 7 per cent over 2022 and 2023, equivalent to £1,700 per household, with real disposable incomes returning to 2014 levels². Energy support becomes less generous from April 2023, when the typical bill cap rises to £3,000, while the £400 bill reductions and council tax rebate end². Threshold freezes mean tax rises land on middle as well as higher earners, and the personal allowance freeze is set to undo around half of the increases made to it over the 2010s². Real wages are not expected to return to their 2008 level until 2027, a 19-year pay downturn that has cost workers £15,000 a year compared with pre-financial crisis growth rates². Accounting for all announcements this parliament, typical households see incomes reduced by £1,100 in 2027-28, rising to a £4,200 loss for the top decile, while the poorest fifth are £350 better off on average¹.

What happens next

The energy support changes and the 10.1 per cent benefit uprating take effect in April 2023, alongside the National Living Wage rise². Spending cuts are backloaded: Public Sector Net Investment is frozen in cash terms from 2025-26, a £15 billion cut taking it from 2.5 per cent of GDP this year to 2.2 per cent in 2027-28, and a £22 billion reduction in day-to-day public services implies cuts to unprotected departments such as transport, policing and local government of around 0.8 per cent per year between 2024-25 and 2027-28¹. The Resolution Foundation notes these cuts are pencilled in for after the next general election and are likely to be undeliverable¹.