Jeremy Hunt says he has not ‘ducked difficult decisions’ as OBR says living standards growth wiped out – as it happened

Former cabinet minister Jacob Rees-Mogg has criticised Jeremy Hunt’s budget, saying he has taken the “easy option” of increasing taxes.

Rees-Mogg, who was business secretary until resigning when Rishi Sunak became prime minister, said taxation was too high and cuts should be made instead to balance the budget.

Speaking to Channel 4 News, he said: “I think the Conservative party should ensure that tax in the country and the expenditure match at a reasonable level. Taxation has got too high and there are issues with the level of expenditure that we have got.

“I think there is a real problem with fiscal drag bringing more and more people into the 40p [tax] band who, particularly if they are living in the south of England, are not necessarily particularly well off.

“That is going to be hard for them paying an extra level of tax on top of what they are already paying.

“Also, freezing the basic band is going to be a burden for all taxpayers, even those who are still in receipt of benefit.

“I think we need to look at the efficiency of government to make sure money is well spent before reaching for the easy option of putting up taxes.”

Jeremy Hunt has spoken to the BBC’s political editor, Chris Mason, in the aftermath of the budget.

The chancellor denied that he had ducked difficult policy choices and denied that any “pain” had been postponed until after the next general election.

“Well, the Conservative chancellor standing up in the House of Commons, and saying there are going to be £25bn pounds of tax increases, that is facing up to difficult decisions,” he told the BBC.

Hunt said voters could trust the Conservatives, despite the tax burden being projected to go up to its highest level since the second world war. In the interview, aired on the BBC News at 6 bulletin, he said the economy was in an “exceptional situation” caused by the pandemic and the war in Ukraine.

He added that Liz Truss’s September mini-budget had had “very little” effect on the UK’s economy.

“There were mistakes. We corrected those within three weeks. But the problems we’re facing are the same problems that Germany, France, America, Japan, all these countries are facing,” he said.

“Only Conservatives understand that successful economies need to be lightly taxed, if they’re going to be dynamic and innovative … [Conservatives] want sound money and low taxes … but sound money has to come first.”

Jeremy Hunt may be able to reverse some of today’s measures in time for the general election, predicts Paul Dales of Capital Economics.

He told clients:

In his autumn statement, the chancellor, Jeremy Hunt, appears to have pulled off the tricky task of reassuring the financial markets of the government’s fiscal discipline while also managing not to deepen the recession.

Our economic forecasts suggest he may be rewarded by being able to announce plans to reverse some of the tax hikes and spending cuts before the next general election in 2024.

Paul Hollingsworth, chief European economist at BNP Paribas Markets 360, has dubbed today’s autumn statement a “mañana budget” – as some of the cuts are scheduled beyond the next general election:

Hollingswoth says:

The Autumn Statement was a sombre affair that sought to restore the credibility of UK fiscal policy in the aftermath of the so-called ‘mini Budget’, without contributing to an even deeper recession in the short term.

However, the bulk of the fiscal consolidation is set to take effect after the next general election (which must take place before January 2025), which calls into question whether it will actually be delivered and/or whether growth will be as strong in the medium term as the OBR expects in order to deliver the desired improvement in the public finances.

The most prominent public spending thintanks are the Institute for Fiscal Studies and the Resolution Foundation, and we have already featured their autumn statement assessments, at 4.23pm and 5.32pm.

Here are comments on the autumn statement from five more thinktanks

From Ryan Shorthouse, chief executive of Bright Blue, which promotes liberal conservatism:

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.

From Chris Hayes, senior analyst at Common Wealth, which promotes common ownership:

Despite the chancellor’s rhetoric about letting the broadest shoulders carry the greatest weight, the policies on offer are weak. Despite cutting the tax-free allowance for dividends, asset owners continue to enjoy significant preferential tax treatment compared to working people. Instead of closing that unjustifiable gap, the chancellor has opted for further austerity for our teetering public services. As the OBR point out, total departmental spending faces a further £28bn of cuts compared to previous plans, after more than a decade of damaging and unnecessary austerity. This new round of spending cuts is similar in scale to the £32bn announced by George Osborne in the 2010 budget.

From James Kirkup, director of the Social Market Foundation, a centrist thinktank:

The government’s entire economic plan now relies on a forecast of net immigration at more than 200,000 a year, around 50% higher than the numbers used in previous forecasts. Those migrants will bring skills and commitment to the British economy, supporting growth that benefits everyone. Without these workers, Britain would face bigger tax rises and deeper cuts.

It’s good that the Treasury has accepted the economic reality that an open approach to immigration brings benefits to the UK, but ministers now need to start an open and honest conversation with voters about that economic reality. Voters with concerns about immigration should be listened to and policy must ensure that they feel they share in the economic benefits that migration brings.

From Sam Tims, economist at the New Economics Foundation (NEF), a leftwing thinktank:

Today’s announcement to increase social security payments by inflation keeps things as they are: with the benefits system plagued by the ongoing impact of austerity. Support is still far below what families need, forcing people to go without heating and rely on foodbanks, particularly those impacted by the benefit cap, which should have been scrapped, not increased.”

​Social security needs a fresh start. To support every family through this income crisis and the looming recession, the current system should be replaced by the living income which would set an income floor that’s enough to meet life’s essentials.

