55% of households will be worse off as a result of the measures announced in the chancellor’s autumn statement, according to a Treasury analysis, while Labour blames “12 weeks of Conservative chaos” and “12 years of Conservative economic failure” for the bleak outlook.
Jeremy Hunt predicts that the UK’s economic outlook will be “challenging” for the next two years.
In an attempt to plug the gaping hole in the public finances, the chancellor presented his autumn statement to parliament on Thursday, which was littered with £55 billion in stealth taxes and spending cuts.
However, the independent Office for Budget Responsibility (OBR) has warned that the disposable incomes of British households will decline by 7.1% over the next two years, the largest decline on record.
Mr. Hunt stated that it is “a difficult time for everyone,” but that tax increases and spending cuts are necessary to stabilize the economy.
“Over the next two years, it will be difficult,” he said.
“However, I believe that the public wants a government that is willing to make tough decisions, has the plan to reduce inflation, and halts large increases in the cost of energy bills and groceries, while also taking steps to get through this difficult period.”
The chancellor insisted that his autumn statement is a “very conservative package” in response to criticism from some Conservative members of parliament.
“Yesterday, the Office of Budgetary Responsibility stated that what we are doing is recession-mild and will save jobs,” he stated.
“However, what I would say to my Conservative colleagues is that there is nothing conservative about spending money you don’t have, there is nothing conservative about ignoring inflation, and there is nothing conservative about avoiding tough decisions that put the economy back on track.
“And we’ve done all of these things, which is why this is a very conservative plan to stabilize the economy.
None of this is simple, but it is the right course of action.
Former business secretary Jacob Rees-Mogg accused the chancellor of taking the “easy option” on public spending in Thursday’s autumn statement, as opposed to exerting greater pressure.
He stated that the country required lower taxes to stimulate growth.
When asked how it can be fair that pensions will increase by the rate of inflation while public sector workers will not see pay increases, Mr. Hunt stated that the elderly are unable to work more to increase their take-home pay.
“Well, I believe the reality is, first and foremost, that pensioners have retired. The chancellor stated that they cannot work more or longer hours than adults of working age.
“However, I disagree that only the poorest retirees are feeling the pinch at the time.
“I believe that this is something that affects everyone and that it is correct.
“Having promised pensioners in our manifesto that we would implement this triple lock, I believe this is precisely the kind of difficult time when people want it to take effect.
Therefore, I believe it to be the proper course of action.
“We’re not pretending that this won’t be a difficult time for everyone,” the chancellor continued. However, we have a plan.”
In yesterday’s autumn statement, Mr. Hunt outlined economic policies that the government hopes will assist in rebalancing the nation’s finances following the economic turmoil caused by former chancellor Kwasi Kwarteng’s mini-budget.
These comprised:
• The income tax thresholds will be frozen for an additional two years, until April 2028
• The highest rate of income tax is now paid on earnings over £125,140 rather than £150,000
• The triple lock on pensions will continue, with pensioners’ weekly payments rising by 10.1% in line with inflation.
• Benefits will increase by inflation, by 10.1%
• The annual energy cap will increase from £3,000 to £2,500 after April.
• The minimum wage in the United Kingdom will increase from £9.50 to £10.42 per hour for people aged over 23.
• The windfall tax on the profits of oil majors will increase from 25% to 35% and be extended by two years until March 2028
• Additional cost of living payments of £900 for welfare recipients and £300 for senior citizens
• Spending on public services in England will increase less quickly than anticipated
As a result of Mr. Hunt’s announcements, the tax burden in the United Kingdom will reach its highest level since the Second World War, and there are dire warnings about rising costs and unemployment as the recession deepens, as well as predictions that the economy will still contract by 1.4% in 2023.
But the majority of critical spending decisions have been postponed until after the 2024 general election.
An estimate by the Treasury indicates that approximately 55% of households will be worse off as a result of the measures.
Labour attributes the grim future on “12 weeks of Conservative disarray” and “12 years of Conservative economic failure.”
Rachel Reeves, the shadow chancellor, accused the government of putting the British economy into a “doom spiral” in which low growth leads to greater taxes, fewer investments, and tighter wages, along with a decline in public services.
Ms. Reeves told that she is “very concerned about what will happen to people’s living standards next April” and that a Labour government would have done more “to relieve some of that burden on the average working person.”
As Mr. Hunt participated in the broadcast round on Friday morning, the Resolution Foundation released a study indicating that his autumn statement’s tax increases would reduce the income of ordinary households by 3.7%.
The foundation stated that the statement increased pressure on the “squeezed middle” and that the focus on “stealthy” tax threshold freezes to increase revenue would reach far beyond high-income earners.
In addition, the think tank determined that the budget will reverse a significant portion of the government’s aim to level the playing field.
“The £15 billion in cuts to capital investment announced yesterday will reverse 80% of the remaining gains in public investment planned by former chancellor Rishi Sunak, which supported the objective to level the playing field,” the report stated.
James Smith, director of research at the Resolution Foundation, later stated that Mr. Hunt’s planned spending cutbacks “do not appear realizable.”
While the Institute for Fiscal Studies (IFS), an independent economics think tank, stated that “increased taxes appear to be here to stay,”
Director of the IFS Paul Johnson stated during a news conference that the 7% decline in discretionary income over the next two years will “impact everyone,” adding that “middle England is in for quite a shock.”
“The truth is that we have become much poorer. We are in for a long, difficult, and unpleasant road; a journey made more difficult than it could have been by a series of economic own goals,” he warned.
