The chancellor outlined the government’s medium term fiscal plan to put public spending on a sustainable footing, get debt falling and restore stability.
He began by acknowledging that the UK was in recession, but stated his plan would help rebuild the economy. Forecasts from the Office for Budget Responsibility show the economy will grow by 4.2% this year. GDP is expected to shrink by 1.4% next year, before rising by 1.3% in 2024, 2.6% in 2025 and 2.7% in 2026.
Income tax: From April 2023, the rate at which people pay the additional rate of income tax, charged at 45%, will change from £150,000 to £125,140.
Freeze on personal tax thresholds: Income, national insurance, and inheritance tax allowance thresholds will be maintained at current levels.
Tax-free dividend allowance: The tax-free dividend allowance will be reduced to £1,000 in 2023-24, and then to £500 in 2024-25.
Capital Gains Tax: Tax-free allowance for capital gains will reduce in 2023/24 from £12,300 to £6,000, and again to £3,000 in 2024/25. This will likely be unwelcome news for landlords, with capital gains tax applied at a much higher rate for residential property sale.
Stamp Duty: SDLT cuts will now be time-limited, ending on 31 March 2025.
Electric vehicles: From 2025, road tax will be introduced for EVs, so all motorists begin to pay a fair share. Support for charging infrastructure is continuing.
National Living Wage increase: The National Living Wage will see its largest ever cash increase, rising to £10.42 for over 23s from 1 April 2023, an increase of 92 pence or 9.7%.
Cost of living payments for the most vulnerable: The chancellor announced new cost of living payments to help the most vulnerable households. This includes new one off payments of £900 for those on benefits, £300 for pensioners, and £150 for those on a disability benefit.
Energy Price Guarantee: The government’s energy price guarantee will be kept for a further 12 months at an average of £3,000 for a typical household, up from £2,500 at present.
Social housing: The chancellor said social housing rents will be capped at 7% next year, to avoid rent hikes of up to 11%.
Pensions: The pensions triple lock will be kept.
Windfall tax on oil and gas companies: The Energy Profits Levy will continue on for longer and at a higher rate. The government is also introducing a temporary 45% tax levy on proceeds from electricity generators.
Business rates support: The government is providing a £13.6bn package of business rates support in a bid to help businesses through these tough times.
Employment allowance: This will be retained at a higher level of £5,000.
Schools: The budget for schools will be increasing by £2.3bn next year & £2.3bn the year after – taking the core schools budget to a total of £58.8bn.
Health and social care: The government is making available up to £2.8bn in 2023/24, £4.7 billion in 2024/25 for Adult Social Care, as well as £3.3bn in 2023/24 and a further £3.3bn in 2024/25 to improve the performance of the NHS.
Infrastructure: The chancellor says he will not cut capital budgets for the next two years. HS2 will be kept, alongside core “northern powerhouse” rail, and new hospitals. He also stated that there will be more devolution deals in England to boost levelling up.
Research and Development: Hunt says it would be a “profound mistake” to cut the government’s research and development budget. He says funding will be protected, with an increase to £20bn by 2024/25.