Biggest Hit to UK’s Living Standards on Record as Hunt Lays Out Autumn Statement
Story Code : 1025417
Underlining the fragility of the economy, the chancellor pushed back the fresh austerity measures until after the next election amid evidence that higher energy bills and the worst inflation in four decades will cause a protracted recession, a jump in unemployment of 500,000 and a lost decade for living standards.
In a somber assessment of the economic crisis, the independent Office for Budget Responsibility [OBR] said the biggest two-year squeeze since modern records began – a cumulative drop of 7% – would wipe out the previous eight years of growth in living standards and return them to their 2014 level by 2024.
The OBR said the economy had just entered a recession that would last for more than a year and lead to the economy shrinking by 1.4% in 2023.
Hunt trimmed the budgets of Whitehall departments, broadened the scope of the windfall tax on energy companies, extended the freeze on tax allowances, reduced the threshold for paying the 45% rate of income tax to £125,100, gave local authorities the go-ahead to raise council tax, and raised more from capital gains tax and inheritance tax as part of a plan to convince the financial markets of the government’s intention to reduce its budget deficit.
But Hunt increased spending on the NHS and schools, and deferred most of his tough measures until 2024-25 and beyond, as he stressed the need to avoid a “doom loop” of rising taxes and lower growth.
“We are honest about the challenges and fair in our solutions. Yes, we take difficult decisions to tackle inflation and keep mortgage rises down. But our plan also leads to a shallower downturn, lower energy bills, higher long-term growth and a stronger NHS and education system,” the chancellor said.