The NEF has also published research saying that more than a third of households (10.6 million) will be unable to afford the cost of essentials such as household bills or a trip to the dentist by April 2024, following the autumn statement.

From Jennifer Dixon, chief executive of the Health Foundation:

Today’s autumn statement will provide short-term respite for a chronically overstretched health and care service but fails to tackle the underlying challenges facing the system.

While the NHS and social care have been offered some protection to 2025, most other public services still face significant real terms cuts. This, alongside falling living standards and rising unemployment, will only worsen the health of the population.

Additional funding for social care is welcome but after more than a decade of austerity will do little more than paper over the cracks of a broken system. And by shelving the planned changes to introduce a cap on care costs first recommended by the Dilnot Commission more than a decade ago, this government becomes the latest to break its promise to deliver the long-term reforms needed to improve the system. The government has chosen to prolong a major public policy failure that leaves older and disabled people without the care they need and many facing catastrophic costs.

The UK tax take is set to hit £1tn for the first time this financial year, lifted by the windfall taxes on energy producers.

The Office for Budget Responsibility has lifted its forecast for tax receipts in 2022-23 to £1,001bn, up from £981bn forecast back in March.

Oil and gas receipts, for example, are set to double compared with the March forecast, to £14.9bn this year. They have been lifted by the energy profits levy on North Sea producers (which Hunt increased from 25% to 35% today).

The OBR also expects higher corporation tax receipts this year, due to stronger-than-expected profits, and higher VAT takings.

As we flagged earlier, this will push the UK tax burden to its highest sustained level since the second world war.

UK households face a £1,700 fall in disposable incomes over the next two years, the Resolution Foundation has calculated.

That’s the conseqence of the record-breaking 7% drop in living standards that will hit the economy in 2023 and 2024.

Such a drastic squeeze will push average incomes back to 2014 levels, wiping out eight years of income growth.

Torsten Bell, the chief executive of the Resolution Foundation, says Hunt’s autumn statement combined the rhetoric of George Osborne and the policies of Gordon Brown.

In the short-term, the chancellor has announced a smaller but more progressive energy support package, with two-thirds going to the poorest half of households. But there will still plenty of rough justice – particularly for the 2.3 million low-income households who don’t receive means-tested benefits and therefore don’t qualify for lump-sum payments.

The chancellor announced concrete and big tax rises, disproportionately hitting middle- and higher-income households, while significant spending cuts were only pencilled in for after the next election and are unlikely to be delivered on the scale envisaged.

Stepping back, the UK government has gone from announcing the biggest tax cuts in 50 years to the biggest tightening since 2010 in just a few weeks. Today provided the more reality-based version – but that reality will feel very tough indeed, as unemployment and energy bills rise, while average incomes fall by £1,700 over this year and next.

Anti-poverty campaigners expressed relief at the chancellor’s decision to raise benefits by 10.1% next year but warned that millions of the poorest people would still see their spending power fall amid rising inflation.

The increase is lower than the current 11.1% rate of inflation and follows years of cuts to the real value of benefits, affecting the lives of 9 million households – 7 million of which include someone who works.

On average, a family on universal credit will benefit next year by about £600, but analysts pointed out that increased payments would not arrive for another five months.

“This winter and beyond is still going to be a frightening obstacle course just to afford the essentials,” said Rebecca McDonald, the chief economist at the Joseph Rowntree Foundation.

Alison Garnham, the chief executive of Child Poverty Action Group, said: “It’s a relief that benefits and the benefit cap will rise with inflation. But … today’s package will not stop the ice from cracking under struggling families.”

Action for Children’s director of policy, Imran Hussain, said: “Families we support will be greatly relieved,” but he said benefit levels “are still well out of step with what families need to live on”.

Hunt said there would be additional cost-of-living payments next year of £900 for households on means-tested benefits, but only £150 for people on disability benefits, which Disability Rights UK said was below inflation and like “being thrown peanuts”.

Douglas Ross, the Scottish Conservative leader, is being accused of leaking one of the main announcements in the autumn statement when he spoke in the Scottish parliament this afternoon.

At first minister’s questions Ross said the UK government was uprating pensions and benefits in line with inflation. At the time, Jeremy Hunt, the chancellor, was on his feet in the Commons. But the SNP say Hunt had not delivered the inflation-uprating news before Ross announced it to MSPs.

The SNP MP Brendan O’Hara said he was writing to the cabinet secretary demanding an inquiry. He said:

There are serious questions here, including on whether the ministerial code may have been breached – something which has even more relevance given the recent tawdry examples of Tory ministers playing fast and loose with the rules.

Douglas Ross may have thought he was being smart by pre-empting the chancellor in this way – but if the tables were turned he would be the first on his feet demanding an investigation, so he and his Westminster colleagues should now face the same level of scrutiny.

In 1947, Hugh Dalton resigned as chancellor after giving some details of his budget to a journalist a few minutes before he delivered his speech. The journalist worked for an evening paper, and the information appeared in print before Dalton had concluded his speech.

But nowadays budget leaking is much more common, and no one was surprised by the decision to uprate benefits in line with inflation, because ministers had strongly hinted this was coming.

As expected, Jeremy Hunt announced in the autumn statement that the £86,000 cap on the amount anyone has to pay for their adult social care costs will not come in next October, as planned, but will be delayed for two years.

