Smoke and Mirrors in Autumn Budget
In a classic case of misdirection, people were quick to celebrate the good news to come out of Jeremy Hunt’s autumn statement, but this is exactly what the party was banking on. While some newspapers celebrated the tax cuts that were announced, there was a whole lot more going on behind the scenes that pointed to a worse outcome later down the line. Crumbling schools aren’t even on the agenda.
What Was Announced?
Last week, on Wednesday 22nd November, the chancellor announced the following measures against the background of supporting growth in the economy:
Reducing National Insurance contributions by 2%, and reducing or removing rates for the self-employed
Increase in Universal Credit by 6.7%
Triple lock in state pension
Increase in minimum wage by 9.8%
While these are all good factors, intent on gathering public support in the run up to a general election, there are many elements that were deliberately excluded to prevent focus on a bleak outlook in future. Most notably, how these National Insurance cuts are being paid for by slashing public service funding.
What Wasn’t Announced?
Lower living standards
Private sector growth at the cost of the public sector
No extra funding for public sector services
The Office for Budget Responsibility (OBR) has downgraded its forecasts for UK growth from its March prediction. Growth for 2024 has been reduced to 0.7% from a previous high of 1.8%. It is expected to be lower in every subsequent year now, meaning the low levels we’ve seen under the current government will continue.
While inflation has come down, albeit slower than anticipated, extremely high interest rates are going to cause long term financial pain to households for the foreseeable future. Additionally, unemployment levels are expected to reach 4.6%, which was higher than OBR’s March forecast.
Reduced Living Standards
Usually measured in disposable income per person, living standards are expected to fall by 3.5% from 2019/2020 levels by 2024/2025. This makes it the biggest reduction since the 1950s, i.e., post-war levels.
This could also come back to bite the Conservatives as it depends when they decide to have a general election. With real household disposable income per person much lower in the build-up to the election than it was back in 2019, this could prove fatal.
Private Sector Growth
Tax cuts for business investments, coupled with National Insurance cuts and incentivising more people to work look good for the private sector, but this came at the cost of the public sector. Government departments won’t have extra money to play with either, including the Department for Levelling Up, the Home Office and HMRC.
The OBR was quick to point out that sustained neglect of the public sector of this kind will severely reduce output beyond any forecasts. The UK’s potential growth output was then revised down from 1.7% to 1.6%, with a more negative view on average hours worked and negligible increases in productivity.
Decreased Spend on the Public Sector
Public services are now expected to suffer, as the big tax cuts announced will lead to even more debt over time. With inflation levels being as high as they have been, funds set aside for public services have diminished and become a fraction of what they were, which will only continue in the years ahead. In the chancellor’s mind, tax cuts were more beneficial to the longevity of the public sector.
Back in 2021, when funding for public services was announced at 3.6% a year, funding looked good. Since inflation rocketed and wage deals were made at bigger levels than expected, this has only reduced what has been left. Now, a paltry 1.9% increase in real terms is expected, which only means that pre-pandemic levels of public sector services will be even harder to reach.
Jeremy Hunt did announce an increase of just under 1% past 2025, but the OBR expects this to work out at a 2% cut a year in real terms. This means that performance in many areas, such as the NHS, childcare and the criminal justice system, will plummet. Old equipment, structurally unsound buildings and archaic technology will be all that these areas can rely on.
Tax thresholds have been frozen until 2027/2028, but this creates something known as ‘fiscal drag’. This means that taxes will rise to their highest levels since the Second World War to a high of 38% of GDP in 2028/2029. The Institute for Fiscal Studies has noted that most people will see a tax rise, despite the tax cuts that were highlighted in the statement.
Save Yourself From Future Misery
Instead of bracing yourself for a severe downturn in living standards in the next coming years, you can get ahead by seeing if you can claim money back in some way.
Marriage Tax Allowance
This allows you to receive less of a tax bill per household for married couples or those in a civil partnership. You can even backdate and receive the full £1,256 benefit if you qualify. Find out what Martin Lewis said about Marriage Tax Allowance.
Uniform Tax Rebate
Do you wear a uniform to work? You can claim tax back on a flat rate, and different amounts are available for various professions. Take a look at how long the process takes.
PPI policies contained commission, but excessive levels above 50% give you grounds to make a claim. There isn’t a cut off date to make a Plevin PPI claim, and you can put a claim in even if you’ve had a PPI payout.
Have you had a flight delayed in the last 6 years? You could be entitled to up to £520 in compensation per passenger. Use our flight delay compensation calculator to find out how much you’re owed.
Diesel Emissions Claim
A group claim can be made against vehicle manufacturers if your diesel was affected by defeat devices. Claims can take years to process, so this may come in handy some time in the future. See our list of diesel claim articles for more information.