{"id":141412,"date":"2022-11-14T11:22:09","date_gmt":"2022-11-14T10:22:09","guid":{"rendered":"https:\/\/www.vuelio.com\/uk\/?p=141412"},"modified":"2022-11-14T18:00:38","modified_gmt":"2022-11-14T17:00:38","slug":"autumn-statement-2022-predictions","status":"publish","type":"post","link":"https:\/\/www.vuelio.com\/uk\/blog\/autumn-statement-2022-predictions\/","title":{"rendered":"Autumn Statement 2022 predictions"},"content":{"rendered":"

At the Autumn Statement on Thursday, the Chancellor will set out tax rises and spending cuts totalling \u00a360bn, roughly divided into \u00a335bn of spending cuts and \u00a325bn of tax rises. <\/strong><\/p>\n

Here is what you can expect:<\/p>\n

Tax, Pensions and Benefits<\/strong><\/p>\n

Last week, the Chancellor and the Prime Minister met to plan this month\u2019s Autumn Statement. It looks like they will bring \u2018stealth\u2019 increases in income tax and National Insurance<\/strong> by freezing the thresholds<\/strong> at which people start to pay different rates. It was already expected that the two thresholds would be frozen until 2026, but the new plan sees this being extended for two years or even longer.<\/p>\n

While it was previously understood<\/a> that Sunak and Mr Hunt have ruled out increasing the rates of income tax, National Insurance and VAT, as to do so would breach the Conservatives\u2019 2019 manifesto, there have been reports<\/a> that they might increase the number of people paying the highest rate of income tax<\/strong> by lowering the threshold from \u00a3150,000. However, the Treasury has ruled out changes to higher-rate pension tax relief<\/strong>, over concerns it could disincentivise people to save and would hit middle earners.<\/p>\n

Government officials said<\/a> Jeremy Hunt was drawing up plans to extend a freeze in the inheritance tax<\/strong> \u2018nil-rate band\u2019 from 2025-26 to 2027-28. It is also understood<\/a> that the pension lifetime allowance<\/strong> is set to be frozen for two more years, with a rise in line with prices delayed from 2025 to 2027. The approach comes with the future of the pensions triple lock<\/strong>, still hanging in the balance. Mr Hunt could<\/a> decide that pensions should only rise in line with earnings rather than the current 10.1% inflation rate. Another big decision for Chancellor and the Prime Minister is whether to raise benefits <\/strong>in line with inflation. There have been reports<\/a> that Rishi Sunak will bow to pressure, however, a Government source stressed<\/a> no final decision had been made, so a real-terms cut could still happen.<\/p>\n

It seems<\/a> like Treasury officials are examining whether the Autumn Statement could include changes to non-dom status<\/strong> and moves to raise taxes on dividends by cutting tax-free allowances<\/strong>. Changes could include reducing the time period over which high net worth individuals can avoid tax on their worldwide income. The Chancellor could also cut the tax-free threshold for shareholders\u2019 earning from dividends<\/strong> from the current level of \u00a32,000. Jeremy Hunt has also been asked to consider changes to capital gains tax<\/strong>, which has the potential to bring in billions if it were changed to match income tax rates.<\/p>\n

Moreover, it looks<\/a> like No.10 and No.11 have returned to discussions about allowing local authorities to raise more in council tax<\/strong> by removing a requirement to hold a referendum if they are increasing it by more than 2.99 per cent. A Government source thought Sunak and Hunt would ultimately reject the plan, but said the fact that it was being discussed again made it more likely than before.<\/p>\n

Capital Spending<\/strong><\/p>\n

All capital spending<\/strong> is under review<\/a>, with a view to making billions in savings on infrastructure projects. No 10 denied reports that plans for the new Sizewell C nuclear power station could be scrapped, but big energy projects along with every other major infrastructure plan such as HS2 and Northern Powerhouse Rail will have costs reviewed. The biggest ticket item under threat appears to be the northern rail scheme, which was a manifesto promise in the 2019 election. Asked whether HS2 could also be subject to cuts, the Levelling Up Secretary Michael Gove said: \u2018I am sure everything will be reviewed.\u2019 This came<\/a> as the head of the HS2 expressed confidence that that project would not face cuts.<\/p>\n

Health <\/strong><\/p>\n

Having made repeated references to the need for \u2018difficult decisions\u2019, Prime Minister Rishi Sunak and his Chancellor are expected to announce at least \u00a335 billion pounds in spending cuts.<\/p>\n

However, with public support for the NHS so high<\/a> \u2013 and the service already stretched to a breaking point \u2013 any significant cuts to the health service would likely prove unpopular. Sunak has said<\/a> in Cabinet that health spending<\/strong> would not be cut and that he \u2018would always support the NHS and that it would continue to be prioritised as difficult decisions are taken on spending\u2019, however the NHS <\/strong>will be expected to \u2018find efficiencies\u2019<\/strong>. An important issue will be public sector pay<\/strong>, with speculation that that pay rises could be limited to 2% for 2023\/24, despite inflation being over 10%. This would likely anger unions representing workers from across the NHS, who are threatening to walk out over below inflation pay deals. The specificities of pay deals will not be decided until next year, though the Autumn budget is likely to give a good indication of how much money the Department of Health and Social Care will have to work with.<\/p>\n