Sir Andrew Dilnot, the economist who first drew up plans for a cap on social care costs in a report for government more than a decade ago, told the Guardian he was “astonished, puzzled and deeply disappointed” by the decision.

He said he welcomed announcements of up to £4.7bn in extra money for adult social care.

But he said the government had broken a 2019 manifesto promise to implement widespread reforms which were finalised a year ago. They included raising the amount of assets a person could have before getting state funding for social care from £23,250 to £100,000 as well as capping care costs at £86,000. He told the Guardian:

Without these reforms, individuals and families facing the possibility of long social care journeys are left entirely on their own, with the state only helping once assets, including housing, are down to £23,250.

We heard much today about compassion as a British value, and about the way that the government was seeking to protect the most vulnerable. It is hard to think of a more vulnerable group than those with significant care needs and yet this group is put, again, at the bottom of the priority list.

Many such individuals and families have been relying since last September on the announcement the government made then that these reforms would be implemented in October 2023. That promise now appears to be broken, despite having been agreed by both houses of parliament and being given the royal assent.

And this is from Caroline Abrahams, charity director at Age UK.

We regret the decision to delay the cap on catastrophic care costs for two years because prime minister Boris Johnson had made a firm commitment to introduce it in 2023 and having raised public expectations so high we feel it was right for this government to follow through.

Although the cap as currently proposed is considerably less generous than we wanted, it is a start and something to build on. Delaying it by a further two years raises serious questions over whether it will ever be introduced at all.

Abrahams may be right to worry whether the cap will ever come in at all. Rishi Sunak reportedly does not support the policy anyway, because he thinks it is just about enabling rich people to avoid having to sell their homes to fund their care.

Here’s a jaw-dropping forecast: The Treasury is expected to pay £133bn to the Bank of England over the next few years to cover losses on the central bank’s quantitative easing (QE) programme.

The Bank has bought almost £900bn of UK government debt under QE since 2009, to stimulate the economy – first after the financial crisis, and then in the pandemic.

For many years, QE was profitable – because the Bank was bringing in more money through interest payments on those bonds than it was paying out to commercial banks for reserves they kept at the BoE.

So profitable, in fact, that former chancellor George Osborne decided in 2012 that the government should get the profits, in return for covering any losses.

The Treasury has reaped more than £120bn of profit from QE so far, in a short-term boost to taxpayers, but now it needs to pay the BoE back for losses on its Asset Purchase Facility (APF).

There are two reasons why.

First, the Bank bought those bonds with newly created electronic money – which it used to buy bonds from commercial banks. Those banks receive interest on those reserves, while the Bank gets interest (called a coupon) on the gilts which it holds.

Recent interest rate rises mean that Bank Rate has now risen above the average interest rate which the Bank earns on those coupons.

Second, the Bank is expected to crystallise losses on its QE programme. It has begun selling off some of its gilts – and will receive lower prices than it paid for them.

That, the Office for Budget Responsibility says, “will mean cash starts flowing from the Treasury to the APF”.

Bloomberg’s David Goodman has more details:

The OBR said the losses would mean a £61 billion contribution to debt, revised up by £90 billion from March. The terms of the BOE’s buying means the Treasury, and ultimately taxpayers, are on the hook to cover the losses.

That’s a stunning turnaround and a real headache for politicians who have to explain why billions of pounds of taxpayers money is being sent to the BOE.

The Institute for Fiscal Studies thinktank has published its analysis of the autumn statement. It says that living standards growth has been bad, and is getting worse, and that by 2028 average households will be 31% poorer than they would have been if we had carried on getting richer at the pre-2008 rate. It says:

Living standards growth since 2008 has been extremely weak by historical standards. Unsurprisingly given the cost of living crisis, today’s Office for Budget Responsibility forecast suggests that this is going from bad to worse. This year we are set to see the largest fall in real household disposable income per head (4.3%) since the late 1940s; next year, we are set to see the second-largest fall (2.8%). Modest growth is expected to return after that, but even by 2027-28 we are not expected to have had a single year of growth higher than the pre-2008 average since 2015-16. Average household income per head is due to be the same in 2027-28 as it was in 2018-19, and 31% below where it would have been if the pre-2008 trend had continued.

And here are three charts that help to illustrate this.

Yesterday Rishi Sunak said that he was working “incredibly hard” to ensure that the measures in the autumn statement were fair. When he said that, he may have been thinking of this chart, in the distributional analysis of the measures in the autumn statement published by the Treasury. On this basis, the measures are reasonably fair. The poorest households gain, and everyone else loses – but by roughly the same amount, as a share of household income.

If you look at the impact of households in cash terms, the autumn statement looks even more progressive, because the richest are paying the most.

The Treasury says:

This analysis shows that, on average, households in the poorest income deciles are gaining the most in cash terms and as a percentage of net income in 2023-24 as a result of government policies announced at autumn statement 2022.

These figures are based on an analysis of the impact of the tax, benefit and energy price guarantee measures in the autumn statement. And they take the status quo as a baseline (which means, if you think the tax system is inherently unfair in the first place, that “unfairness” does not register). These charts do not take into account cuts to spending on public services, which might affect poorer families most. But they also don’t take into account the impact of the national living wage going up by 9.7%.

