Chancellor’s statement: what’s in it for families?

The Chancellor has announced a raft of plans in his autumn statement, including tax rises and less support for energy bills, but he said benefits would rise by 10.1%

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Families face rising tax bills and energy costs as the Chancellor confirmed the UK is in recession, although he confirmed that benefits will rise in line with inflation.

The Chancellor Jeremy Hunt announced a raft of plans for addressing the budget deficit, caused in part by his predecessor’s mini budget in September. They include tens of billions in tax rises and spending cuts, a freeze in income tax thresholds which will mean millions of people pay more in tax, a rise in the energy gap next year, meaning typical bills will increase from £2,500 to £3,000, and a rise in pensions, benefits and tax credits by 10.1%, in line with the inflation level in September, although this has since gone up.

He also said that there would be £900 for those on means-tested benefits, £300 for pensioner households and £150 for those on disability benefits. Other announcements include the lowering of the top rate of tax for the highest earners from £150,000 to £125,140, an expansion in the windfall tax on energy companies and a review of the issues preventing people from working as well as a review of the pension age in view of labour market shortages. He said the government would ask more than 600,000 further people on universal credit to meet a “work coach” so that they “can get the support they need” to increase their hours or earnings.

The Office for Budget Responsibility said the measures would mean average living standards would fall by 7.1% – their biggest fall on record. It says current levels will not be recovered for six years and that real household disposable income per person would drop by 4.3% in the next year, the largest decline since records began, and by 2.8% the following year. It also expects unemployment will rise from 3.5% to 4.9% in 2024.

The Resolution Foundation thinktank said the outlook was grim with real wages not expected to return to 2008 levels until 2027 and the so-called ‘aqueezed middle’ taking a big hit. Meanwhile the Institute for Fiscal Studies said the government was “reaping the costs of a long-term failure to grow the economy”, an ageing population and high levels of borrowing. Paul Johnson from the IFS said the UK had got poorer due to a series of “own goals” for a number of years, including Brexit and failure to invest in areas such as further education.

The Child Poverty Action Group welcomed the inflation-linked rise in benefits, but said this followed years of effective cuts. It pointed out that the flat-rate support for energy costs means families with children will have to spend more but get proportionately less support.  And, in response to previously announced plans to force those claiming benefits to work more hours or face sanctions, it said many families simply can’t work more hours due to childcare costs and other problems.

Chief executive Alison Garnham added that the CPAG would like to see a longer term investment in social security to ensure families are not in the same position next winter.

There was anger from the struggling early years sector who said that they had yet again been ignored while costs are rising, including to pay rising minimum wage bills [which will increase from £9.50 to £10.42 per hour in April for over 23s – the highest increase yet]. This means parents are likely to take the hit. The Chancellor mentioned an extra £2.3bn a year for schools, but there was no reference to the early years sector.

Neil Leitch, CEO of the Early Years Alliance, said: “Let’s be clear: nurseries, pre-schools and childminders have reached crisis point. High-quality educators are leaving in their droves, years of underfunding are prompting providers to limit their hours or close completely, and this is only set to get worse as settings continue to battle through the cost-of-living crisis with limited government support, especially in light of energy price cap changes announced today.

“Rather than taking meaningful action to address this by properly funding the sector, the government continues to recklessly point to policies – like relaxing ratios – that will only worsen the quality of early education and heap more pressure on a workforce that is teetering on the edge.”

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