Energy<\/strong><\/p>\n

Following former Prime Minister Liz Truss\u2019s introduction of the Energy Bill Relief Scheme and news that the scheme will change following 31 March 2023, it is expected that further details of the Government\u2019s plans will be announced in the Autumn Statement. The Chancellor has already explained that \u2018any support for businesses will be targeted to those most affected and the new approach will better incentivise energy efficiency\u2019.<\/p>\n

There are renewed questions over whether the current windfall tax<\/strong> on oil and gas companies will be extended, whether that is increasing the temporary levy, the time frame and\/or extending the tax to electricity suppliers. Mounting pressure comes from reports of more record-breaking oil and gas profits in the last few months.<\/p>\n

International Development<\/strong><\/p>\n

The Government notified the International Development Committee at the start of the month that the FCDO\u2019s temporary pause on non-essential ODA spending would be extended to 17 November. The question will be whether the suspension will be extended beyond the Autumn Statement, especially in light of future Foreign Office funding commitments made at COP27<\/a>. The proportion of spending will only be restored from 0.5 to 0.7% once the Government is not borrowing for day-to-day spending and debt is falling.<\/p>\n

Home Office<\/strong><\/p>\n

The UK Government had previously announced that the IR35 regime reforms were to be repealed from April next year<\/a>. Chancellor Hunt announced<\/a> in his statement on the 17 October that these repeals will no longer be going ahead, scrapping Kwarteng\u2019s previous plans, meaning the current IR35 regime will stay. Staffing companies and end clients will continue to be liable for personal service company (PSC) contractor tax and, given HMRC’s likely refreshed focus on enforcement, should keep going with their procedures relating to determination of the IR35 tax status of PSCs. The UK seems likely to face a period of greater-than-expected economic uncertainty and this will put pressure on the revenues and profits of many involved in the use or supply of contingent workers, as well as potentially impacting the right to work checks for employees through the Identification Service Provider method to check passports of non-nationals. If the Government is serious about the status of this, Jeremy Hunt\u2019s Autumn Statement will address this.<\/p>\n

Science and Technology<\/strong><\/p>\n

In an attempt to demonstrate a return back to serious financial management of the economy and the tax system, it is rumored that the Government may overhaul Research and Development (R&D) reliefs. R&D reliefs are used to support companies that work on innovative projects in science and technology and can be claimed by those that seek to research or develop an area in their field. The rumored overhaul could therefore impact the UK\u2019s position as a global science and technology superpower.<\/p>\n

Education and Skills<\/strong><\/p>\n

The Prime Minister so far vowed to protect only one area of spending, the NHS, meaning education could face much deeper cuts. This is put into context by research<\/a> by the Institute for Fiscal Studies showing the costs faced by schools are by more than economy-wide inflation.<\/p>\n

However, in keeping with the Conservative Government\u2019s focus on skills over the last few years, it has been reported<\/a> Sunak is preparing a radical set of reforms to transform the nation\u2019s education system, including a British baccalaureate and a network of technical institutes to transform vocational training. This approach contrasts his predecessor Truss, who neglected to address skills in her plan for growth, and follows a recent Education Committee session<\/a> on the International Baccalaureate. This builds on his leadership campaign pledges over the summer, which included requiring all pupils to continue to study core subjects like English and Maths.<\/p>\n

His campaign pledges for education also covered other areas of education; to build on the Early Career Framework and improve professional development, establishing a new headteacher shadowing programme and giving the DfE a \u2018new mandate to explore how more digital technology could be used in schools, building on the Oak National Academy, to provide teaching resources, and use AI to reduce workload outside of teaching time\u2019. However, given the pressures of this budget and the heavy investment on skills, it is unlikely other parts of the sector will experience the same focus as the 16-19 landscape.<\/p>\n

Defence<\/strong><\/p>\n

The Defence Secretary has denied<\/a> threatening to resign if the Chancellor didn\u2019t maintain the commitment to spend 3% of GDP on defence by 2030. At a meeting of the Defence Committee meeting, Ben Wallace said he would instead be fighting for as much money as he could get for defence. He described the target as an \u2018aspiration\u2019 and would later complete<\/a> the roll back on the target, saying he would like there to be a real terms investment in defence but conceded he would like the country to meet the 3% target at \u2018some stage\u2019, with acknowledgement that there is a new Prime Minister and new Cabinet.<\/p>\n

DCMS <\/strong><\/p>\n

With a plethora of competing issues to contend with this year, the Budget is unlikely to deliver any big announcements for the Department for Digital, Culture, Media and Sport. A Whitehall source revealed<\/a> earlier this month that \u2018every department that tried to put bids in has been quite harshly rebuffed\u2019 going on to specify: \u2018If DCMS was asking about arts funding or whatever, that has been rebuffed\u2019.<\/p>\n