These charts mean that, when Jeremy Hunt does a round of broadcast interviews tomorrow, he can say, with some justification, that his measures have helped the poorest most. It is not what Kwasi Kwarteng could have said after the mini-budget. The Treasury did not produce a distributional impact on that occasion, but if it had, it would have shown the exact opposite to chart 1.B.

Jeremy Hunt didn’t mention this in his statement, but the Office for Budget Responsibility says fuel duty is set to rise by 23% next March.

This will add £5.7bn to tax receipts next year, which would be a record cash increase, the budget watchdog says.

It would be the first time that any government has raised fuel duty rates in cash terms since 1 January 2011.

It is expected to raise the price of petrol and diesel by around 12p a litre, the OBR adds.

The government has confirmed that it will enact legislation to grant formal regulatory powers to a new regulator with a remit to crack down on the behaviour of tech firms including Google, Facebook and Apple.

The Digital Markets Unit, which has been set up in shadow form within the Competition and Markets Authority pending the granting of official powers, could fine firms billions of pounds if they do not follow a code of conduct based on “fair trading, trust and transparency” when dealing with rivals and third parties.

Delivering today’s autumn statement, Jeremy Hunt said:

We will legislate to give the Digital Markets Unit new powers to challenge monopolies and increase the pressure to innovate.

The DMU will enforce a code of conduct that includes, for example, assessing the terms on which digital publishers trade with the tech firms, such as the commercial terms around the republishing of “snippets” of content, to ensure they are fair to “prevent [them] from taking advantage of power and position”.

Owen Meredith, the chief executive of the News Media Association, an industry body, said:

By acting to give the DMU the teeth it needs to level the playing field between news publishers and the tech platforms, government has moved forward with its stated objective of placing journalism on a truly sustainable footing. As the main investor in trusted journalism in the UK, the news media sector has a vital role to play in our democratic society as we face up to the serious challenges ahead of us.

Jason Furman, who chaired Barack Obama’s Council of Economic Advisers, says it’s an important step forward.

The average band D household in England faces paying an extra £250 in council tax by 2027-28, the Office for Budget Responsibility says.

Councils are expected to lift council tax by 5%, now that the government has removed the requirement to hold a referendum.

In his speech, Jeremy Hunt referred to “more council tax flexibilities” which he said would help boost funding for the social care sector.

The Treasury estimating that 95% of councils will raise rates by the maximum amount.

This is an increase from the current 3% levy, with the new total being comprised of 3% in general council tax and 2% for the adult social care precept.

The OBR explains that this will rake in billions of pounds more:

This reflects the decision to give councils in England increased flexibility to raise council tax bills without the need for a local referendum, which is expected to result in bills rising by around 5% a year over the next five years.

This change is expected to yield £4.8bn a year by 2027-28, equivalent to increasing the average band D council tax bill in England by around £250 (11%) in that year.

As we covered this morning, allowing councils to lift council tax without a referendum is unpopular with voters. So there could be a backlash in the May local elections.

James Jamieson, the chairman of the Local Government Association, says:

Local government is the fabric of the country, as has been proved in the challenging years we have faced as a nation. It is good that the chancellor has used the autumn statement to act on the LGA’s call to save local services from spiralling inflation, demand, and cost pressures.

While the financial outlook for councils is not as bad as feared next year, councils recognise it will be residents and businesses who will be asked to pay more. We have been clear that council tax has never been the solution to meeting the long-term pressures facing services – particularly high-demand services like adult social care, child protection and homelessness prevention. It also raises different amounts of money in different parts of the country unrelated to need and adding to the financial burden facing households.

When Rishi Sunak delivered his spring statement earlier this year, the Office for Budget Responsibility said it was going to take the tax burden (taxation as a share of GDP) to its highest sustained level since the second world war.

The tax burden is still forecast to reach a postwar record later this decade – only now it will peak at an even higher level. Here is the chart from the OBR report saying so.

The OBR says:

Taking forecast and policy changes together … the tax burden rises from 33.1 per cent of GDP in 2019-20 to 37.1 per cent of GDP at the forecast horizon, 1.0 percentage point higher than forecast in March and its highest sustained level since the second world war.

Despite cuts in departmental budgets, total public spending also rises – from 39.3 per cent of GDP in 2019-20 to 43.4 per cent of GDP in 2027-28 – 2.9 percentage points higher than predicted in March, reflecting higher debt interest and welfare spending raising cash spending, and the energy-shock-driven smaller economy.

State schools in England will receive a funding boost of £2.3bn a year for the next two years, Jeremy Hunt has announced – with the Treasury saying the extra £4.6bn amounts to an “average cash increase for every pupil of more than £1,000” by 2024-25 when compared with last year.

The extra cash would mean core schools funding rising from £53.8bn this year to £58.8bn by 2025, meeting a previous pledge by the government to restore funding for pupils up to the age of 16 back to 2010 levels in real terms.

The announcement was greeted with relief by school leaders, who have been lobbying ministers publicly and privately for more funding to counteract the effects of steep rises in pay and energy costs that have been wreaking havoc with budgets.

Geoff Barton, general secretary of the Association of School and College Leaders, said the announcement was “positive news” that suggested the concerns of parents and school leaders were being heard by government. He said:

We’ll be closely looking at the figures to fully understand the implications. In particular, we’ll be looking at where this leaves special educational needs and post-16 provision which are both facing extraordinarily difficult financial circumstances.

