Chancellor’s Financial Statement lays groundwork for significant tax rises and spending cuts in the Autumn Budget

The Chancellor’s statement is laying the foundation for significant tax rises and future spending cuts

The Chancellor’s statement in the House of Commons this afternoon is laying the foundation for significant tax rises and future spending cuts targeting ‘middle England’.

Robert Salter, Director said:

It was noticeable that Ms Reeves has already announced the withdrawal of the Winter Fuel Payment, worth at least £200 for most UK pensioners, from the majority of British pensioners.

Going forwards only those pensioners who qualify for ‘pensions credit’, which is basically a supplement to their core UK state pension, will be eligible for the Winter Fuel Payment. This means that approximately 90% of British pensioners will now not qualify for this payment.

The public sector pay rises which have been promised, including a pay rise of ca. 22% for NHS ‘junior doctors’, do not appear to have been linked to any specific efficiency savings and improvements. They will represent a real cost to public sector budgets and could push up the general rate of inflation in the short-term.

In many cases at least 50% of the salary increase to junior doctors will actually be ‘clawed back’ by the Government. For example, a junior doctor already earning say £52,500 per annum – before the pay rise – will face the following marginal tax rates on their additional salary after this 22% pay rise:

Income tax of 40%;
NIC of 2%; and
Student loan repayments (in effect a graduate tax) of 9%.

Robert said:

Whilst most commentators accepted that the Labour Party’s tax manifesto in the run-up to July’s General Election was ‘light on detail’ it is still very surprising to see the Government make cuts to the Winter Fuel Payment. This will mean that many pensioners with genuinely modest incomes will be impacted by the change.

In addition, by making the Winter Fuel Payment subject to a ‘means test’, the Government knows that many pensioners who would in principle be eligible for the pensions credit will not claim the relief, either because of personal pride, embarrassment or simply because they are confused by the whole system.