Written by Lewis Dennison, Westminster Producer
The Chancellor is due to deliver his autumn statement on Wednesday, outlining his financial plans for the government over the coming year.
It’s Jeremy Hunt’s opportunity to update the public on the state of the UK economy, announce changes to taxes and set out spending plans.
Ministers had been managing expectations ahead of the statement, warning that finances were too tight to deliver any major giveaways, but the unexpected fall in the level of inflation means Rishi Sunak and the Chancellor have more fiscal space to work with.
Although inflation – at 4.6% – is well above the Bank of England’s 2% target, it has halved since the start of the year – meaning Sunak has achieved his target and wants to show that to the public with tax cuts.
Use a Monday’s speech to pledge tax cuts They pledged to “reward hard work” in what appeared to be a clear signal of their intentions on benefits and personal taxes.
what are you expecting
There are usually two financial events in a parliamentary year, the first being the main Budget, also known as the Spring Statement. The second is the fall statement, which is intended to be an update but could still contain big announcements.
The Chancellor will deliver his autumn statement on Wednesday at approximately 12:30 p.m. This will take place immediately after Prime Minister’s Questions and will continue for approximately an hour.
Then there will be a follow-up discussion.
The National Living Wage and the National Minimum Wage will rise next year, the Treasury announced on Tuesday.
The National Living Wage – the minimum hourly wage that a person over 23 earns when working – will increase by £1.02 per hour.
It will rise from £10.18 to £11.44 in April, representing the biggest increase in more than a decade. For the first time, the age threshold will be lowered to 21 years.
National minimum wage rates for people aged 18-20 will also receive a pay rise of up to £8.60 per hour – the equivalent of £1.11 per hour.
The government is clearly planning to announce tax cuts on Wednesday, in light of Mr Sunak’s speech which mentioned them repeatedly. What is less clear is who he will choose to help.
ITV News political editor Robert Peston, who attended the speech, believes there will “absolutely” be personal tax cuts, most likely to income tax or National Insurance.
He added: “If he doesn’t, the Prime Minister will look very stupid for saying this morning, over and over again, that it is time to start cutting taxes.”
Peston said he expects personal tax cuts because the Prime Minister “knows that most voters do not see the extension of business capital allowances (although important and expensive) as tax cuts that matter to them”.
“I promised you we would have inflation. We made the tough decisions and delivered on that promise. Now you can trust me when I say we can start cutting taxes responsibly,” Sunak said on Monday.
Given that Sunak has said he is prepared to reward Britons after suffering through months of high inflation, Peston believes it is unlikely he will not do so with a personal gift.
However, something else he said suggests there may be a giveaway for business.
“We will prioritize, we will be disciplined, very much focused on the supply side and growing the economy,” Sunak said when he spoke about the tax cuts on Monday, referring to business relief.
Hunt insisted he would be “responsible for the country’s finances”, but his statement on Wednesday “will focus on how to boost business investment and get people back to work”.
While ministers still refuse to give anything away, ITV News has confirmed that corporate tax cuts are being considered.
Hunt made clear that his “priority is to support British businesses” after promising an “Autumn Growth Manifesto”.
“We have delivered on our pledge to halve inflation, but we must continue to support the Bank of England to reduce inflation to 2%,” Hunt said.
“This means being responsible for the country’s finances.
“In my fall statement tomorrow, I will focus on how we can boost business investment and put people back to work to deliver the growth our country needs.”
Cutting inheritance tax – perhaps by half – would be popular on the Tory right, with Sunak under increasing pressure from that wing of his party, but would directly benefit only a small proportion of the public.
Only around 4% of deaths in 2020/21 triggered inheritance tax, with exemptions allowing many couples to pass on up to £1 million tax-free.
Inheritance tax is levied at 40% on estates worth more than £325,000, with an additional £175,000 for the main residence passing to direct descendants.
The Conservatives are said to be considering halving it before potentially promising to scrap it entirely in the next Tory manifesto, which could cost £7bn a year in the short term.
Benefit payments will increase as planned in line with the September figure of 6.7% and the pension triple lock will be protected.
Welfare payments are raised in April each year in line with the previous September’s inflation rate, however there has been talk of benefits increasing at a lower rate in October of 4.6% – the equivalent of a £3bn cut according to the Institute for Fiscal Studies.
Hunt reportedly chose not to make this provision, given the idea of rewarding workers while punishing those unable to work.
The triple lock on pensions will be linked to the normal income rate of 8.5%.
The Treasury also ruled out changing the winter fuel allowance in its autumn statement, with a spokesman saying: “This is not something we would do.”
The Chancellor is expected to announce a change to benefits that will require people with mental health or mobility problems to find work that can be done from home.
Free prescriptions and legal aid will be cut for benefit claimants deemed fit for work and not looking for work, while the Treasury said digital tools would also be used to “track” attendance at job fairs and interviews under the toughened sanctions regime.
The Department for Work and Pensions launched a consultation on the proposals in September and will be the latest attempt by the government to get hundreds of thousands of people back into work.
Mr Sunak said he also wanted to tackle benefits fraud.
He said it was a “national scandal” that about two million people of working age were not working.
“We believe in the inherent dignity of a good job, and we believe that work, not welfare, is the best path out of poverty,” he said.
“Yet, around two million people of working age are currently not working at all. This is a national scandal, and a colossal waste of human potential.
“So we must do more to support those who can work to do so, and we will clamp down on welfare fraudsters because the system must be fair to the taxpayers who fund it.”
“Work for those who can, a generous safety net for those who can’t, and tougher penalties for fraudsters,” he said in summarizing his plan.
“This is what a compassionate conservative social welfare system looks like.”
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