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Pound falls after Chancellor’s autumn statement and UK enters recession

Chancellor of the Exchequer Jeremy Hunt delivering his autumn statement (House of Commons/PA)
Chancellor of the Exchequer Jeremy Hunt delivering his autumn statement (House of Commons/PA)

Households will face increased energy bills, high inflation and tax hikes as the country is hit by recession.

Chancellor Jeremy Hunt told MPs he was having to make difficult decisions to ensure a “shallower downturn”, but the economy was still expected to shrink 1.4% in 2023.

The Office for Budget Responsibility (OBR) forecast the UK’s inflation rate to be 9.1% this year and 7.4% next year, contributing to the squeeze on living standards.

  • OBR says UK is now in recession
  • Top rate income tax threshold cut from £150,000 to £125,140
  • Windfall tax on oil and gas giants raised from 25% to 35%, with 45% levy on electricity generators
  • An extra £2.3bn per year for schools and £3.3bn for NHS
  • Energy price guarantee scheme increasing to £3,000 for the average household from April
  • State pensions to rise in line with inflation in April
  • Extra cost-of-living payments for the most vulnerable

2.17pm

We are ending our live coverage now.

2.16pm

Local authorities will now be able to raise council tax by 5% without holding referendums, with the Treasury estimating that 95% will hike rates by the maximum amount.

This is an increase from the current 3% levy, with the new total being comprised of 3% in general council tax and 2% for the adult social care precept.

2.14pm

Green Party MP Caroline Lucas said the Chancellor did not acknowledge the “elephant in the room”, which she said was “the economic catastrophe of Brexit”.

The MP for Brighton, Pavilion said: “The Chancellor said he will be honest about the challenges we face, so it is frankly extraordinary that he could speak for almost an hour without once acknowledging the economic catastrophe of Brexit.”

G20 summit
Caroline Lucas (UK Parliament/Andy Bailey)

She added: “When will he actually name the elephant in the room? When will he start to actually address that and reverse some of the damage it’s doing?”

Chancellor Jeremy Hunt said: “I don’t deny for one second that Brexit will be a change in our economic model.

“But whether we make a success of it or not is up to us, and this Government is going to make a success of it, and make it a tremendous opportunity.”

2.10pm

Chancellor Jeremy Hunt said local councils are “welcoming today’s announcement”.

Labour MP Clive Betts (Sheffield South East) mentioned the social care package announced in the Commons, and went on to say local government is “going to face real-terms cuts in essential services”.

“This is austerity mark II, and the prospect of financial collapse for many councils up and down the country,” he said.

Players Trust Launch – Houses of Parliament
Sheffield Labour MP Clive Betts (PA)

Mr Hunt said: “I think local councils are welcoming today’s announcement because the biggest item of expenditure, that worries them the most, is their social care budgets.

“And this is the biggest ever increase in the social care budget.”

2.04pm

A Conservative MP has warned that raising taxes on both businesses and hard-working people risks “stifling” growth and productivity.

Richard Drax, who represents the South Dorset constituency, told the Commons: “I have huge sympathy for my right honourable friend, we are facing severe financial challenges for the reasons he explained so well.

“But both sides of the House are promising to spend billions and billions more pounds. Can I just remind the House that it is the private sector and hard-working people through their taxes that pay for Government expenditure?

Coronavirus – Thu Oct 15, 2020
Richard Drax (UK Parliament/Jessica Taylor/PA)

“So will my right honourable friend agree with me that raising taxes on both risks stifling the growth and productivity that he and I both want?”

Chancellor Jeremy Hunt replied: “He is right to make the case for a lightly taxed dynamic economy and I would like to bring taxes down from their current level.

“I think we are faced with the necessity to do something fast to restore sound money and to bring inflation down from 11% which is why we’ve made difficult decisions today but yes, he is absolutely right, there is no future for this country unless we get back on the path to being a lower taxed economy.”

2.03pm

Chancellor Jeremy Hunt said it was an objective for the NHS to train all the doctors and nurses it needs.

Conservative MP Anthony Browne (South Cambridgeshire) welcomed plans for an NHS long-term workforce plan, and said: “Can he confirm or not, whether as part of that, that one of the objectives will be to make the UK self-sufficient ultimately in the training of nurses and doctors?”

Autumn statement 2022
Chancellor of the Exchequer Jeremy Hunt (Stefan Rousseau/PA)

Mr Hunt replied: “Absolutely, because the NHS as it stands at the moment would fall over without the brilliant contribution made by doctors and nurses born or trained overseas… we always welcome international exchanges, but in the end, a huge health organisation like the NHS… should be training the number of doctors and nurses that it needs itself.

“With a two million shortage of doctors worldwide, there is no other alternative.”

2.02pm

An extra 92,000 people will be paying tax above the personal allowance and 130,000 will be paying the higher rate of income tax in 2027/28, according to Treasury analysis.

Figures are yet to be provided on how many more people will be paying the top rate of income tax.

POLITICS Budget
(PA Graphics)

2.01pm

The autumn statement will see around 55% of households worse off, according to a Treasury analysis.

It comes after Jeremy Hunt announced a budget that contained a range of tax rises and spending cuts.