The sector has faced other funding woes of late; DCMS recently ordered Arts Council England to postpone its new three-year funding commitment to arts organisations, although it has since been announced<\/a> that there will be \u00a3446m per annum available for ACE\u2019s 2023-26 Investment Programme.<\/p>\n

This follows the House of Commons Digital, Culture, Media and Sport Committee\u2019s most recent report<\/a>, which found that urgent financial support is needed for the sector as many organisations are facing an \u2018existential threat\u2019 from the cost-of-living crisis. The report touched on the Government\u2019s levelling up agenda, a manifesto commitment, by suggesting the Government neesd to tackle geographical funding imbalances for arts and culture. However, links to the levelling up agenda have been drawn out in recent DCMS funding announcements, with Greater Manchester; the West of England and Cornwall and the Isles of Scilly; Norfolk, Suffolk and Cambridgeshire; Leicestershire, Derbyshire and Lincolnshire; Kent, Essex and East and West Sussex; and the North East of England all set to benefit from a new \u00a317.5 million funding pot\u00a0<\/a>to help creative businesses expand their operations.<\/p>\n

Whether indirectly or directly, arts organisations will need financial support if they are to survive the cost-of-living crisis this year, as many in the sector have pointed out<\/a>.<\/p>\n

Housing <\/strong><\/p>\n

With UK house prices falling at the sharpest rate in almost two years, the Government will be hoping the budget can stabilise the housing market. Many believe that the fate of market could determine the result of the next election.<\/p>\n

Jeremy Hunt has reversed almost all the tax cuts set out in Kwasi Kwarteng’s mini-Budget. One of the only two elements that was retained was the cut to stamp duty in England and Northern Ireland. (Scotland and Wales have their own property purchase tax regimes). This means that the SDLT nil-rate band \u2013 the threshold below which Stamp Duty does not need to be paid \u2013 will be doubled from \u00a3125,000 to \u00a3250,000. First-time buyers, who currently do not pay SDLT on the first \u00a3300,000 on homes costing up to \u00a3500,000, will see the nil-rate band extended to \u00a3425,000 on homes costing up to \u00a3625,000.<\/p>\n

During the summer leadership election, Sunak committed<\/a> to tackling the problem of land banking, where housebuilders delay construction on sites earmarked for development in order to drive up property prices. He vowed to look at a new levy with the aim of boosting the number of new homes being built.<\/p>\n

On retrofitting, the Climate Change Committee (CCC) and its Chairman Lord Deben wrote to Jeremy Hunt, stressing the need for urgent action on decarbonising buildings, through measures like loft and cavity insulation, and through a heat pump rollout. He wrote<\/a> \u2018The next two years should be a period for a concerted push to improve rates of loft and cavity wall insulation, draught-proofing and installing modern tools to manage energy use (such as smart thermostats, thermostatic radiator controls and smart meters)\u2019.<\/p>\n

Friends of the Earth head of policy Mike Childs said<\/a> \u2018Fixing the UK’s heat leaking homes will cut energy bills, help keep people warm, boost energy security and slash carbon emissions. The Chancellor must recognise this in next week\u2019s Autumn Statement by committing to investing at least \u00a35bn annually on insulation over the coming years.\u2019<\/p>\n

For more news from the political and public affairs sector, sign up to Vuelio\u2019s Friday newsletter\u00a0Point of Order<\/a>.<\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

At the Autumn Statement on Thursday, the Chancellor will set out tax rises and spending cuts totalling \u00a360bn, roughly divided into \u00a335bn of spending cuts and \u00a325bn of tax rises. Here is what you can expect.<\/p>\n","protected":false},"author":393,"featured_media":141453,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[7383,7271],"tags":[],"_links":{"self":[{"href":"https:\/\/www.vuelio.com\/uk\/wp-json\/wp\/v2\/posts\/141412"}],"collection":[{"href":"https:\/\/www.vuelio.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vuelio.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vuelio.com\/uk\/wp-json\/wp\/v2\/users\/393"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vuelio.com\/uk\/wp-json\/wp\/v2\/comments?post=141412"}],"version-history":[{"count":4,"href":"https:\/\/www.vuelio.com\/uk\/wp-json\/wp\/v2\/posts\/141412\/revisions"}],"predecessor-version":[{"id":141454,"href":"https:\/\/www.vuelio.com\/uk\/wp-json\/wp\/v2\/posts\/141412\/revisions\/141454"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vuelio.com\/uk\/wp-json\/wp\/v2\/media\/141453"}],"wp:attachment":[{"href":"https:\/\/www.vuelio.com\/uk\/wp-json\/wp\/v2\/media?parent=141412"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vuelio.com\/uk\/wp-json\/wp\/v2\/categories?post=141412"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vuelio.com\/uk\/wp-json\/wp\/v2\/tags?post=141412"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}