Hunt’s budget: What you need to know

Chancellor Jeremy Hunt announced a string of tax increases and tighter public spending in a tough budget plan on Thursday that he said was needed after the blow dealt to the country’s fiscal reputation by former prime minister Liz Truss.

Following is a snapshot of what he announced and reaction.

Growth and Inflation

Hunt said Britain’s economy was forecast by the Office for Budget Responsibility to grow 4.2 per cent this year. It will then shrink by 1.4 per cent in 2023, compared with the OBR’s March forecast of 1.8 per cent. The OBR sees growth of 1.3 per cent in 2024 and 2.6 per cent in 2025, Hunt said, compared with previous projections of 2.1 per cent and 1.8 per cent respectively.

He said the OBR projected inflation of 9.1 per cent in 2022, a revision from its March forecast of 7.4 per cent, and of 7.4 per cent next year, up from a previously forecast 4.0 per cent.

Business Rates

The business rates multiplier will be frozen at its current level in 2023-24.

Business rates relief for eligible retail and hospitality businesses will increase from 50 per cent currently to 75 per cent in April 2023, up to a maximum of £110,000 of relief per business

A new Supporting Small Businesses Scheme (SSBS) will cap the bill increases for those losing their eligibility for Small Business Rate Relief or Rural Rate Relief to a maximum of £50 extra a month in 2023-24.

Energy Cap

Hunt said the cost of an average household energy bill would rise to £3,000 a year from April after he reined in his predecessor’s vast support package for gas and electricity bills.

Minimum Wage

The national minimum wage will increase by 9.7 per cent to £10.42 per hour from April.

Tax

The top rate tax threshold has been brought down to £125,140 from £150,000 – so a further 250,000 people are expected to start paying income tax at 45 per cent.

Tax free allowance on Capital Gains Tax has been cut in stages to £3,000 the lowest level since 1981. IHT allowances will remain frozen until April 2028. Dividend allowance has been cut in stages to £500.

Income tax thresholds frozen for a further two years to 2028.

A windfall tax on oil and gas firms would be increased to 35 per cent from its current rate of 25 per cent, and extended to power generation firms at a rate of 45 per cent from Jan. 1.

Public Finances

Britain will bring down its government debt as a percentage of economic output within five years under a new fiscal rule, Hunt said, not three years as previously.

He said the government would meet another fiscal rule that the budget deficit will be below 3 per cent of GDP within five years.

Hunt said public spending would grow more slowly than the economy, but overall spending in public services would rise in real terms over the next five years.

Bank of England

Hunt confirmed the Bank of England’s inflation-fighting remit, adding that the government and Bank should work “in lockstep”.

Politics

“Our priorities are stability, growth, and public services,” said Hunt. “We also protect the vulnerable because to be British is to be compassionate.”