The Chancellor has announced his Autumn Statement, aiming to restore stability to the economy, protect high-quality public services and build long-term prosperity for the United Kingdom.
Jeremy Hunt outlined a targeted package of support for the most vulnerable, alongside measures to get debt and government borrowing down. The plan he set out is designed to fight against inflation in the face of unprecedented global pressures brought about by the pandemic and the war in Ukraine.
As a result of today’s tax and spending decisions, the Welsh Government will receive around an additional £1.2 billion over 2023-24 and 2024-25.
Delivering for the people of Wales, the Chancellor has announced the UK Government will provide up to £10 million of support for the Advanced Technology Research Centre (ATRC), subject to a business case, to deliver a defence-focused Centre of Excellence site in Wales collaboratively with the Welsh Government.
He also confirmed £1.6bn in funding for the UK’s 9 Catapult innovation centres, an increase of 35% compared to the last funding cycle, which includes the Compound Semiconductor Catapult in Wales.
The Chancellor of the Exchequer Jeremy Hunt said:
“In the face of rising prices and soaring inflation, this Autumn Statement will help deliver economic stability and sustainable public services across the UK.
“Difficult decisions have been made, but we are taking decisive action to support the people of Wales, including increasing pensions and benefits in line with inflation next year and providing the Welsh Government with £1.2 billion in additional funding over the next two years.
“This money will protect the most vulnerable in our society and support households, businesses and public services through the challenging times ahead.”
Secretary of State for Wales David TC Davies said:
“The difficult and necessary decisions taken today aim to tackle inflation and restore confidence and stability in the UK economy.
“The UK Government has already committed to protecting Welsh households and businesses from rising energy prices, but balancing the books and getting debt falling is the best long-term solution to inflation and to limit interest rate rises.
“As the Chancellor made clear, there is a tough road ahead but the economy remains strong with UK unemployment at historically low levels. Difficult choices are being made, but it is only through sound management of the public finances that we can provide the long-term economic stability that is so vital for families and businesses up and down Wales.”
To protect the most vulnerable from the worst of cost-of-living pressures, the Chancellor announced a package of targeted support worth £26bn, which includes continued support for rising energy bills. More than eight million households on means-tested benefits will receive a one-off payment of £900 in instalments, with £300 to pensioners and £150 for people on disability benefits.
The Energy Price Guarantee, which is protecting households throughout this winter by capping typical energy bills at £2,500, will continue to provide support from April 2023 with the cap rising to £3,000. With prices forecast to remain elevated throughout next year, this equates to an average of £500 support for households in 2023-24.
Working age benefits will rise by 10.1%, boosting the finances of millions of the poorest people in the UK, and the Triple Lock will be protected, meaning pensioners will also get an inflation-matching rise in the State Pension and the Pension Credit.
The National Living Wage will be increased by 9.7% to £10.42 an hour, giving a full-time worker in Wales a pay rise of over £1,600 a year, benefitting 110,000 of the lowest paid workers.
The Welsh Government is receiving additional funding at the Autumn Statement for the current Spending Review period to 2024-2025, but will be expected to live within these new budgets and support our mission of fiscal discipline. To improve public finances, from 2025/26 onwards day to day spending will increase by 1% with capital spending held flat in cash terms. This means overall departmental and devolved administration budgets will continue to rise in real terms, although more slowly, increasing by 0.5% each year to 2027/28.
To raise further funds, the Chancellor has introduced tax rises of £25 billion by 2027-28. Based around the principle of fairness, all taxpayers will be asked to contribute but those with the broadest shoulders will be asked to contribute a greater share.
The threshold at which higher earners start to pay the 45p rate will be reduced from £150,000 to £125,140, while Income Tax, Inheritance Tax and National Insurance thresholds will be frozen for a further two years until April 2028. The Dividend Allowance will be reduced from £2,000 to £1,000 next year, and £500 from April 2024 and the Annual Exempt Amount in capital gains tax will be reduce from £12,300 to £6,000 next year and then to £3,000 from April 2024.
The most profitable with the broadest shoulders will also be asked to bear more of the burden. The threshold for employer National Insurance contributions will be fixed until April 2028, but the Employment Allowance will continue protect 40% of businesses from paying any NICS at all.
In addition, the government is implementing the reforms developed by the OECD and agreed internationally to ensure multinational corporations pay their fair share of tax. And as confirmed last month, the main rate of Corporation Tax will increase to 25% from April 2023.
To ensure businesses making extraordinary profits as a result of high energy prices also pay their fair share, from 1 January 2023 the Energy Profits Levy on oil and gas companies will increase from 25% to 35%, with the levy remaining in place until the end of March 2028, and a new, temporary 45% levy will be introduced for electricity generators. Together these measures will raise over £55 billion from this year until 2027-28.
To ensure fiscal discipline while providing support for the most vulnerable, the Chancellor has introduced two new fiscal rules, that the UK’s national debt must fall as a share of GDP by the fifth year of a rolling five-year period, and that public sector borrowing in the same year must be below 3% of GDP. Overall, the Autumn Statement improves public finances by £55 billion by 2027-28, and the OBR forecasts both of these rules to be met a year early in 2026-27.