We recognise this commitment to education is made in the context of a bleak economic picture but to put it into perspective this comes after a decade of real-terms cuts to schools and colleges.

Karen Roberts, chief executive of the Kemnal Academies Trust, which runs 45 primary and secondary academies in the south and east of England, said the extra money would make “some headway” in bridging current funding gaps. She went on:

However, with costs rising, on average, by 7% and the increase in funding announced equating to approximately 3% it is not clear where the extra funding needed to plug the gap will be found. My concern is that it will be up to individual schools to find the money.

The decision not to extend extra funding to sixth form or further education colleges was hugely disappointing, according to sector leaders.

David Hughes, chief executive of the Association of Colleges, said: “I’m pleased to see some extra school funding – they need it. But the failure to extend that to colleges is devastating.”

Hunt has delivered “a budget that boils the frog”, says Genevieve Morris, head of tax at Blick Rothenberg.

That’s because the decision to freeze tax thresholds, rather than lift them in line with inflation, means millions of people will pay more tax due to “fiscal drag”.

Morris says:

The continued freezing of tax thresholds means most people won’t notice it directly as the temperature increases, and so won’t leap out of the water.

They’ll simply discover years down the line that they boiled.

Smaller companies are also getting the scalded-amphibian treatment, because Hunt froze the VAT registration threshold at its current level until March 2026.

Martin McTague, chair of the Federation of Small Businesses, has criticised Hunt’s announcement, saying:

“Today’s Budget is high on stealth-creation and low on wealth-creation, piling more pressure on the UK’s 5.5 million small businesses, their employees and customers.

He adds:

Stealthily freezing the VAT threshold at a time of sky-high inflation will both drag more struggling small firms into scope for the tax, while disincentivising others from growing.

FSB’s research shows one-in-four (24%) of small firms and the self-employed are held back by the VAT threshold.

McTague also warns that Hunt has pushed up the cost of employing people – at a time when unemployment is already expected to rise by 505,000:

Freezing the threshold for employer national insurance at a time of such high inflation is a stealthy hike in the jobs tax, just as recessionary pressures threaten an increase in unemployment.

Alongside the understandable rise in the Living Wage, this budget will ramp up the costs of employment without offsetting that with measures to reduce other business costs

As Paul Johnson, the head of the Institute for Fiscal Studies thinktank points out, the figures in the Office for Budget Responsibility report show that the reason why the chancellor is needing to cut spending and put up taxes so drastically is because the cost of government debt interest – the amount it has to pay to service its borrowing – has gone up enormously this year.

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Referring to the graph in Johnson’s first tweet, the OBR says:

Debt interest spending (net of asset purchase facility, or APF, flows) more than doubles in cash terms from £56.4bn (2.4 per cent of GDP) last year to peak at £120.4bn this year (4.8 per cent of GDP), the highest since immediately following the second world war both as a share of GDP and as a share of revenue (12.0 per cent).

Johnson says this explains the background to the autumn statement.

UK house prices are expected to have fallen by 9% in two years’ time.

The Office for Budget Responsibility predicts that the jump in mortgage rates will cool the market, while the recession will also hit demand.

The OBR says:

House prices are forecast to fall by 9.0% between the fourth quarter of 2022 and the third quarter of 2024, largely driven by significantly higher mortgage rates as well as the wider economic downturn

That means the house price correction will be well under way when the next election could be taking place in 2024.

Prices are then expected to recover slowly, and “remain below their current level for the next five years”, the OBR adds:

Both Nationwide and Halifax have reported that house prices fell in October, as the mini-budget spooked buyers.

Looking further ahead, property agent Emma Fildes of Brickweaver predicts a jump in sales in 2025, when Jeremy Hunt has announced the stamp duty cuts from the mini-budget will end.

The cost of bailing out failed energy supplier Bulb has ballooned to £6.5bn, it has emerged.

Documents released alongside the autumn statement show that £4.6bn will be spent on handling the company in 2022-23. In March, the Office for Budget Responsibility said the rescue would cost £2.2bn over two years.

Bulb, which has around 1.5 million customers, collapsed in November last year and was put into a special government-handled administration.

The government has faced criticism for not allowing the company to buy power ahead, exposing it to volatile gas prices.

Bulb was bought by rival Octopus Energy late last month in a deal that founder Greg Jackson vowed would be a “fair deal” for taxpayers.

However, it is still awaiting court approval after rival suppliers complained over a lack of transparency over the terms of the acquisition.

Unemployment is set to rise by more than half a million, as the UK falls into recession.

The OBR predicts that the jobless total will rise by 505,000 from 1.2 million at present to 1.7 million at its peak.

The fiscal watchdog says:

We expect the rise in unemployment to lag the fall in GDP as vacancies are likely to fall first before workers are laid off.

Ramping up energy efficiency is a no-brainer when it comes to cutting energy bills, ensuring security of supply and reducing climate-heating emissions. In Jeremy Hunt, the Conservatives appear to have found a brain. In the autumn statement, he pledged to double annual energy efficiency investment with new funding of £6bn.

That is the good news. The bad news is that doubling does not happen until 2025, when the energy bills crisis may well be over and the climate crisis will be even worse. Hunt is the fourth chancellor of 2022 and the chaos in the Tory party has meant unnecessary delays in making people’s homes warmer and cheaper to heat.

