Autumn Statement 2022 reaction: Verdicts on what it means for the Cambridge region
Jeremy Hunt has unveiled his Autumn Statement as he attempts to rescue the UK from recession.
With inflation spiralling and a cost-of-living crisis squeezing households, the Chancellor unveiled a £55bn package of tax rises and spending cuts.
But he also announced increases in education and NHS spending and committed to spending on R&D and infrastructure.
Cambridge’s Labour MP Daniel Zeichner said we will be picking up the bill for Tory mistakes, following the disastrous mini-budget from Mr Hunt’s predecessor Kwasi Kwarteng, which had to be ripped up after market turmoil sent mortgate rates spiralling.
Here are the key measures, with reaction below.
‘No apology for the damage they’ve done - the Tories put the interests of wealthy friends first’ says Cambridge MP
Daniel Zeichner, the Labour MP for Cambridge, said we will all pay for blunders from the Conservatives.
He said: “Just a few weeks after their disastrous previous budget, we find that the Conservatives expect Cambridge residents to pick up the bill for their mistakes.
“Tax rises for everyone, but still no contribution from the big energy giants who continue to rake in the cash but evade a proper windfall tax, happy days for bankers who will see the cap on bonuses lifted, and still no action on non-doms - wealthy people who benefit from living in the UK but don’t pay their way.
“The buck was passed to councils who will inevitably have to raise council tax to pay for measures dumped on them by the government. No apology, no sense of responsibility for the damage they have done, the Conservatives continue to put the interests of their wealthy friends and donors first.”
While he welcomed confirmation that East West Rail would be funded, which he said he and others had been pressing for, he told the Cambridge Independent that he still had some doubts about the promise.
He told the Cambridge Independent: “I’m not sure how much it is worth, given both [Grant] Shapps and [Michael] Gove, who are in key departments, have expressed doubts.
“I asked Hunt directly in the Chamber on Monday, and it was a positive reply then as well, so it may be the Treasury have a more positive view of the economic significance
“The research and development tax credit changes may well have an impact, but it will depend on the detail, and we will need to see how the rent cap for social housing tenants will be paid for.
“I suspect that will be paid for by councils and housing associations who are already very stretched. The promises on research funding are all, of course, no substitute for access to the EU Horizon programme.”
It’s carefully balanced, says South Cambs Tory MP Anthony Browne
Anthony Browne, the Conservative MP for South Cambridgeshire welcomed the Autumn Statement.
“The Chancellor’s Autumn Statement is carefully balanced, but makes the hard decisions necessary,” he argued. “He has filled the fiscal black hole, put downwards pressure on inflation, protected schools, hospitals and pensioners, and done that without raising the headline rates of tax.
“The commitment to keeping the rise in research and development funding to £20bn a year will be very welcome among Cambridge's scientists. The NHS workforce plan, aimed at ensuring the UK trains as many medical workers as it needs, will also bring a sigh of relief to our hospitals and life science companies.
“The UK faces inflation of 11.1 per cent, the highest in 41 years, driven by global economic forces, including Putin’s war in Ukraine. The Chancellor is right to focus on getting inflation under control. High inflation exacerbates the cost-of-living crisis and disproportionately affects the least well-off.
“It is vital that we reduce inflationary pressures and hasten the return to stable pricing levels to restore confidence in the economy. We cannot underestimate the dire situation public finances are in. After the essential measures the now Prime Minster took to steer us through Covid and the previous Prime Minister took to tackle the energy crisis, national debt is on an unsustainable footing, especially given the recession forecast by the Office of Budget Responsibility.
“Despite the fiscal pressures, I applaud the Chancellor’s decision to protect investment and capital spending. Infrastructure projects, like the new hospitals programme and gigabit broadband rollout are the gateway to a more productive and higher growth economy. My position on East West Rail remains the same - we should only continue the Bedford to Cambridge extension of it if there is actually a positive business case for it, which we are yet to see.”
Lib Dem Parliamentary candidate condemns “chaotic and incompetent” plans
Pippa Heylings, the Lib Dems’ Parliamentary candidate for South Cambridgeshire, said we will all be paying more for less.
She said: “This damaging budget is a bitter blow for local people. Everyone in our area is being forced to pay the price for months of this Conservative government’s incompetence.
“Higher tax bills and weaker public services are the shameful result of chaos and incompetence from this Conservative government.
“We are all expected to pay more for less.
“We need a fair deal, including support for people unable to afford skyrocketing mortgage bills after the government’s previous budget sent rates spiralling. We need to protect local services and instead make the richest companies pick up the tab for this mess. At the next election, it will be a choice between the Liberal Democrats demanding a fair deal for our area, or a chaotic and incompetent Conservative government.”
Mr Hunt increased the windfall tax on oil and gas giants from 25 per cent to 35 per cent and imposed a 45 per cent levy on electricity generators to raise an estimated £14billion next year.
But Cllr Heylings, a South Cambridgeshire district councillor, said the Lib Dems want a tougher windfall tax to support the vulnerable.