2pm

Conservative former minister David Davis said Jeremy Hunt delivered a “remarkably skilful statement” before he pressed the need for the Chancellor to “reinforce” the agenda for growth at the budget.

He told the Commons: “Of course fiscal responsibility is incredibly important but one of the risks that go with it is the risk of worsening a recession that comes, so it’s particularly important that on small businesses, on investment, on innovation he came up with a radical new agenda for growth.

Downing Street partygate
MP David Davis (PA)

“Can I ask him when he comes to deliver his budget in the spring, after hopefully gas prices have stabilised and financial markets have stabilised, he reinforces that agenda for growth?”

Mr Hunt replied: “If we are going to go to the British people as a party that can deliver a plan for our economy, they need to see we’ve made progress in the growth agenda, they need to see where this country is going to excel – not just in the next two years but in the next 20, 30, 40 years – and I think they will reward the party that demonstrates it understands how to do that and that’s what we do know.”

1.57pm

Jeremy Hunt acknowledged there will be a “very big fall” in disposable income but said forecasters believe his autumn statement will reduce the impact.

Labour former minister Chris Bryant said the OBR figures show that disposable income for households “will fall, after what he’s done today, by 7% over the next two years”.

He told the Commons: “Will he confirm that is the biggest fall in our history? That is families not being able to afford things, isn’t it? That is, in the end, at the doorstep of No 10, isn’t it?”

Mr Hunt replied: “The first part of what he said is broadly correct. There is going to be a very big fall… in disposable income. But what the OBR says is the measures that I took today mitigate that, reducing the effect by around 25% and that is very important.”

Mr Hunt went on to highlight the impact of the pandemic and war in Ukraine on the situation.

1.50pm

The Government is not kicking defence spending decisions “into the long grass”, Jeremy Hunt said after facing questions about whether it will decrease.

Conservative chairman of the Intelligence and Security Committee Julian Lewis told the Commons: “On the necessary need not to send the wrong signal about defence expenditure, I note that he skilfully linked that to a future defence review. When would that defence review come to fruition? And in the meantime will he guarantee that there will be no real decrease in defence expenditure?”

Autumn statement 2022
Chancellor Jeremy Hunt delivering his autumn statement (House of Commons/PA)

Jeremy Hunt replied: “I was very clear in my words. First of all that the Prime Minister and I recognise the need to increase defence spending, and secondly that the update for the integrated review needs to happen before the spring budget.

“So this is not pushing something into the long grass, this is making sure we get the decisions right.”

1.40pm

Conservative former chancellor Sajid Javid said: “I commend the Chancellor on his autumn statement and I think it has risen to the challenges that he set out.”

Chancellor Jeremy Hunt said: “The reason growth matters is because often it’s not something you can deliver in one year or two years, you need to have a long-term strategy.”

Labour shadow business secretary Jonathan Reynolds could be heard shouting “12”.

Elsewhere, father of the House Sir Peter Bottomley said: “People around the country will give backing to his approach.

“We may have arguments about the details, but the key point is getting that stability, getting the growth and defending public services.”

1.35pm

Chancellor Jeremy Hunt said the Office for Budget Responsibility confirmed that “because of the decisions we have taken inflation will be lower and that means less pressure on interest rates and less pressure on mortgages”.

He said: “This country voted for a Conservative Government because they know that we will take the tough and difficult decisions.”

1.32pm

Liberal Democrat Treasury spokesperson Sarah Olney told the Commons: “This cost of chaos budget will cause untold pain for everyone.

“Soaring mortgages, unfair tax hikes and further cuts to our struggling public services, this Conservative Government has plunged the economy into chaos and now they are forcing ordinary families to pay for their incompetence.

“For an average family this will mean thousands of pounds in increased taxes and bills, and yet their local services are being cut while their real-terms pay is decreasing.”

“Who voted for this? Because it certainly wasn’t the British people,” she said.

1.26pm

The Chancellor’s announcement on health spending was “not even Osborne-esque funding for the NHS”, the Labour MP who chairs the Public Accounts Committee said.

Labour former minister MP Dame Meg Hillier said: “The Chancellor has unveiled large numbers, or numbers that seem large. But let’s be clear, take the NHS that £3.3 billion a year is not even Osborne-esque funding for the NHS.

Integrated Review
Meg Hillier (UK Parliament/Jessica Taylor)

“It is not enough to keep the NHS standing still. Will he level with us and tell us what percentage of the NHS budget it is?”

Chancellor Jeremy Hunt referenced the Parliament of 2010 to 2015, and said: “I apologise to her… for not being able to do that kind of maths in my head. But I can tell you that in that period the NHS budget went up by 0.1% a year, and this is a lot more than that.”

1.23pm

The Chancellor said that Conservatives “always back families” as the SNP laid the blame of economic troubles on Brexit and austerity.

SNP Treasury spokeswoman Alison Thewlis told MPs: “I want to come to the policy that unites all the unionist parties in this House: Brexit. Tories, Labour, the Lib Dems, all Brexiteers now, truly committed to this futile project of deliberate self-destruction.”