The trouble goes back almost a decade in fact, when David Cameron’s ditching of “green crap” resulted in insulation rates falling by 95%, a decision that has cost billpayers billions. Details of the new efficiency plans are yet to be published but will include a new “energy efficiency taskforce”. Its goal will be to reduce the UK’s energy use in buildings and industry by 15% by 2030, a fairly modest ambition.

On the supply of low-carbon energy, Hunt backed expensive nuclear power as well as offshore wind, but said nothing on the fastest and by far the cheapest sources - onshore wind and solar. With blocks on the latter, the Tories continue to be wildly out of tune with voters.

Hunt increased the windfall tax on soaring oil and gas profits from 25% to 35%, making the total tax rate 75%. That may look high, but remember that the oil and gas belongs to the nation - you and me - not the fossil fuel companies, and other nations like Norway have higher rates. A windfall tax on electricity producers of 45%, including wind, solar and nuclear, was also announced by Hunt. Depending on how that is implemented, the green energy companies could end up being taxed more than the fossil fuel producers. That would be mad when green energy is the solution to the energy and climate crisis, and while oil and gas firms can get 91% tax rebates by investing in more oil and gas.

Electric car sales are in the fast lane and Hunt announced that from 2025 owners will need to start paying vehicle excise duty, also known as road tax. That is a disincentive to go electric but by that date electric cars will not only be cheaper to run, as they already are, but also very probably cheaper to buy than petrol or diesel models.

On climate change, Hunt said: “With the existential vulnerability we face, now would be the wrong time to step back from our international climate responsibilities. So I can confirm that, despite the economic pressures, we remain fully committed to the historic Glasgow climate pact agreed at Cop26, including a 68% reduction in our own emissions by 2030.” The government is not currently on track to meet this target.

The autumn statement’s purpose was to find £55bn in tax rises and spending cuts to stabilise the UK economy. To put that in context, that’s about 18 days’ worth of the pure profit the global oil and gas industry has been banking for the last 50 years.

Rachel Reeves, the shadow chancellor, told MPs that the Tories had put the economy into a “doom loop” in her speech responding to Jeremy Hunt. She said:

Nobody doubts that the Covid pandemic and the war in Ukraine have had profound implications and the whole house is united in its condemnation of Russia’s aggression.

But Britain’s problems started before the Covid pandemic and they started before Russia’s illegal invasion of Ukraine. The UK has grown by an average of 1.4% a year under the Conservatives compared to 2.1% a year in the Labour years before that.

We are the only G7 economy that is still poorer than before the pandemic.

The chancellor is saying today he will be honest, so let’s be honest: no one was talking about cuts to public spending two months ago and no other advanced economy is cutting spending or increasing taxes on working people as they head into recession.

This government has forced our economy into a doom loop where low growth leads to higher taxes, lower investments and squeezed wages, with the running down of public services - all of which hits economic growth again.

She joked that police around Westminster were warning people about pickpockets. Pickpockets managed to trick people by appearing to be friendly, the police say. Reeves went on:

In the last hour, the Conservatives have picked the pockets and purses and wallets of the entire country as the chancellor has deployed a raft of stealth taxes taking billions of pounds from ordinary working people. A Conservative double whammy that sees frozen tax thresholds and double-digit inflation erode the real value of people’s wages. Just one of those freezes, in the personal allowance, will cost an average earner more than £600.

She also said the Tories were treating people like fools by claiming not to be responsible for the events of the past 12 years.

The chancellor and prime minister are trying to convince us that Britain faces problems that are nothing to do with them, that the mini-budget - which imposed a Tory mortgage premium, put pensions in peril and trashed our reputation around the world - was all just a bad dream.

It’s their Bobby Ewing strategy. Downing Street as Dallas. Old cast members return as if nothing has happened, with tangled plotlines to keep the audience.

But the truth is it has lost all credibility and everyone knows it is long past time that this series was cancelled.

And the problem for the British people is this: this is not a dream, this is the everyday nightmare of Tory Britain.

The Conservatives would have us believe that they are not responsible for the last 12 years of failure. In doing so they take the British people for fools.

The UK national debt is on track to be £400bn higher than forecast in March, the OBR says.

The OBR predicts that the UK’s recession will last about a year, with GDP falling about 2%.

That’s a relatively shallow recession, and shorter than the Bank of England warned of this month.

But it’s dire enough – and it will mean that the UK economy will not reach its pre-pandemic size until 2024.

That means an entire parliament of lost growth.

In comparison, the US economy reached its pre-pandemic size last summer.

Other G7 nations are also larger than before the pandemic – although some also face the risk of recession.

As Hunt sat down, the Office for Budget Responsibility released its latest economic and fiscal outlook.

It’s grim.

The OBR says that despite the new support with energy bills, living standards are going to fall by 7% over the next two years.

That’s a dire outcome, wiping out eight years of growth.

The OBR says:

Over £100bn of additional fiscal support over the next two years cushions the blow of higher energy prices – but the economy still falls into recession and living standards fall 7% over two years, wiping out eight years’ growth.

Over the medium term, around £40bn in tax rises and spending cuts – in roughly equal measure – offsets higher debt interest and welfare costs and gets debt falling as a share of GDP.

The fall in living standards next year will be the biggest on record, so since at least the mid-1950s, the OBR adds:

On a fiscal year basis, RHDI per person (a measure of living standards) falls by 4.3% in 2022-23, which would be the largest since ONS records began in 1956-57.

