For further comment or to arrange an interview please get in touch with Max Anderson: max@brightblue.org.uk or 07850 684474.
Commenting on the Autumn Statement 2022, Ryan Shorthouse, Chief Executive of Bright Blue, said:
“Britain seems to be going backwards. We are back in recession. Inflation is back to historic highs. We are back to an austere fiscal strategy. These economic woes are largely driven by global factors, but also in part by the policy decisions of Conservative-led Governments: the so-called ‘mini-Budget’ and Brexit, in particular.
“Most of the public are now paying higher taxes, higher mortgages and higher bills as a proportion of their household income. Since all this significant financial hardship is happening after twelve years of Tory rule, they are unlikely to forgive the Tories for yet another round of austerity. Even if there is no other alternative to the broad fiscal strategy that is now being pursued.
“Faced with such dreary economic forecasts, the Chancellor was right to set a plan to reduce the current budget deficit over the next five years, even if the fiscal rules have been softened somewhat. Since public expenditure is reliant on investment in government bonds, it is essential that the Government gets a grip on public borrowing so investors are not spooked.
“The new deficit reduction plan announced today is broadly well-balanced in terms of composition, distribution and timing. Unlike in the 2010s, spending will not be disproportionately cut, although from 2025 onwards the settlements will be particularly stringent, posing problems both for public sector pay and a probable Labour Government. Tax is playing a much greater role, with lots of fiscal drag affecting different types of taxes and taxpayers. The pain is indeed being widely shared, but with those individuals and companies with the broadest shoulders rightly bearing the brunt.
“The Government did miss an opportunity to shift the weight of taxation away from work on to wealth. It could have been bolder on Capital Gains, Inheritance and Non-Dom taxation, which could have softened the increases in payroll taxes.
“Prioritising public money being paid direct to individuals, especially the poorest, rather than through bureaucracies should be a clear overriding principle for a centre-right Government. That is why it was good to protect the value of state benefits and pensions in line with inflation. But promising yet more real-terms increases in funding for the NHS without substantial reform, only promising yet more reviews, is unwise and unsustainable.”
The 2022 Autumn Statement adopted two of Bright Blue’s policies:
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Increasing the value of state benefits in line with inflation
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Increasing the value of the National Living Wage in accordance with recommendations by the Low Pay Commission
Payments for low-income households
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Increasing benefits in April 2023 in line with inflation, which measured 10.1%
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Increasing the benefit cap in April 2023 in line with inflation, which measured 10.1%
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Providing additional Cost of Living payments in 2023-24, with a value of £900 for households on means-tested benefits and a value of £150 for those on disability benefits
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Extending the Household Support Fund for 2023-24 and providing an additional £1 billion of funding
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Increasing the National Living Wage by 9.7% to £10.42 an hour for those aged over 23
Anvar Sarygulov, Head of Research at Bright Blue, commented:
“The decision to uprate benefits in line with inflation is both great policy and good politics. Given the already historically low real value of benefits, and rampant inflation, many low-income households will need this increase in the next year to avoid destitution. Increasing the Benefit Cap in line with inflation alongside this ensures that households can receive an appropriate level of support given rising prices.
“The commitment to additional support for low-income households through the Household Support Fund and the Cost of Living Payments is also extremely welcome given the ongoing pressures they will be facing from inflation next year. This is what compassionate conservatism looks like in action.”
“But the Household Support Fund will now run for two and a half years, the Cost of Living Payments for more than one and a half. The ongoing need for such support, and the ongoing debates over uprating benefits in recent years, shows that the baseline level of state benefits is inadequate. The Government needs to design a systemic and robust way of setting benefit levels that corresponds with the cost of living.”
“The Government is also right to increase the National Living Wage substantially and in line with recommendations set out by the Low Pay Commission.”
Personal taxation
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Maintaining Income Tax and National Insurance thresholds at 2023-24 levels until April 2028
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Reducing the additional rate threshold for Income Tax from £150,000 to £125,140 from April 2023
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Maintaining Inheritance Tax thresholds at current level until April 2028
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Reducing the dividend allowance from £2,000 to £1,000 from April 2023 and then £500 from April 2024
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Reducing the annual exempt amount for Capital Gains Tax from £12,300 to £6,000 from April 2023 then £3,000 from April 2024
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Increasing the referendum limit for increases in council tax to 3% per year from April 2023. In addition, local authorities with social care responsibilities will be able to increase the adult social care precept by up to 2% per year
Sam Robinson, Senior Research Fellow at Bright Blue, commented:
“Extending the freeze on Income Tax and National Insurance thresholds, while reducing it for the additional rate, is a politically astute move. But the Chancellor could have extended more targeted help to those struggling this year by unfreezing the personal allowance to avoid more people on low incomes being dragged into basic-rate Income Tax.
“The changes to the Dividend Allowance and Annual Exempt Amount today are a welcome statement of intent to tax income from different sources more equitably. There is no reason why someone who earns their income from multiple sources should get a much higher effective tax free allowance than someone earning all their income from work. Today’s reforms narrow that gap.
“But the logic of taxing work less and wealth more could have been taken further, in particular by being bolder on Capital Gains Tax rates and reducing the scope of reliefs for Inheritance Tax. Doing so would have mitigated the need to increase payroll taxes, as well as softening the often sharp discrepancies in the way we treat different forms of income.
“Enabling local authorities to increase Council Tax without any attempt at substantive reform is timid policymaking. To keep squeezing revenue out of the current system when the basic design of Council Tax is so regressive is disappointing and punitive for those in lower-value homes. At the very least, the Chancellor should have announced a revaluation and reform of Council Tax bands to make them more progressive”.
Business taxation
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Extending the Energy Profits Levy until 31 March 2028 and increasing the rate to 35% from 1 January 2023
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Introducing a new Electricity Generator Levy with a 45% tax on excess returns from 1 January 2023 to 31 March 2028
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Setting the Annual Investment Allowance (AIA) at its highest ever permanent level of £1 million from 1 April 2023
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Freezing Business Rates multipliers in 2023-24 at 49.9 pence and 51.2 pence, preventing them from increasing to 52.9 pence and 54.2 pence
Sam Robinson, Senior Research Fellow at Bright Blue, commented:
“Extending the windfall tax by raising the main rate is good policy; it mitigates the need for more painful permanent tax rises on workers and businesses. But keeping in place the overly generous deductions for North Sea oil and gas extraction offers firms an easy way out of paying the windfall tax, which will reduce its fiscal effectiveness, and is the wrong priority for the environment.
“Low investment is one of the key drivers of the economic malaise we find ourselves in. Setting the Annual Investment Allowance at £1 million permanently is a welcome move which will give businesses additional incentives to invest in the resources that will set the foundations for future growth.
“Extending support through the Business Rates system will help small businesses to weather the storm over the next year. Over the longer term, the work started in this statement on the transitional relief scheme needs to be continued to ensure Business Rates are fit for purpose.”
Notes to editors:
To arrange an interview with a Bright Blue spokesperson or for further media enquiries, please contact Max Anderson at max@brightblue.org.uk or on 07850 684474.
- Bright Blue is the independent think tank and pressure group for liberal conservatism.
- Bright Blue’s Board includes Diane Banks, Philip Clarke, Alexandra Jezeph, Richard Mabey,
- and Ryan Shorthouse.
- Our advisory council can be found here. We also have 211 parliamentary supporters. Members of our advisory council and our parliamentary supporters do not necessarily endorse all our policy recommendations, including those included in this press release.
[Image: Gov.uk]
