Lloyds Banking Group rises as surcharge on bank profits is cut to 3%
Hunt confirms stamp duty extension, but buy-to-let 'bonfire' expected
Oil majors not fussed by Hunt hike to windfall tax, smaller independents see shares fall
2.00pm: Reaction to the Autumn Statement
Reaction has been coming thick and fast.
Martin McTague, chair of the Federation of Small Businesses, has criticised Hunt’s announcement, saying:
“Today’s Budget is high on stealth-creation and low on wealth-creation, piling more pressure on the UK’s 5.5 million small businesses, their employees and customers.”
Read our full reaction to the Chancellor's Autumn Statement ⬇️ https://t.co/JSnJ4Zvve8 pic.twitter.com/ySLh6mDbeo
— FSB (@fsb_policy) November 17, 2022
Paul Johnson, head of the Institute for Fiscal Studies thinktank points out, the figures in the Office for Budget Responsibility report show that the reason why the chancellor is needing to cut spending and put up taxes so drastically is because the cost of government debt interest – the amount is has to pay to service its borrowing – has gone up enormously this year.
Here are the £ billion numbers. Simply huge. To repeat. The increase in debt increase spending forecasts is responsible for the greater part of the additional fiscal problem we face.
Spending more on debt interest than on any public service bar the NHS pic.twitter.com/O26HkU1ljP
— Paul Johnson (@PJTheEconomist) November 17, 2022
Johnson added “The increase in debt increase spending forecasts is responsible for the greater part of the additional fiscal problem we face. Spending more on debt interest than on any public service bar the NHS”
George Lagarias, chief economist at Mazars says: “The government announced the largest tax increases and spending cuts in nearly a decade.”
“In this, austerity-focused, budget it has deliberately prioritised alleviating market pressures and putting the brakes on debt, over lightening the burden on consumers.”
“In all, this is an emergency budget for emergency times."
"Inflation is running rampant, growth is stalling and a third of developed markets could experience a recession next year. Meanwhile, the distress in the bond market is increasing. The UK government chose to carefully navigate very choppy economic waters instead of, once again, spooking the markets.”
Neil Wilson at markets.com doesn’t think today’s Budget will, on the face of it, make the UK a more appealing place to invest.
“You feel that after this investors will look at all of this and look to move assets...which kind of counteracts the kind of ‘market credibility = lower bond yields’ idea as investors will look at the hit to growth and real spending and think maybe there is somewhere better to park their cash.”
“Yields are higher, sterling is lower…not a great response but we are a long way from the mini-Budget” he said.
The IEA, the libertarian thinktank credited with coming up with many of the free-market policies pursued (with disastrous results) by Liz Truss and Kwasi Kwarteng, are not impressed.
They have described Hunt’s statement as “a recipe for managed decline”, rather than a plan for prosperity.
1.30pm: Pound slips and gilts yields rise after Autumn Statement
Market reaction to the autumn statement has been slightly negative although it has not led to the turmoil of the mini-budget in September.
However, it is worth pointing out that Kwasi Kwarteng's mini-budget did not immediately spook the markets.
In terms of equities, the FTSE 100 is close to its lows for the day, down 52 points, at 7,299.
Energy generators which initially fell as the new 45% windfall tax was announced have pushed back into positive territory with SSE PLC (LSE:SSE) up 1.2% and Centrica PLC (LSE:CNA) up 4%.
But the pound has extended its falls against the US dollar, down 1%, to US$1.179.
The gilt market has seen yields rise amid the forecast hefty increase in government borrowing.
The five year yield is up 9 basis points at 3.273%, compared to the 3.214% before the chancellor started speaking.
The ten year yield is up 7 basis points at 3.225%. Before the statement it was 3.182%.
1.00pm: Tories have put UK economy in a doom loop - Labour's Reeves
Labour’s shadow chancellor, has had her say, telling MPs that the Tories had put the economy into a “doom loop.”
She said: “Britain’s problems started before the Covid pandemic and they started before Russia’s illegal invasion of Ukraine.”
“The UK has grown by an average of 1.4% a year under the Conservatives compared to 2.1% a year in the Labour years before that.”
“We are the only G7 economy that is still poorer than before the pandemic.”
“This government has forced our economy into a doom loop where low growth leads to higher taxes, lower investments and squeezed wages, with the running down of public services - all of which hits economic growth again.”
12.50pm: OBR forecasts recession will last just over a year
As the chancellor sits down the Office for Budget Responsibility (OBR) had had its say on the economic state of the country. And it's not pretty.
It forecast living standards would fall by 7% over two years.
The OBR said: “Over £100bn of additional fiscal support over the next two years cushions the blow of higher energy prices – but the economy still falls into recession and living standards fall 7% over two years, wiping out eight years’ growth.”
Government support this year and next adds 3½% on average to household incomes. But even so, living standards are set for the largest fall on record this year. And real incomes per person fall 7% over the 2 years to 2023-24, wiping out the previous 8 years’ growth. pic.twitter.com/JskoUxk33D
— Office for Budget Responsibility (@OBR_UK) November 17, 2022
Over the medium term, around £40bn in tax rises and spending cuts – in roughly equal measure – offsets higher debt interest and welfare costs and gets debt falling as a share of GDP.
“Rising prices and interest rates tip the economy into a recession that lasts just over a year, with GDP falling 2% and not returning to its pre-pandemic level until the end of 2024.”