That is followed by the second largest fall in 2023-24 at 2.8%.

This would be only the third time since 1956-57 that RHDI per person has fallen for two consecutive fiscal years – the last time this happened was in the aftermath of the global financial crisis.

This chart shows the scale of the hit to living standards, as inflation hammers households.

Hunt ends by confirming that benefits and pensions will rise in line with inflation.

Benefits will go up in line with the inflation rate in September, 10.1%, he says. He says this will cost £11bn, but an average family on universal credit will gain by £600, he says.

Mr Speaker, there have also been some representations to keep the uplift to working age and disability benefits below the level of inflation given the financial constraints we face, but that would not be consistent with our commitments to protect the most vulnerable. So today I also commit to upgrade such benefits by inflation with an increase of 10.1%.

And pensions, and pension credit, will also rise by 10.1%, he says. The triple lock is being protected, he says.

He ends by saying:

This is a balanced plan for stability, a plan for growth and a plan for public services.

It shows that you don’t need to choose either a strong economy or good public services.

With Conservatives, and only with Conservatives, you get both.

Hunt says he is accepting a recommendation from the Low Pay Commission and increasing the national living wage by 9.7% next year.

That means from April 23, the hourly rate will be £10.42 which represents an annual pay rise worth over £1,600 pounds to a full time worker.

Hunt says rent increases in the social rented sector will be capped at 7%.

Hunt says compassion is a great British value as he turns to the final section of his speech.

On energy bills, he says the energy price guarantee will be extended for 12 months from April. Unit prices will be capped, and the average household will pay £3,000, he says.

He says there will also be further payments for help with energy bills for pensioners, for poorer households and for disabled people.

Hunt turns to growth. As Labour MPs jeer, he claims they have never been interested in growth.

Energy is part of the growth plan, he says, and he says there will be an acceleration of efforts to make the UK energy independent.

He says the government will go ahead with building a new nuclear power plant, Sizewell C.

Hunt says he is increasing the NHS budget in the next two years by £3.3bn.

He says Amanda Pritchard, the NHS England chief executive, says this will allow the NHS to fulfil its key priorities.

And he says the devolved governments will get funding too.

The new 45% windfall tax on energy generators is higher than the 40% that had been expected.

Shares in SSE, which runs gas-fired power stations alongside hydroelectric plants and windfarms, have dropped by 3.75% (yesterday, SSE reported a tripling of profits thanks to the energy crisis)

Centrica shares have dropped by 1.1%, while Drax – which runs a large biomass power station in North Yorkshire – are down 3.9%.

Turning to the NHS, Hunt says a former chair of the health committee called for better workforce planning in the NHS. He is referring to himself. He says he has listened carefully to the proposal, and will accept it.

The NHS will publish a workforce plan for the next five, 10 and 15 years, he says.

On social care, he says he is allocating an extra £1bn this year, and then £1,7bn, for adult social care. This will free up hospital beds, he says.

He says this will fund an extra 200,000 care packages.

But he says the NHS also needs reform to operate more efficiently. He has asked Patricia Hewitt, a former Labour health secretary, to conduct a review looking at this.

Hunt turns to education spending.

He says some people (ie, Labour) want to put VAT on private school fees. That would raise £1.7bn, he says.

But he says he will be practical, not ideological. He says next year and the year after he will put an extra £2.3bn into schools.

Today’s statement delivers a consolidation (ie tax rises and spending cuts) of £55bn, Hunt says.

It means inflation and interest rates end up “significantly lower”.

He explains that fiscal policy will support the economy in the short term as growth slows and unemployment rises.

The OBR confirm that because of our plan, the recession is shallower and inflation is reduced, Hunt says.

Unemployment is also lower, with around 700,000 jobs saved, the chancellor adds.

Then, the pace of consolidation increases as growth returns to get debt falling – that will take pressure off the Bank of England to raise interest rates.

On spending, Hunt says the government will protect the increases in departmental spending in cash terms already set out in existing plans.

But departments will have to make efficiencies to compensate for inflation, he says.

Hunt covers changes to business taxes, saying he will maintain the VAT threshold.

And he confirms he is extending the windfall tax. He says he is in favour of taxes on genuine windfalls.

From January 1st until March 28 we will increase the energy profits levy from 25% to 35%. The structure of our energy market also creates windfall profits for low carbon electricity generation. So from January 1st we’ve decided to introduce a new temporary 45% levy on electricity generators. Together these measures raised £14bn.

The UK is forecast to borrow 7.1% of GDP, or £177bn, this financial year, Hunt says.

That’s a major jump – back in March, the OBR forecast a deficit of 3.9% of GDP, or around £98bn.

Next year, the UK expects to borrow £140bn, or 5.5% of GDP – again up from the 1.9%, or £50.4bn predicted in March.

By the 2027-28 financial year, the deficit drops to 2.4%, or £69bn.

Underlying debt as a percentage of GDP will start to fall from a peak of 97.6% in 2025-26, to 97.3% in 2027-2028.

Hunt is now summarising those tax changes. They are in line with expectations.

The threshold for the top rate of income tax, 45%, will come down from £150,000 to £125,000.

Allowances and thresholds for income tax, national insurance and inheritance tax will be frozen for a further two years, going up to April 2028.

