Rebecca Evans MS, Minister for Finance and Local Government
The Chancellor of the Exchequer today presented his Autumn Statement against the backdrop of inflation at a 40-year high and the ongoing cost-of-living and cost-of-energy crisis for people, public services and businesses.
The Office for Budget Responsibility (OBR) has confirmed the UK economy is in the early phase of a recession that will likely be lengthy and which will result in real and significant costs for people across the UK. The rate of unemployment is expected to increase substantially. People’s household disposable incomes are expected to fall by more than 7% over next two years – the biggest fall on record – to levels last seen in 2013.
Ahead of the Autumn Statement, I called on the Chancellor to invest in people and public services. This was partially reflected today, with additional funding over the next two years but it does little to address the immense challenges created by rising inflation.
Our overall settlement over the three-year spending review period (2022-23 to 2024-25) is still worth less in real terms than it was at the time of the Spending Review last year. We will receive an additional £1.2bn over the next two years (2023-24 and 2024-25) but our overall budget in 2024-25 will be no higher in real terms than in the current year and our capital budget will be 8.1% lower.
As the London School of Economics, OECD and others have stated, additional capital investment is vital to improve productivity and growth, yet there was little of substance in the Chancellor’s statement to support our energy security and decarbonisation.
The tax measures announced today do mean that those on higher incomes, and more able to afford it, are being asked to contribute more to help fill the hole created by the UK Government’s mismanagement of public finances. However, everyone is being asked to pay more.
I am concerned about the UK Government’s stealth tax increases on workers with its decision to freeze income tax thresholds, particularly the personal allowance. As more workers are drawn into higher tax bands, a greater proportion of their pay will immediately be lost. People in Wales are likely to be disproportionately affected by this measure.
The UK Government has listened to my suggestion to increase the windfall tax on the energy sector, however it could have done more to close loopholes that enable oil and gas companies to offset their tax liability if they invest profits in the UK. There was also scope for the UK Government to expand this tax to cover the banking sector.
Targeting support to the most vulnerable is an absolute necessity and it was essential that the Chancellor responded to our call to raise pensions and benefits in line with inflation. There was nothing in the statement about additional measures which could have made a practical difference to the cost-of-living crisis, such as help for those on pre-payment meters, support for credit unions and further action to prevent people becoming homeless.
While the Chancellor’s Statement provided further details of the energy price guarantee for homes, from April next year the average household can still expect to see a further increase of £500 in its annual energy bill and there was no clarity for businesses about what tariffs they will be paying next year.
Inflation has eroded the Welsh Government’s budget to worrying levels and local authorities and NHS organisations are reporting significant shortfalls in funding as a result of inflation, pay pressures and rising energy costs. The Chancellor’s statement today fails to address this significant funding gap.
To make up this shortfall and secure the short-term future of the vital public services on which we all rely, we needed to see our budget increase in line with inflation. This has not happened.
As a Welsh Government, we will continue to work to prioritise our budgets to shield the most vulnerable and maintain our commitment to create a stronger, fairer and greener Wales as we prepare our draft Budget 2023-24.
We will carefully consider the detail of today’s statement as we work towards publication of the draft Budget next month.