What can we expect from Thursday’s autumn budget?

Chancellor Jeremy Hunt is due to present his much-anticipated autumn budget in the House of Commons on Thursday, where he is expected to announce a raft of tax hikes and spending cuts as the government seeks to restore the UK’s economic credibility following Liz Truss’ short-lived administration.

The autumn statement will mark an abrupt reversal of Kwasi Kwarteng’s disastrous mini-budget that plunged the country into financial turmoil, as Rishi Sunak hopes to calm markets and stabilize the country’s finances.

Here’s what we can expect this week.

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Chancellor Jeremy Hunt has made it his mission to restore market confidence in the UK and put the country on the path to fiscal stability (James Manning/PA)

how did we get here

Just a few weeks ago, Liz Truss and Kwasi Kwarteng promised tax cuts as the only solution to boost Britain’s growth.

But the September 23 mini-budget, which promised £45bn in unfunded tax cuts on top of a massively expensive energy support package, shocked mainstream economists and spooked markets.

Not only that, but the Bank of England was forced to step in to stabilize the economy.

The deletion of Chancellor Kwasi Kwarteng and the abandonment of most plans were not enough to save Ms Truss as prime minister, but the arrival of Mr Hunt and Mr Sunak reassured markets as investors expected a more orthodox approach to economic policy .

What is the “fiscal black hole”?

We’ve heard a lot about a so-called ‘black hole’ in UK finances. Since Mr Kwarteng took office, Chancellor Jeremy Hunt has made it his mission to restore market confidence in the UK and put the country on the path to fiscal stability.

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The mini-budget promised £45bn in unfunded tax cuts on top of a massively expensive energy support package (Dominic Lipinski/PA)

The size of this budget hole is then widely expected to be around £60bn, which can be filled through a combination of tax hikes and spending cuts.

This budget hole didn’t happen overnight and cannot be blamed solely on Liz Truss’ mini-budget.

That fiscal event helped boost borrowing by up to £30 billion, according to the Resolution Foundation think tank. But the think tank said its legacy is not the “existence of a budget hole, but the urgent focus on it”.

And while it is ultimately up to the Chancellor of the day to set his own tax code, the Resolution Foundation and others argue that the price of raising doubts about the UK’s overall sustainability is now the focus on tax hikes and spending cuts that it is not was on the agenda just a few weeks ago.

That’s why the Chancellor has been talking in recent days about Britain having to show that we can “pay our way”.

What will the fall statement say?

Chancellor Jeremy Hunt has specifically said that “difficult decisions” on taxes and spending lie ahead, but as is usual with budgets and financial statements, nothing has been officially confirmed yet.

Spending cuts are expected in most, if not all, government departments, although all eyes will be on whether health and defense spending is protected from the brunt of the cuts.

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It is widely expected that the Chancellor will try to raise the finances through covert taxes (Yui Mok/PA).

Cuts could prove painful for already stretched public services and Mr Hunt will likely seek to win back revenue through tax hikes.

The chancellor is widely expected to seek to bolster finances through hidden taxes by freezing the rates at which workers start paying higher tax rates. Put simply, inflation and wage increases will result in more people being drawn into the higher classes.

A plan is also believed to be under consideration to increase the amount by which local authorities can increase council tax without holding referendums.

The threshold at which the 45% income tax rate kicks in for the highest earners could also potentially be lowered from £150,000 to £125,000.

Mr Hunt is expected to make the energy bill support plan less generous from April and instead switch to more targeted measures to save the Treasury billions, while also considering raising the windfall tax for oil and gas giants from 25% to 35% to increase % with simultaneous extension of the levy to power generators.

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The Chancellor is expected to make the energy bill support plan less generous from April (Danny Lawson/PA)

The cap on welfare costs announced by Boris Johnson could also be pushed back by at least two years, although campaigners have already expressed concerns about such a decision.

Mr. Hunt is also expected to succeed his predecessor, Mr. Kwarteng, in removing the cap on bankers’ bonuses.

What’s not in the budget?

Given fears of a return to austerity, no one in this household should expect big freebies.

And unlike Mr Kwarteng’s mini-budget, Mr Hunt is unlikely to bring any good news on the UK economic outlook or any ‘bunnies of hats’, as budget surprises are often called.

But in some good news, Mr Sunak hinted that the triple lockdown on pensions could be protected as he said pensioners were at the forefront of his thoughts ahead of Thursday.

https://www.belfasttelegraph.co.uk/news/uk/what-can-we-expect-from-thursdays-autumn-budget-42147996.html What can we expect from Thursday’s autumn budget?

Linh

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