SMF Responds to Chancellor Jeremy Hunt’s Autumn Statement 2022

Here’s the Social Market Foundation’s response to Chancellor Jeremy Hunt’s Autumn Statement 2022.

On energy bills and cost of living support, Amy Norman, Senior Researcher said:

“It is welcome news that the Energy Price Guarantee will remain in place for the millions of households who would have otherwise faced much greater hardship. However, the choice to retain a universal system simply highlights the fact that our system of delivering support is both inadequate and inefficient.

“In all, the Chancellor’s plans mean low-income households who are outside the benefits system will see their average energy bill rise from April. Meanwhile, higher-income pensioners will receive additional cash support from taxpayers. This is not just a political choice but an administrative one – the social security system is the only real means we have for providing targeted support with energy, but that system isn’t able to identify all the millions of people who are in need of help with energy bills.

“This raises obvious questions about fairness and the responsible use of public money. As bills are expected to remain above pre-crisis levels for the rest of the decade, a sustainable policy for energy bills needs a more accurate and less wasteful way of delivering help.”

On energy efficiency, Niamh O Regan, SMF Researcher said:

“Energy efficiency is the key to reducing consumption and therefore costs for households and businesses over the long-term. It is welcome that the Government has recognised this and committed additional new funding to insulate the UK’s drafty, leaky buildings.

“But additional support for energy efficiency measures is needed now, not in two years’ time. Energy bills are highest now and will continue to burden households as the weather gets colder. With bills expected to remain high this decade, the sooner efficiency measures are put in place, the sooner households, businesses, and taxpayer benefit.

“It is concerning that the promised additional £6bn of funding for 2025–2028 is not included in the Treasury’s policy costings published today. This naturally causes us to question how serious this Government is about supporting energy efficiency or whether it will be left to the next government to act.”

On education spending, Aveek Bhattacharya, SMF Research Director, said:

“It is encouraging to see the Government putting education at the heart of its economic strategy, with the Chancellor claiming that ‘being pro-education is being pro-growth. Yet the sector needs more than warm words to ensure that more people are able to learn, enhance their skills, and fulfil their potential. More money for schools is welcome, but the fear is that post-16 and adult education, so often overlooked, will not get the support they need to help people navigate an increasingly choppy labour market.”

On the triple lock and welfare, James Kirkup, SMF Director, said:

“Maintaining the triple lock is a crude and wasteful way of looking after those pensioners who are in need because it means handing more and more cash to the large numbers of pensioners who are quite comfortably off.

“Instead of prioritising cash for all pensioners, a government motivated by fairness and careful use of public money would find ways to target help more accurately on those pensioners who really need it and avoid more handouts to the 3 million pensioners who live in households with more than £1 million in assets.

“It is right and sensible that welfare payments for working-age people will rise in line with inflation, but waiting until April for that to take effect exposes some of the poorest members of our society to a significant period of further hardship as their costs rise but their incomes don’t.”

On immigration, James Kirkup, SMF director, said:

“The Government’s entire economic plan now relies on a forecast of net immigration at more than 200,000 a year, around 50% higher than the numbers used in previous forecasts. Those migrants will bring skills and commitment to the British economy, supporting growth that benefits everyone. Without these workers, Britain would face bigger tax rises and deeper cuts.

“It’s good that the Treasury has accepted the economic reality that an open approach to immigration brings benefits to the UK, but ministers now need to start an open and honest conversation with voters about that economic reality. Voters with concerns about immigration should be listened to and policy must ensure that they feel they share in the economic benefits that migration brings.”

On VED on electric vehicles, Gideon Salutin, SMF Researcher said:

“Waiving vehicle excise duty on electric vehicles was a helpful way to encourage green transport uptake, although one that has disproportionately benefited wealthier households so far. Yet with EV prices to remain higher than petrol-diesel vehicles until 2030, those incentives will be needed to make them affordable to poorer customers. While other countries such as France and Norway are experimenting with subsidies for electric vehicles, the UK is driving the wrong way.

“By removing the tax difference in VED between polluting cars and electric vehicles, ministers have set back the UK’s climate goals while encouraging lower-income drivers to pay for petrol vehicles that will cost more to run in the long run.”

“This was a missed opportunity for the Chancellor to develop a route map to a more sustainable approach to road travel and tax, culminating in a system of road pricing. This would charge drivers based on the distance they travel and its associated cost to infrastructure while maintaining a preference for electric vehicles through subsidies and VED. Levying an old tax on new technology is a policy choice from the past, not the future.”

On the fiscal rules, Aveek Bhattacharya, SMF research director, said:  

“This Budget was intended to reassert the Government’s fiscal credibility, but by introducing the 19th and 20th fiscal rules since 2010, it also served to highlight the fragility of our fiscal regime. That inconsistency demonstrates politicians’ tendency to chop and change their targets at will, largely driven by political considerations. This endless carousel of fiscal rules has done little to help the UK economy, and may well have done harm.

“What is needed is an independent fiscal watchdog that can properly hold the government to account, ensuring that fiscal policy responds to objective economic circumstances rather than politicians’’ own moving targets.”

On the new National Living Wage rate, Jake Shepherd, Senior Researcher said:

“In meeting the Low Pay Commission’s recommendations to raise the National Living Wage, the Chancellor has provided a much-needed boost for low-paid workers. The increase will give millions of households additional spending power and help them to absorb living costs – it is an announcement many will be grateful for.

“But the 9.7% uprating is still not in line with inflation. For many workers, the new rate will not be enough to meet the cost of living. Equally, businesses continue to stare down the barrel of growing overhead pressures. For some, particularly smaller films, it will be a tough challenge to rise to the new requirements. Some may even feel the need to pass on their wage bills to the consumer.”