Rising prices and interest rates tip the economy into a recession that lasts just over a year, with GDP falling 2% and not returning to its pre-pandemic level until the end of 2024.
At the forecast horizon, GDP is over 3 ppts lower than our March forecast. pic.twitter.com/lg3RRIIZAl
— Office for Budget Responsibility (@OBR_UK) November 17, 2022
House prices are forecast to fall by 9% over the next 2 years and remain below their current level over the next five years.
House prices are forecast to fall by 9% over the next 2 years and remain below their current level over the next five years.#AutumnStatement pic.twitter.com/nJzBtEq58H
— Office for Budget Responsibility (@OBR_UK) November 17, 2022
12.35pm: A 'balanced plan for stability'
Hunt has finished up now declaring his statement "is a balanced plan for stability, a plan for growth and a plan for public services."
The Chancellor said there may be a recession "made in Russia" but he insisted there will be a "a recovery made in Britain."
12.30pm: Capital spending projects will not be cut
On capital spending Hunt said energy is part of the growth plan and there will be an acceleration of efforts to make the UK energy independent.
He said the government will go ahead with building a new nuclear power plant, Sizewell C.
Other public spending projects, such as HS2 and the Northern Powerhouse rail link will not be cut.
Hunt said he is “not cutting a penny from our capital budgets for the next two years.”
On stamp duty the chancellor has scrapped the stamp duty cuts announced by Kwasi Kwarteng at the September mini-Budget but from 31 March 2025.
12.25pm: Energy price guarantee extended
Hunt said the energy price guarantee scheme will increase from £2,500 for the average household to £3,000 for 12 months from April.
He said “This winter, we will stick with the plan to spend £55bn to help households and businesses with their energy bills – one of the largest support plans in Europe.”
He also announced an increase to the national living wage of 9.7% to £10.42 and said benefits will rise in line with inflation, 10.1%, costing around £11.1bn.
The pensions triple lock remains unchanged.
12.10pm: Public spending - education and NHS get budget increases
The chancellor said the government will protect the increases in departmental spending in cash terms already set out in existing plans.
But departments will have to make efficiencies to compensate for inflation, Hunt said.
The DWP will get an extra £280m to tackle fraud and error but aid spending will stay at 0.5% of GDP.
On defence the government remains committed to keeping spending at 2% of GDP.
Education spending will rise by £2.3bn in the next two years while the NHS budget will also rise in the next two years by £3.3bn.
12.00pm: Windfall tax extended
Hunt has confirmed he is extending the windfall tax. He said he is in favour of taxes on genuine windfalls.
He commented: "From January 1st until March 28 we will increase the energy profits levy from 25% to 35%."
"The structure of our energy market also creates windfall profits for low carbon electricity generation."
"So from January 1st we’ve decided to introduce a new temporary 45% levy on electricity generators. Together these measures raised £14bn."
11.55am: Tax changes - top rate threshold lowered
The level at which the 45p rate of income tax kicks in has been cut from £150,000 to £125,140 but allowances and thresholds for income tax, national insurance and inheritance tax will be frozen for a further two years, going up to April 2028.
The dividend allowance will be cut from £2,000 to £1,000 next year, and then to £500 in April 2024.
The annual exempt amount for capital gains tax will be cut from £12,300 to £6,000 next year and then to £3,000 from April 2024.
And electric vehicles will no longer be exempt from vehicle excise duty.
Company car tax rates will remain lower for electric vehicles and the chancellor will limit rate increases to 1ppt a year for three years from 2025.
The OBR expects housing activity to slow over the next two years, so the stamp duty cuts announced in the mini-budget will remain in place but only until 31st March 2025.
The VAT registration threshold was left unchanged employers national insurance contributions were frozen until April 2028.
11.45am: New economic forecasts
Hunt said the Office for Budget Responsibility expects inflation to be 9.1% this year, and 7.4% next year, while GDP is forecast to decline 1.4% in 2023 with growth forecast of 1.3% in 2024..
Unemployment is expected to rise to 4.9% by 2024, Hunt said.
He also announced two new fiscal rules. First, underlying debt must be falling as a proportion of GDP at the end of a five-year rolling period.
And, second, public sector borrowing over the same period must be below 3% of GDP.
11.35am: Hunt's three priorities – stability, growth and public services
Jeremy Hunt has started his statement by saying that in the face of “unprecedented global headwinds”, people are worried about the future.
So he will deliver a plan “to tackle the cost of living crisis and rebuild our economy.”
He said his three priorities will be stablity, growth, and protecting public services – but he also wants his plans to be compassionate.
We will respond to a global crisis with British values.
Hunt said his plan will lead to a shallower downturn, and higher long-term growth.
11.20am: Tax rises and spending cuts expected
The chancellor, Jeremy Hunt is set to unveil the autumn statement which is expected to include a swathe of tax rises and spending cuts aimed at reassuring the financial markets that the UK is in responsible hands following the turmoil caused by the infamous mini-budget.
Today’s announcement is expected to outline plans to cut public spending by around £30bn along with £24bn of extra taxes.
Ahead of the statement AJ Bell investment director Russ Mould said: ““If the mini-budget was what made the UK economy and its assets sickly, today is the day on which some painful medicine is delivered in the form of the Autumn Statement.”
READ: Tax rises for all as chancellor plots path to stability
The statement is expected at 11.30am.