Autumn Statement: Key announcements from Jeremy Hunt
As it stepped into defend the spending cuts and tax increases unveiled by the Chancellor in last week’s Autumn Statement, a Treasury source branded inflation the “number one public enemy”.
And they warned that growth will not return and living standards will not improve until it is tackled.
“We have to do whatever it takes to bring down inflation,” the source said. “It is an insidious tax that is eating into pay packets, household budgets and savings… The message from the Chancellor is, ‘Please bear with us. It will get better but we need to stick to this plan to get inflation down’.”
Household incomes are predicted to be eroded by seven per cent and Thursday’s statement from Jeremy Hunt has come under fire from politicians on both the Left and the Right.
But the Government says it is making “massive” investment in the NHS and is committed to the biggest-ever increase in the state pension. And Health Secretary Steve Barclay promised improvements to the health service are on the way.
“This extra money – up to £8billion a year from 2024-25 – will ensure we can provide the vital services that patients and those in care need,” he said.
“We can crack on with improving A&E services, reducing the treatment backlog left by the pandemic, free up hospital beds by discharging people who should be cared for at home and increasing the availability of GP appointments.
“At a challenging time for the country, we are making the difficult decisions needed to strengthen our public services while restoring economic stability.”
Hunt announced major economic policies in the Autumn Statement on Thursday
Writing in the Sunday Express, pensions minister Laura Trott said the 10.1 percent triple lock boost to state pensions will make “a huge difference to the millions of pensioners who have worked hard all their lives and contributed so much to this country”.
The call for Britain to get behind the Chancellor’s measures to rescue its finances comes amid fears the UK could not cope with another economic shock on the scale of Covid or the invasion of Ukraine.
With Treasury debt interest payments expected to reach £120.4billion this year, fiscal watchdog the Office for Budget Responsibility has warned that the burden “leaves the public finances more exposed than has been the case for many decades”.
And the Treasury source added the UK can only withstand future shocks if it lives within its means and gets debt down.
This warning was echoed by economics expert Steven McCabe, of Birmingham City University. “The economy is currently running on empty,” he said.
But Tom Clougherty, of the Centre for Policy Studies, stressed the need for a major increase in growth so it can cope with unforeseen events.
He said: “It’s tempting to think taxing more and spending less is the answer – and in the short term it might help. But the real problem is our economy isn’t as dynamic as it should be, meaning we can’t bounce back the way we used to. In the long run, if we want to improve our fiscal position and be ready for future crises, we really need to get the economy going again.”
The Government is facing calls to abandon the planned increase in corporation tax from 19 percent to 25 percent from April.
A report from the Centre for Brexit Policy warns the rise will act to reduce foreign investment in the UK. It claims the Republic of Ireland’s 12.5 percent corporation tax rate has been key to the nation becoming a powerhouse of the pharmaceutical industry.
Former Brexit minister David Jones said this means businesses are more attracted to setting up across the Irish Sea.
“This report underlines what we already suspected: that stable, low-tax environments are most likely to attract inward investment. Ireland has a corporation tax rate of 12.5 percent. The UK’s rate is dounight.
It is small wonder, therefore, that international pharmaceutical companies are choosing Ireland, rather than Britain, as their centre of operations.”
The deputy chairman of the European Research Group added: “If the Government really is serious about growth, it must learn the lesson that low-tax economies are the most successful.”
Economist Patrick Minford – widely seen as an influence on the policies of Margaret Thatcher and Liz Truss – wants the increase in corporation tax stopped and hopes MPs will demand changes to the Autumn Statement. “It’s the most stupid way to conduct the Government finances I have ever come across,” he said.
And John Longworth, president of the Independent Business Network, said: “Messrs Hunt and Sunak have given us a Budget which amounts to economic vandalism. We could have had growth and instead have been presented with austerity: cuts, job losses and tax rises.”
However, the Treasury source insisted tax cuts must be affordable, saying: “We believe in sound money and low taxes but sound money has to come first. We have to be able to afford tax cuts.”
Government figures are plotting to forge a Swiss-style relationship with the EU to secure frictionless trade, it was claimed last
Switzerland and the EU have struck more than 100 bilateral agreements in areas including trade, tax and free movement.
The Sunday Times claimed “senior government sources” believe frictionless trade requires moving towards a Swiss-style relationship.
However, ex-Brexit minister Lord Frost warned: “Any approach requiring the UK to align with EU rules to get trade benefits, whether as part of a Swiss-style approach or any other, would be quite unacceptable.
“Boris Johnson and I fought very hard to avoid any such requirements…and ensure the UK could set its own laws, and we should not contemplate giving this away.”
Last week Jeremy Hunt rejected joining the single market but said he had “great confidence” Britain could “remove the vast majority of the trade barriers that exist between us and the EU”.
Richard Tice, the leader of Reform UK – the successor to the Brexit Party – said a Swiss-style relationship was “utterly unacceptable” and “appalling” and vowed to resist any attempt to bring Britain “back into the backyard of the EU”.
A Downing St source said suggestions a Switzerland-style deal is on the cards are “total nonsense” and the Government is “not considering anything like it”.