She added: “Scotland did not vote for this. We did not choose austerity and we did not choose Brexit.

Prime Minister’s Questions
Alison Thewliss (UK Parliament/Jessica Taylor/PA)

“The OBR say that living standards are to fall by 7% over the next two years. It ought to be of no surprise to anybody that just shy of half of Scots think the UK won’t exit in its current form in the next five years.

“This is a UK so weak that no-one would wish to join it. Scotland cannot be forced to stay in broke, broken, Brexit Britain.”

Jeremy Hunt replied: “I understand that separation means more to her than anything else in politics but families in Scotland today heard other things. They heard £600 million for the Scottish NHS, £385 million for schools, over £4 billion to help Scottish families with their energy bills.”

He added: “That is because we are more than neighbours, we are family, and Conservatives always back families.”

1.21pm

The pound fell against the US dollar as investors appeared concerned over the prospects of a lengthy recession and fears Chancellor Jeremy Hunt’s austerity budget will compound the economic woes.

Sterling dropped nearly 1% to 1.18 US dollars and was 0.3% lower at 1.14 euros.

On the London market, the FTSE 100 Index was 0.7% lower at 7300.4.

1.20pm

Conservative former Prime Minister Theresa May commended the Chancellor and the Government “for their commitment to sound money”.

She said: “Can I welcome and commend my right honourable friend and the Government for their commitment to sound money and sound public finances.”

Autumn statement 2022
Former prime minister Theresa May (House of Commons/PA)

She welcomed the commitment to “innovation and R&D”, saying: “But could I ask him to go further and to look again at the definition of what qualifies for R&D for tax credits? I think there is more that can be done to boost our economy for the future.”

Chancellor Jeremy Hunt said: “We are looking at all the taxes around R&D relief. We want to encourage it. There has been a certain amount of abuse.

“But we particularly want to encourage it amongst small companies who often can be the most innovative.”

1.17pm

Sharon Graham, union Unite’s general secretary, has posted a series of tweets about the autumn statement.

She said: “Our economy is broken. This autumn statement is not for working people. The Chancellor @Jeremy_Hunt, has taxed income over wealth, backed city bankers instead of nurses and chosen profiteers over public services.

“He has made political choices based on rules that he himself has the power to change. As for @UKLabour, they appear to have accepted the the economic premise of the black hole rather than challenge it. That is a mistake.

“We are stuck in an economic straightjacket. Our political class repackage the same failed approach crisis after crisis, choosing to put a sticking plaster on a wound that needs surgery.

“In a country where the wealth of billionaires rockets whilst pay is cut and the gap between the super-rich and the rest grows, we need do more than appease the markets. #Austerity and tax rises for workers will do nothing to create decent jobs or put money in our pockets.

“As a country we must now begin a discussion on how to do things differently. We need different rules and to make different choices. We need an economy that works for all.”

1.16pm

The OBR said on Twitter: “#AutumnStatement reduces real growth in departmental current spending in the medium term from 2.5% to 1.0% a year.

“That could see departmental spending outside health, schools, aid & defence go from rising by 2.8% to falling by 0.7% a year in real terms from 2025-26 to 2027-28”

1.12pm

It is “just not credible” to blame the UK’s economic turmoil on the mini-budget, the Chancellor said.

Responding to Rachel Reeves for Labour, Jeremy Hunt told MPs: “Today we have announced tax rises and spending cuts of £55 billion. We can debate the reasons, but to govern is to choose and she didn’t answer the simplest of questions – does she back the need for a package of this size to bring down inflation?

“If Labour can’t answer they are not fit to govern.

POLITICS Budget
(PA Graphics)

“She says it is the Government’s fault, but with a made in Russia recession, a once-in-a-century pandemic, higher inflation in Europe, bigger cuts to growth in Germany, bigger interest rate hikes in America, to blame this on a mini-budget that was cancelled in three weeks is just not credible.”

He added: “If we want stability, growth and funding for public services the choice is plan or no plan. We have a plan, where is hers?”

1.10pm

Rachel Reeves echoed a song by rock band The Police, as she told the Commons “every mortgage they raise”, the Conservatives “are costing you”.

Labour shadow chancellor concluded her speech, saying: “The Conservatives have crushed our economy, given up on growth and sent inflation through the roof and as usual, it is ordinary working people who are paying the price.

“It is a familiar tune, every mortgage they raise, every cut they make, every tax they hike, the Conservatives are costing you”, she added, in parody of the lyrics of the 1983 hit Every Breath You Take.

POLITICS Budget
(PA Graphics)

“And what have we heard today? Yet more excuses and unfair choices. They have failed to tackle the cost of living crisis, they have failed to show how they will fix our public services, they have failed to show how they will deliver growth and they have no plan for the future of our country.

“And everything we have heard today and after 12 long years of Tory failure, the conclusion that we must come to is that Britain can no longer afford a Conservative Government.”

1.09pm

Deputy Labour leader Angela Rayner said a “lost decade” is the “price of years of Tory failure”.

She tweeted: “But instead of learning from their mistakes, they’re repeating them.

It’s time to break free from their vicious cycle – with Labour’s plan for growth.”