Royal College of Podiatry responds to the Government's Autumn Statement
The Chancellor unveiled his tax and spending plans to the country today. The RCPod has responded to that statement
Today, the Chancellor of the Exchequer, Jeremy Hunt MP, announced how the Treasury plans to tackle the £60bn gap in the UK’s finances in the Government’s Autumn Statement.
When we responded to the former chancellor, Kwasi Kwarteng’s ‘mini-budget’ in September we could not have predicted the economic ramifications that the £45bn programme of tax cuts would trigger. The mini-budget was the sole reason behind the resignation of chancellor Kwarteng and former prime minister Liz Truss, which is estimated to have cost the country approximately £30bn. Since then, mortgage rates have increased over a year from an average fixed rate of 2.25% to 6.65%, the highest rate since 2008.
London is no longer the biggest stock market in Europe; now Paris holds that accolade. Raising output was a laudable aspiration of the seven-week Truss government; however, aiming for growth without any serious investment in education, research and development, manufacturing and healthcare, to ensure the UK has the infrastructure to build such growth, is naive in the extreme.
Through leaks to the media, the country has been told to prepare itself for austerity 2.0. Anyone who has had any dealings in the health and social care sector, whether it is attempting to make a GP appointment, visiting a loved one in a care home, or working within the system, will know that every area is suffering from high long-term sickness rates and high vacancy rates driven by years of underfunding. Of all the government departments, health and social care need long-term investment and a long-term workforce strategy, beyond the cycle of a Parliament.
The Chancellor said that he would be bringing in former Labour Health Secretary, Patricia Hewitt, to advise how Integrated Care Boards can operate effectively with the appropriate autonomy and accountability. He announced that the NHS in England would receive an additional £3.3bn, Scotland £1.5bn, Wales £1.2bn, and Northern Ireland £650m.
Similar to austerity under the Cameron and Osborne governments, those with the least will have to shoulder the burden. It is likely to be the poorest, and the services used by ordinary people, that will be hardest hit by the most severe cuts. Evidence has linked over 335,000 deaths to government austerity policies across Great Britain between 2012 and 20191. There is now little fat to cut from public services, be that in health, education, the armed forces, emergency services, prison services, courts, environmental protection, or local authorities.
The Office for Budget Responsibility (OBR) was able to scrutinise the statement before its release, something that didn’t happen under the previous Chancellor. The OBR stated that global factors are the primary cause of current inflation and that the UK is currently in recession. Whether the slowdown in trade believed to be caused by the UK leaving the European Union is a secondary cause, we can only speculate. The OBR downgraded the levels of growth for the UK and stated that living standards will fall by 7%.
What does this mean for small business owners? Corporation tax will remain at 25%. The Chancellor has cut the tax-free allowance on dividend income from £2,000 to £1,000 and then subsequently £500 over the next two financial years. It is projected that the lowering of the 45% tax threshold will come in for those earning £125,140 (previously £150,000) and it is likely to raise £420m per year for the Treasury.
For those employees on PAYE, the Chancellor included a decrease to the additional rate income tax threshold from £150,000 to £125,140 from April ‘23. This is the threshold at which the tax rate increases from 40% to 45%. This is forecast to bring in £3.7bn over five years. Personal tax and NI thresholds have been frozen until 2028, therefore if you receive a pay rise during this period will end up paying more tax and NI.
The Chancellor did not announce any changes to the current tax relief arrangements for those with non-domicile status. Removal of the non-domicile rule would bring 3.2bn to the Treasury2.
Private schools in the UK receive £3bn per year in tax relief, yet the Chancellor claimed today that removing this tax break would mean 90,000 students would drop out of the private school system. This figure is from a report3 produced by the Independent Schools Council, a group that represents private schools.
Surprisingly there was no mention in the Chancellor’s statement to Parliament about the 23% increase in fuel duty from March ’23, an increase which the OBR predict will bring in £6bn. Fuel duty has been frozen since January 2011, this is likely to raise the price of petrol and diesel by 12p per litre.
The Chancellor ended his statement by stating that you get a strong economy and good public services with the Conservatives. This may come as a surprise to anyone who is suffering under the current cost of living crisis, those whose school or health centre is in a state of disrepair or those who have been stuck on a waiting list for years. This Autumn Statement aimed to renew fiscal credibility in the Conservative party and the government and to prevent the markets from wobbling, as happened after the mini-budget. Instead, the markets have reacted negatively to what appears to be a gloomy future for the UK economy, with Sterling dropping by 1%. We are likely to see the last eight years of living standards growth removed in the next two years.
Notes:
- Walsh D, Dundas R, Mc Cartney G, Gibson G, Seaman R. Bearing the burden of austerity: how do changing mortality rates in the UK compare between men and women? Journal of Epidemiology & Community Health https://jech.bmj.com/content/jech/early/2022/09/26/jech-2022-219645.full.pdf
- Advani, A., Burgherr, D., and Summers, A. (2022), Reforming the non-dom regime: revenue estimates, CAGE Policy Briefing no.38 https://warwick.ac.uk/fac/soc/economics/research/centres/cage/manage/publications/bn38.2022.pdf
- Independent Schools Council (2018) VAT on School Fees- Report. https://www.isc.co.uk/media/5926/isc-vat-full-report-1018-for-circulation.pdf