After an autumn of political and economic chaos following the disastrous ‘mini-budget’ in September, the UK’s latest finance minister, Chancellor Jeremy Hunt MP, stepped up to give his statement on state of the nation’s public finances on Thursday 17 November.
For weeks the government has been trying to manage expectations, scheduling and rescheduling, naming and then renaming this ‘fiscal event’. They’ve been talking incessantly about the need for tax rises and spending cuts, and an ominous ‘fiscal black hole’ of billions and billions in size (it turned out to be £55bn).
It’s important to remember that this is not astrophysics but rather a kind of theatre for the markets and international investors, which were wildly spooked by the alien mini-budget of previous Chancellor Kwasi Kwarteng. The whole thing is based on economic forecasting and self-imposed government fiscal rules, which at the best of times appear to be something marginally more scientific than astrology. The previous Chancellor had abandoned such forecasts, which promptly blew up like a supernova in the form of spiking costs of UK government debt which threatened an economic meltdown.
Given the turbulent economic conditions, the accuracy of these economic forecasts would seem to be even more nebulous than usual. Throw in a General Election campaign starting at some point in the next couple of years – within the timeframe of these forecasts – and the politics of the planned timing of spending cuts and tax rises took on an even more extra-terrestrial quality.
Nevertheless, here we are. Normally an ‘Autumn Statement’ implies a more low-key update on the public finances, with the main event in the Spring. This was a more substantive event, more akin to a full Budget, in an attempt to show that normal service had resumed.
Members of the Civil Society Group, including DSC, had written to Jeremy Hunt in October calling for the following four key issues to be addressed as a priority in his Autumn Statement. Did the Chancellor deliver?
1. Uprating benefits in line with inflation
On this there was some very good news: the Government is increasing benefits in line with an inflation rate of 10.1%, which is anticipated to cost £11bn. Inflation is still rising and may not have peaked, but the variance between current levels and the last time this uprating happened is huge, so the value of various benefits has been decreasing significantly. Although this announcement won’t put back that lost spending power, it will help it keep pace over coming months. The Chancellor also said that government will ‘raise benefits, including working age benefits and the State Pension, in line with inflation from April 2023, ensuring they increase by over 10%’. (see p28).
Another nugget of very important news which barely got any notice was the Chancellor’s funding extension for the Household Support Fund, which funds local councils to provide support for vulnerable households with the cost of essentials. This support is likely under even higher demand than usual, and the Chancellor announced £1 billion to extend it until March 2024 – a really important development that directly helps the most vulnerable.
2. Investing in public services and especially the need for adequate local authority funding
There’s always a lot of spin in these sections of a Budget and it’s going to take some time for the true impact of the spending decisions and the impact on public services to be worked out. The broad picture is that the Chancellor seems to have ‘back-loaded’ many cuts until after the next General Election in a few years’ time, whilst protecting spending to a degree over the next two years.
He did announce that he was increasing the NHS budget by £3.3bn in each of the next three years, with comparable increases for Scotland, Wales and Northern Ireland. However, most other government departments look set to be tied into the spending plans announced at the last Comprehensive Spending Review announced one year ago, when inflation was much lower, meaning that those areas are likely to experience real terms cuts during the forecast period.
The Budget tables do show central government spending on local government rising from £11.8bn to 15.7bn next year, an increase of £3.9bn (see p20), but it’s unclear why exactly and may take some time to decipher. This may be down to changes in how different funding (potentially for social care) is classified rather than any real increase in the central grant that local governments get.
3. No further cuts to international aid spending
The Chancellor didn’t deviate from the existing position on international aid set in place by the current Prime Minister Rishi Sunak when he was Chancellor. This reduces Britain’s aid contributions from 0.7% to 0.5% of Gross National Income until certain conditions on government borrowing are met. So it wasn’t a further cut, but neither was it a restoration to the levels from several years ago. (see p28).
4. Continued support for energy bills and including charities in the development of the Energy Bill Relief Scheme
The Chancellor announced that the Energy Price Guarantee, which sets a maximum price per unit of energy for domestic energy users, will remain in place but increase from April. To defray the impact of this on lower income households, he announced that from ‘2023-24 an additional Cost of Living Payment of £900 will be provided to households on means-tested benefits, of £300 to pensioner households, and of £150 to individuals on disability benefits.’ It’s not clear at the moment how this impacts previous support schemes. (see p28).
The Energy Bill Relief Scheme provides relief for non-domestic users until 31 March, including businesses and crucially, charities. Similar to the household version, it sets maximum unit prices for energy. The Chancellor didn’t mention it in his speech, but the budget book states that a review of the scheme to determine its operation beyond March will be published by 31 December 2022. (see p47).
Further, it says that ‘the overall scale of support the government can offer will be significantly lower, and targeted at those most affected to ensure fiscal sustainability and value for money for the taxpayer’. The spending tables in the budget book don’t provide any funding allocated to this scheme for 2023, so presumably that will need to be addressed at the Spring Budget. (see p58).
Members of the Civil Society Group are currently surveying charities to feed data into this review, in the ‘State of the Sector Survey’. If you haven’t responded yet, do so now!
There was much more to analyse in the Autumn Budget, including many changes to tax that will affect charity employers, their staff, and the people they serve. Also policy and spending measures that will impact social care, education, health and the environment amongst others. The next similar event in the calendar will be the main Budget in the Spring, when some of the above measures will no doubt be modified or changed.
DSC will do further analysis over the coming days and will also signpost analysis done by others inside and outside the sector as the Autumn Statement is dissected, so stay tuned to our newsletter and @DSC_Charity for updates.