Prime Minister Rishi Sunak and Chancellor Jeremy Hunt have pushed back the 'medium-term fiscal statement', due to take place on 31 October, and will now deliver an Autumn Statement on Thursday 17 November.
But what will be announced? In his first speech as Prime Minister on 25 October, Sunak acknowledged the UK's 'profound economic crisis', and that he would seek to fix the mistakes of his predecessor, Liz Truss, who resigned from her position on Thursday 20 October. He also mentioned there would be 'difficult decisions to come'.
There is plenty of speculation as to what these difficult decisions might be. While Chancellor Jeremy Hunt recently sought to reverse the majority of the plans outlined in Liz Truss and Kwasi Kwarteng's mini-budget, with Sunak in place as PM, further changes could be on their way.
On 26 October, the Chancellor announced the economic plan – originally scheduled for 31 October – would be pushed back to 17 November and that it would now be a full Autumn Statement. In it, the Chancellor is expected to outline how taxation, public spending and public borrowing measures will fill a £40bn hole in UK finances.
Hunt claimed it was 'prudent' to delay the plan to ensure it is based on 'the most accurate possible economic forecasts and forecasts of public finances'.
Here, we take a closer look at what could be included in the upcoming Autumn Statement, and what it might mean for the UK economy and people’s pockets.
Possible income tax freeze
During his time as chancellor, Sunak promised to cut the basic-rate income tax to 19% in April 2024, and then gradually reduce it to 16% by the end of the next Parliament in 2029. But considering the economic turmoil that followed Liz Truss’s mini-budget and the need to cut UK debt, it's unclear whether or not this will still take place.
Kwasi Kwarteng in his mini-budget announced that the basic-rate tax cut would be introduced from April 2023; however, Hunt then scrapped this plan, saying income tax cuts would only be a possibility once the economy had improved. This could now be pushed back beyond Sunak's initial April 2024 intention.
As for income tax thresholds, these were frozen until 2025-26 when Sunak was chancellor – but this could be extended. According to Nimesh Shah, CEO at tax and advisory firm Blick Rothenberg, a freeze on personal tax and thresholds is an attractive proposal, with Hunt apparently keen to extend the freeze until 2028. This will send a signal to the international markets that the UK is committed to balancing its books over the long term.
- Find out more: tax-free income and allowances
Threat to the state pension triple lock
State pension payments are usually protected by a triple-lock guarantee, which was first introduced in 2010 by the Conservative-Liberal Democrat coalition government. This means that payments are increased each year by whichever rate is the highest of either average earnings, the Consumer Prices Index (CPI) inflation, or 2.5%.
If the triple lock remains in place, many pensioners will see a 10.1% rise (the rate of CPI inflation) in state pension payments from April 2023. Hunt has refused to rule out any changes to the triple lock, and Sunak will be under pressure to make a decision about whether it stays or goes.
The Prime Minister has previously said the triple lock protects vulnerable older people. But, as Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, points out, Sunak was the one who suspended it last year as the furlough scheme distorted earnings figures. Given the current need to cut back on costs, he may feel he has little choice but to do it again.
- Find out more: what is the state pension?
National Insurance reversal
Despite National Insurance rules changing three times during this tax year, the rollercoaster may not be over yet.
Initially, rates were increased by 1.25 percentage points when Sunak – as chancellor – introduced the health and social care levy to help fund the NHS and the country's social fund provision.
Then in July, National Insurance thresholds rose, so lower-income workers wouldn't have to pay the extra tax.
On 6 November, changes from the mini-budget are due to come into force, as then Chancellor Kwasi Kwarteng sought to scrap the 1.25 percentage point rise altogether.
In his statement on 17 October, Hunt confirmed the National Insurance reduction would still take place, but as Sunak introduced the levy, his becoming Prime Minister may mean we haven't seen the last of it.
One possible outcome is keeping the levy for higher and additional-rate taxpayers. In theory, this could mean employed and self-employed workers continuing to pay the increased rate of 3.25% on earnings or profits over £50,270.
Shah believes the new government could go further on tax increases, and apply the health and social care levy to rental profits and capital gains, as well as limiting forms of tax relief – such as those available on pensions – to just basic-rate taxpayers.
- Find out more: National Insurance calculator – work out how much you'll pay
Targeted support instead of mass giveaways
Sunak gained a reputation for generous public spending when he was chancellor, with the government’s furlough scheme and the Eat Out to Help Out initiative helping workers and businesses stay afloat during the Covid-19 crisis. But it’s very unlikely the new Prime Minister will want to spend his way out of the current economic downturn.
Soaring energy costs are one of the biggest worries for many people this winter, and Sunak’s previous approach to energy support was the monthly energy discounts we’re receiving now.
Liz Truss then introduced an energy price guarantee – in place until April 2023 – but, going forward, Hunt has pledged a more targeted approach for those on the lowest incomes. This could mean more lump sums, but on a means-tested basis, according to Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.
People who receive benefits will hope that Sunak makes good on his previous commitment to increasing them in line with inflation, which measured 10.1% in September. While this move will be costly, Coles says Sunak will be dealing with a divided party that's nervous about re-election, and he won’t want to pass legislation which is going to leave so many voters so much worse off.
This article was first published on 25 October 2022. It has been updated since then, as more rumours have been reported. It was last updated on 26 October 2022.
source https://www.which.co.uk/news/article/autumn-statement-rumours-what-could-the-new-prime-minister-mean-for-your-money-aWVNJ6e6ehFc