Hunt says, even with this freeze, “we’ll still have the most generous set of tax-free allowances of any G7 country”.

The dividend allowance will be cut from £2,000 to £1,000 next year, and then to £500 in April 2024.

And electric vehicles will no longer be exempt from vehicle excise duty, he says.

The OBR has judged that UK is now in recession, “like other countries”, Hunt reveals.

He says GDP is forecast to shrink by 1.4% next year, before returning to growth in 2024.

Here are the new forecasts:

• 2022: GDP growth of 4.2% compared with 3.8% growth predicted in March

• 2023: GDP falls by 1.4% compared with +1.8% growth predicted in March

• 2024: GDP rises by 1.3% compared with 2.1% growth predicted in March

• 2025: GDP rises by 2.6% compared with 1.8% growth predicted in March

• 2026: GDP rises by 2.7% compared with 1.7% growth predicted in March

Higher energy prices are responsible for the majority of the downgrade, Hunt adds.

Hunt says the Conservatives do not approve of leaving debts to be paid by future generations.

He says this is a balance plan. Just over half of the consolidation will come from spending cuts. And the rest will come from tax rises.

He says the plans will involve a “substantial tax increase”.

But headline rates of tax will not change. And the overall tax burden will rise by just 1%.

Hunt says the OBR expects inflation to be 9.1% this year, and 7.4% next year.

Hunt starts by stressing the need for stability.

He says the OBR confirms global factors are the primary cause of inflation.

Most countries are still dealing with the consequences of the pandemic.

That has to be paid for. And this has been worsened “by a made-in-Russia energy crisis”.

Energy prices have risen to eight times their historic average.

He names other countries where interest rates and inflation are higher.

The Bank of England has done an “outstanding job” tackling inflation, he says. He says he will not change its remit.

Jeremy Hunt starts by saying that in the face of “unprecedented global headwinds”, people are worried about the future.

So he will deliver a plan “to tackle the cost of living crisis and rebuild our economy”.

He says his priorities will be stability, growth, and protecting public services – but he also wants his plans to be compassionate.

There is no strict time limits for statements in the Commons, but we were told that Rishi Sunak’s would last for about an hour. That means were are expecting Jeremy Hunt to be on his feet at around 11.30am.

After he delivers his statement, Rachel Reeves, the shadow chancellor, will respond to Labour. Sunak will briefly reply. Other MPs will then get to ask questions about the statement for an hour or so.

YouGov has released polling showing that support for Brexit is now at its lowest level since the vote to leave the EU in 2016.

That might not seem relevant to the autumn statement, but earlier this week Michael Saunders, a former member of the Bank of England’s monetary policy committee, said: “If we hadn’t had Brexit, we probably wouldn’t be talking about an austerity budget this week.”

Good morning. They are still not calling it a budget, but today’s autumn statement will be the second colossal “fiscal event” of the autumn, much bigger than a usual budget, or arguably the third. The first was Kwasi Kwarteng’s mini-budget. Then there was Jeremy Hunt’s announcement in his first full day as chancellor abandoning almost all the measures in the mini-budget – the biggest government U-turn in the modern era. And today Hunt, now working for a new prime minister, will set out a fiscal strategy that entirely reverses the Kwarteng/Liz Truss one.

Kwarteng announced tax cuts worth £45bn. Hunt is expecting to announce tax rises worth £24bn, plus spending cuts worth around £30bn.

The autumn statement won’t just be a repudiation of the short-lived and disastrous Truss premiership. In some respects Hunt will undoing policies that the Conservatives have championed for much of their last 12 years in office. David Cameron and George Osborne kept increasing the personal tax allowance, so they could remove more and more people from having to pay tax in the first place. Today Hunt is going to extend the period for which allowances are frozen, using this as a stealth tax, and dragging more people into paying tax. Osborne cut corporation tax significantly. Now it is shooting up again.

But, in other respects, the autumn statement will feel like a return to 2010. Cameron and Osborne claimed the UK needed austerity to balance the books. This is being dubbed austerity 2.0.

In a statement released overnight, the Treasury says “balancing the books is key to economic stability”. Hunt says the UK is facing “into the storm”. He says:

There is a global energy crisis, a global inflation crisis and a global economic crisis.

But the British people are tough, inventive, and resourceful. We have risen to bigger challenges before.

We aren’t immune to these global headwinds, but with this plan for stability, growth and public services - we will face into the storm.

But in her overnight statementbefore the announcement, Rachel Reeves, the shadow chancellor, says the country is being held back by “12 years of Tory economic failure”. She says:

Britain has so much potential but we are falling behind on the global stage, while mortgages, food and energy costs all go up and up.

The country is being held back by 12 years of Tory economic failure and wasted opportunities and working people are paying the price.

What Britain needs in the autumn statement today are fairer choices for working people, and a proper plan for growth.

Here is the agenda for the day.

8.30am: Rishi Sunak chairs cabinet, where Jeremy Hunt, the chancellor, will outline the contents of his autumn statement.

10.30am: Sunak makes a statement to MPs about the G20 summit.

Around 11.30am: Hunt delivers the autumn statement.

2pm: The Office for Budget Responsibility holds a briefing.

My colleague Graeme Wearden will be joining the blog later to help me cover the statement and provide analysis and reaction afterwards.

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