Hunt: UK already in recession
By Abigail Townsend
Date: Thursday 17 Nov 2022
(Sharecast News) - Chancellor Jeremy Hunt confirmed the UK was already in recession on Thursday, as he unveiled a £55bn package of higher taxes and spending cuts in his first autumn budget.
Citing "unprecedented global headwinds", Hunt said the Office for Budget Responsibility had confirmed the UK was in recession.
Addressing fellow MPs in the House of Commons, he said the government's priorities were "stability, growth and public services" and that the budget was intended to "tackle the cost of living crisis and rebuild our economy".
Although taxes were not directly increased, the level at which people pay the 45p rate of income tax will be cut to £125,140 from £150,000. It is thought the move will pull around 250,000 people into the top rate.
The income tax personal allowance threshold will be frozen until 2028, which is likely to push millions of taxpayers into higher rates because of inflation.
Energy companies, meanwhile, will face an extension of the windfall tax on excessive profits. The 25% tax was introduced amid considerable political pressure in May by then chancellor and current prime minister Rishi Sunak. Hunt said that would now increase to 35%, and be extended until 2028.
A temporary 45% levy will also be introduced on electricity generators. Hunt said that together, the two measures would raise £14bn.
Turning to spending, Hunt said there will be squeezes across all government departments, which will need to take "tough decisions to deal with inflationary pressures in the next two years".
However, he said that overall spending on public services would rise for the next five years, after accounting for inflation. The health budget would also be protected.
The OBR forecast that UK GDP would shrink by 1.4% next year before growing by 1.3% in 2024, while unemployment is expected to rise from 3.6% to 4.9% in 2024.
The OBR also forecast that government borrowing would hit £177bn this year before dropping to £140bn in 2023, eventually reaching £69bn in 2028. Earlier this year, the OBR forecast that borrowing would be £31.6bn in 2027.
Inflation is expected to be 7.4% next year.
Hunt said that the budget meant inflation and interest rates would end up "significantly lower".
In other measures - many of which were widely trailed ahead of Hunt's statement - the energy price guarantee, currently at £2,500, is to be extended from April for a year but at £3,000. The pensions triple lock will also be retained, while benefits are to rise in line with inflation.
He also said that the Sizewell C nuclear power plant in Suffolk would go ahead, with contracts due to be signed with operator EDF "in coming weeks", and that electric cars would no longer be exempt from vehicle excise duty.
Speaking for just under an hour, Hunt concluded: "There is a global energy crisis, global inflation crisis, global economic crisis, but the British people are tough, inventive and resourceful. We aren't immune to his headwinds but with this plan...we will face into storm."
To jeers from opposition MPs, he added: "There may be a recession made in Russia but there is a recovery made in Britain."
Shadow chancellor Rachel Reeves called the budget "an invoice for the economic carnage that this government has created".
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