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UK Chancellor of the Exchequer Jeremy Hunt delivered his autumn statement on Thursday, taking what he called a "balanced" approach that put roughly equal weight on tax rises and spending cuts as he set out to repair government finances while also trying to grow the economy over the longer term.
Hunt delivered the statement in an ever-darkening economic environment, with the Office for Budget Responsibility saying the British economy is already in recession.
The fiscal watchdog said the UK's economy is forecast to grow by 4.2% this year but shrink by 1.4% in 2023. The OBR said the UK is forecast to grow by 1.3%, 2.6%, and 2.7% in 2024, 2025 and 2026 respectively.
Inflation, the OBR said, will hit an average of 9.1% this year before falling to 7.4% next year.
However, Hunt argued that his fiscal plans will mean "the recession is shallower, and inflation is reduced". He said unemployment also will be lower, with "about 70,000 jobs protected as a result of our decisions today". The OBR said UK unemployment is expected to rise from 3.6% now to 4.9% in 2024
Hunt announced two fiscal rules guiding his policies. The first is that underlying debt must fall as a percentage of gross domestic product by the fifth year of a rolling five-year period. The second, that public sector borrowing, over the same period, must be below 3% of GDP.
In order to achieve these rules, Hunt announced £55 billion of financial consolidation, with just over half coming from spending cuts and half coming from tax rises.
Regarding tax rises, Hunt reduced the threshold at which the top rate of income tax becomes payable from £150,000 to £125,140 and announced measures to clamp down on tax evasion, which he said would raise "an additional £2.8 billion by 2027-28."
As well, the income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds will be frozen until April 2028, something which will result in more people paying more tax as a result of 'fiscal drag' as wages increase.
Hunt also increased the windfall tax on oil and gas companies from 25% to 35% and imposed a 45% levy on electricity generators to raise an estimated £14 billion next year.
He argued that windfall taxes must be "temporary, not deter investment and recognise the cyclical nature of energy businesses".
Hunt said repairing the nation's finances involved "taking difficult decisions" regarding public services.
He told MPs: "Anyone who says there are easy answers is not being straight with the British people: some argue for spending cuts, but that would not be compatible with high-quality public services."
The government said it would protect the increases in departmental budgets already set out in cash terms for the next two years, meaning real-terms cuts due to inflation and pressure on public sector wages.
As a result of these proposals, underlying debt as a percentage of GDP is expected to fall from a peak of 97.6% of GDP in 2025-26 to 97.3% in 2027-28.
Looking forward, Hunt announced a series of plans to try to grow the economy in the longer term, arguing that growth was the only way to escape the "doom loop" of ever higher taxes to fund the creeping expansion of public services.
Hunt announced £600 billion worth of investment over the next five years to grow the economy.
Among these measures was extensive investment in energy efficiency. The chancellor said he will add an extra £6 billion of investment in energy efficiency from 2025 to help meet a new ambition of reducing energy consumption from buildings and industry by 15% by 2030, adding this could save £28 billion from the national energy bill.
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