The party also wants a mortgage protection fund to help people in South Cambridgeshire and across the country struggling to pay their mortgage, which the Lib Dems would fund through reversing tax cuts for the big banks.
R&D investment and East West Rail news ‘positive’, says Grant Thornton
James Brown, practice leader at Grant Thornton UK LLP in the Central region, said: "With inflation at a 41-year high and causing great concern across the economy, today's Autumn Statement was always going to be focused on trying to fix the state of the nation's finances with a package of tax hikes and spending cuts.
“That said, all the tax changes were heavily trailed and the emphasis on energy security, infrastructure and research and development as drivers of growth will be welcomed across the region, as will devolved powers for Suffolk.
“One of the big challenges facing thriving cities like Cambridge is infrastructure, so keeping the faith with the development of East West Rail is significant, while it goes without saying Sizewell C is a once-in-a-generation project that will produce positive ripple effects. In terms of energy security, the East of England has a huge focus on renewables, and, unlike oil, we will never run out of wind.”
Retaining stamp duty cuts welcomed by Cheffins
Changes to stamp duty announced at the end of September by then-Chancellor Kwasi Kwartend will remain in place until March 31, 2025, the Chancellor announced.
The threshold at which stamp duty is paid was dropped in the announcement from £250,000 to £125,000, and the threshold at which first-time buyers pay stamp duty was increased from £300,000 to £425,000.
The maximum value of a property on which first-time buyers’ relief can be claimed also rose from £500,000 to £625,000.
Richard Freshwater, head of residential at property advisors and estate agency Cheffins, says: “By retaining the stamp duty cuts made by Kwasi Kwarteng for another two years, Jeremy Hunt is signalling the government’s support for the housing sector.
“The property market has continued to be one of the government’s most profitable areas when it comes to tax, so it is pleasing that he hasn’t killed the golden goose in this scenario, and rather is taking measures to bolster the sector and encourage more first time buyers onto the ladder.
“As mortgage companies are beginning to drop their rates, we are hopeful that this, combined with the news today, will help to ensure that property transactions will rise and we will see a healthy market as we head into the new year.
“Bricks and mortar remains a stable investment for many, and within this inflationary environment, and with other traditional asset classes seeing wild fluctuations, it is important that the overall population has a level of confidence in the values of their homes.”
‘Significant’ tax rises coming after next General Election
Tax rises will increase “significantly” towards the end of the period covered by the Autumn Statement, in 2027-28, noted Stuart Wilkinson, EY’s managing partner for East of England.
A General Election is due in 2025.
Mr Wilkinsson said: “The Chancellor may have avoided pulling rabbits from hats, but this Autumn Statement was certainly intended to make instability disappear.
“This was very much in keeping with a traditional role of an economic statement, setting out the future direction rather than revealing mass changes that take immediate effect. Indeed, the tax rises, outside of energy, increase significantly towards the end of the forecast period, as thresholds are frozen for the next two years.
“While the £50bn ‘black hole’ in annual public finances remains a significant sum, the measures announced today will begin to plug it, but won’t deliver this full amount per year until 2027-28. However, once put into the context of the UK’s total tax receipts exceeding £1trillion by 2025-6, it is clear why the Chancellor didn’t feel the need to act too swiftly. The extensions to threshold freezes announced today are intended to avoid exacerbating the effects of a recession in the short term but will start to contribute to greater tax receipts for the Exchequer, particularly once inflation causes pay to rise.
“On the business side, there was comparatively little other than on energy, beyond confirmation that the UK would remain committed to the changes to international tax being discussed at the global level.
“One area of action was in the changes to tax support for research and development, where the Chancellor differed from his predecessors and shifted support from small to big business. Those hoping for broader investment support will have to wait until the Chancellor next takes to the dispatch box.
“The government will be hoping that the stability of the economy is enough to maintain the attractiveness of the UK, despite the rise in corporation tax.
“Much of what we saw today was a seamless extension of the policy framework of Rishi Sunak’s time as Chancellor, with the current Chancellor even referring to the Mais Lecture in which the now-PM set out his economic vision. Businesses will hope that the incentives for investment that were part of that approach will still come to pass, perhaps in the spring.”
Hospitality is heading for a car crash, says hotel boss
Roberto Pintus, general manager of The Varsity Hotel & Spa in Cambridge, said: “[Former Prime Minister] Liz Truss crushed all hope for the hospitality industry with the economic chaos caused with her budget.
“The Autumn Statement was a chance for [PM] Rishi Sunak and Jeremy Hunt to throw the sector a lifeline. I wanted to see a reduction in VAT for hospitality to maintain consumer demand as the country falls into recession and allow small to medium size hotels and restaurants to keep people in employment and avoid closure.
“This is a national crisis and is a challenge for hospitality businesses in and around Cambridgeshire too.
“We need our local Cambridge council to also get on board and support hospitality, especially given how much it contributes to the local community. Hospitality is often placed as a low priority but it is a huge industry, employing a significant number of people and needs to be given more support.”
The industry was “heading for a car crash”, he warned.
