Can Jeremy Hunt fix the UK economy and get it firing on all cylinders again? Watch the STRICTLY BUSINESS debate
The Chancellor Jeremy Hunt, donned his hair shirt for his Autumn Statement, and delivered a tax and spending plan designed to beat back inflation and restore stability.
The big question as Britain enters recession though is can Hunt rescue the UK economy and get it firing again? Ruth Sunderland and Alex Brummer debate that on the Strictly Business show.
At the core of Jeremy Hunt’s package were savage tax rises on business and ordinary working citizens.
Middle income taxpayers particularly are hard hit by an extension on the freeze on tax allowances until 2027-28. This measure will drag millions of people into higher tax bands in a process known as ‘fiscal drag.’
The consequence is that taxes as a percentage of national output will jump to 37.1 per cent of national output over the next several years which the independent monitor, the Office for Budget Responsibility (OBR), describes as the longest ‘sustained’ period of high taxation since the Second World War.
Even though the Chancellor sought to portray his measures as pro-growth, by backing big capital programmes such as £700m for a new nuclear power project at Sizewell C in Suffolk, he still moved as far away from the Liz Truss plans of a supply-side, tax cutting agenda as it is possible to travel.
By clobbering businesses with higher taxes, with energy companies and electricity generators hardest hit, he is gambling that enterprise values calmer markets more than incentives to invest.
There is a real risk that the combination of higher taxes and the Bank of England’s interest rises will give rise to a deeper and longer recession than makes any sense in the current turbulent global circumstances when war is being waged in the heart of Europe.
In the recent past the OBR’s forecasts often have been off target and faster than expected output has delivered higher tax receipts creating unexpected headroom for the Exchequer.
This time around the OBR’s projections for the economy are more optimistic than the Bank of England and it is predicting a year long recession against the Bank’s two years with a recovery starting in the final months of 2023.
Nevertheless, the high costs of the energy price guarantee, extended into next winter with a higher cap of £3,000, plus a inflation matching rise in state pensions and most benefits means borrowing will surge to an eye watering £177 billion in 2022-23.
Hunt sought to give a nod to Britain’s brilliant research universities and innovation with the promise to maintain research and development tax breaks which looked to under threat.
In deciding to bet on restoring stability over all else together Rishi Sunak and Jeremy Hunt have overcooked the tax shock to ordinary people. They are also stifling enterprise and entrepreneurship by coming down hard on capital gains taxes.
Hunt’s was a financial statement built on Treasury orthodoxy which could as easily been delivered by a Labour Chancellor.