Page 2 - Budget Newsletter November 2022

Budget Newsletter

17 November 2022

THE BACKGROUND

The line between Statements and Budgets has blurred in recent years. Chancellor Jeremy
Hunt’s second major announcement was designated as an Autumn Statement, but it will
have a greater financial impact than most Budgets. A broad range of tax increases and
spending cuts ensures that will be the case, regardless of the Treasury branding.

As the past few weeks of leak-driven media coverage have made clear, the Autumn

Statement had two primary purposes:

• to re-establish the UK as a fiscally responsible developed country after the ill-fated
Truss premiership; and

• to fill a black hole in the public finances, that was variously estimated to be between
£40bn and £60bn a year, by 2027/28. Not all the blame for that can be placed at the
feet of Mr Hunt’s short-lived predecessor, Kwasi Kwarteng. His self-destructive

‘fiscal event’ on 23 September included about £45bn of unfunded tax cuts.

By the time Mr Hunt came to the despatch box, just under eight weeks later, some £32.3bn
of those cuts had already been reversed, including the planned reduction in the basic rate
of tax and the freezing of corporation tax rates. The only major measures that outlived Mr
Kwarteng are those that had entered the legislative process before his demise – the
reduction in National Insurance Contributions (NICs), the abolition of the Health and Social

Care Levy and the modest cuts to Stamp Duty Land Tax (in England and Northern Ireland).

When announcing the U-turns on the Trussonomics tax policy a month ago, Mr Hunt spoke
of future ‘decisions of eye-watering difficulty’, but gave little explanation of why
government finances had deteriorated seemingly so rapidly. In truth, the fiscal hole had
been deepening for some while:

• The last official projections from the Office for Budget Responsibility (OBR) were

carried out in mid-March 2022, three weeks after the invasion of Ukraine. The
assumptions made back then now look rose-tinted. For example, the OBR thought
that inflation would peak at 8.7% this year before dropping to 4% in 2023 and that
the UK economy would grow by to 1.8% in 2023. The corresponding figures in the

Raymond James Budget Newsletter November 2022 1