Business group welcomes freeze in business rates
Richard Tunnicliffe, CBI East of England director, said: “The test for the Autumn Statement was to deliver stability at the same time as unveiling a clear plan for growth. The Chancellor deserves credit for delivering stability, as well as protecting the most vulnerable, but businesses will think there’s more to be done on growth.
“Backing the CBI’s call for a freeze in business rates and smoothing the increase for those facing higher bills is very welcome.
“Staying the course on R&D spending and major infrastructure, including Sizewell C and East-West Rail, will give a major boost to communities across the East of England. Similarly, a renewed energy efficiency drive will take us closer to our goal of a low carbon, energy secure future. Indications of further devolution deals are also welcome.
“But stabilising public finances inevitably means difficult decisions have to be taken. Businesses will view a freeze in NICs thresholds and further windfall taxes as the sharpest stings in the tail. Firms will also need more detail on what happens with the business energy support scheme in the coming weeks.
“The Autumn Statement lays down an important marker for the direction of the country. Business will work with government to turn today’s ambitions into a serious plan for growth that can lift us all out of the current crisis.”
Digital markets announcement welcomed
Mr Hunt announced he would bring forward legislation for the Digital Markets Unit, saying: “The second lesson of Nigel Lawson’s big bang is the most important driver of global success is not tax subsidies, but competition. So we will legislate to give the Digital Markets Unit new powers to challenge monopolies and increase the competitive pressure to innovate.”
News Media Association chief executive Owen Meredith responded: “We are delighted that the government has used the Autumn Statement today to restate the commitment to bring this vital legislation before Parliament during this session. These measures are pro-growth and will deliver value for money back to the pockets of consumers, both vital at this time.
“As the main investor in trusted journalism in the UK, the news media sector has a vital role to play in our democratic society as we face up to the serious challenges ahead of us.
“By acting to give the Digital Markets Unit the teeth it needs to level the playing field between news publishers and the tech platform, government has moved forward with its stated objective of placing journalism on a truly sustainable footing.”
The OBR verdict
The biggest drop in living standards in history is forecast by the Office for Budget Responsibility (OBR) as it unveiled a bleak outlook for the UK economy.
It said average household income will drop seven per cent in the coming years when income is adjusted for rising prices. Inflation was at 11.1 per cent in October.
Not until 2027-28 will living standards recover to where they were last year, said OBR.
The fiscal watchdog said the economy is already in recession and will shrink further next year due to sky-high inflation.
It forecast the UK economy will be shrink by two per cent in total over a lengthy recession which started earlier this year.
The OBR said squeezed incomes, higher interest rates and tumbling house prices – which it expects to drop by nine per cent by 2024 – are all set to contribute to a recession lasting “just over a year”.
The official forecaster downgraded previous projections that the economy would actually grow by 1.8 per cent in 2023 to a fall of 1.4 per cent for the year.
Growth expectations for the following year were also downgraded in the face of continued inflationary pressure.
It has, however, slightly upgraded the total economic growth expected this year to 4.2 per cent from 3.8 per cent in the March statement.
The OBR has also predicted that inflation will hit an average rate of 9.1 per cent this year and 7.4 per cent in 2023.
Previously, forecasts had indicated inflation of four per cent next year.
Meanwhile, government debt is set to balloon £400billion higher than previously expected.
Labour’s Shadow Chancellor says Tories have picked the pocket
Rachel Reeves, the Shadow Chancellor, told the Commons: “In the last hour, the Conservatives have picked the pockets of purses and wallets of the entire country as the Chancellor has deployed a raft of stealth taxes taking billions of pounds from ordinary working people.
“A Conservative double whammy, that sees frozen tax thresholds and double-digit inflation erode the real value of people’s wages.
“Just one of those freezes, in the personal allowance, will cost an average earner more than £600.”
Ms Reeves earlier said the country had been given an “invoice for the economic carnage” created by the Government following the mini-budget, which was introduced during Liz Truss’s brief time as prime minister before being scaled back amid economic turmoil.
She also said the government has forced the UK economy into a “doom loop where low growth leads to higher taxes, lower investments and squeezed wages, with the running down of public services”.
She acknowledged the impact of the Covid pandemic and the war in Ukraine but said Britain’s problems started before then.
Ms Reeves added the government has adopted the “Bobby Ewing strategy” by trying to pretend the mini-budget was a “bad dream”.
She said: “The Chancellor and Prime Minister are trying to convince us that Britain faces problems that are nothing to do with them, that the mini-budget – which imposed a Tory mortgage premium, put pensions in peril and trashed our reputation around the world – was all just a bad dream.
“It’s their Bobby Ewing strategy. Downing Street as Dallas. Old cast members return as if nothing has happened, with tangled plotlines to keep the audience.
“But the truth is it has lost all credibility and everyone knows it is long past time that this series was cancelled.
“And the problem for the British people is this: this is not a dream, this is the every day nightmare of Tory Britain.
“The Conservatives would have us believe that they are not responsible for the last 12 years of failure. In doing so they take the British people for fools.”
In a nod to The Police, Ms Reeves also told MPs: “It is a familiar tune – every mortgage they raise, every cut they make, every tax they hike, the Conservatives are costing you.”
More reaction to follow.