Living wage and pensions rise as National Insurance comes down. What does Jeremy Hunt’s Autumn Statement mean for household budgets?

Chancellor Jeremy Hunt unveiled his Autumn Statement this afternoon, announcing a rise in the living wage and pensions.

National Insurance will be cut from January and inflation is on track to reach 2% by the end of 2025.

Here’s what happened:

Wages

The national living wage will rise from £10.42 an hour to £11.44 an hour, working out as an average increase of £1800 a year for a full-time worker.

Pensions

The state pension is set to rise 8.5% or £900 a year.

The chancellor also announced plans for employees to ask a new employer to pay contributions into existing pension pot, if they so choose, rather than being asked to adopt a company’s specific pension scheme.

National insurance contributions

National Insurance will be cut from 12% to 10% from January 6th, saving a worker earning £35,000 a year £450.

Nurses will save an average of £520 a year, police officers £630 a year.

National Insurance relief will also continue to be provided for businesses supporting veterans until April 2025.

Self employed

In recognition of the plumbers, delivery drivers and farmers who kept the country running throughout the pandemic, self-employed taxes will be simplified and reformed.

Class 2 National Insurance contributions, which are a flat rate of £3.45 a week for those earning up to £12,500 a year, will be abolished, saving the self-employed £192 a year.

Class 4 NI contributions of up to 9% for those earning between £12,300 and £50,270 a year will be cut to 8% from April, saving two million people an average of £350 a year.

Inflation

Following the worst global inflation shock for a generation, inflation fell last week to 4.6%

The government anticipates it will fall to 2.8% by the end of 2024 and to 2% by the end of 2025.

The Chancellor thanked the Bank of England for its role in helping to bring it down and pledged to support families in financial difficulty.

Universal credit increased and housing benefit freeze ended

‘Cost of living pressures remain at their most acute for the poorest families,’ said Hunt.

Universal credit is now set to rise 6.7% in line with September’s inflation rate, the equivalent of £470 for 5.5 million households next year.

And because the cost of rent can take up to half of the living costs for those that rent on the lowest incomes, the Local Housing Allowance will also no longer be frozen, as it has been since 2020.

Housing benefit will now cover the bottom 30% of local rents from April 2024, providing an extra £800 of support for 1.6m households.

Welfare reforms

The Chancellor announced a ‘Back to work’ plan for the 100,000 new people who claim benefits every year because of sickness or disability, ‘where treatment, rather than time-off becomes the default’.

If a Universal Credit claimant in England and Wales has failed to find a job after 6 months, they will be referred to an expanded and improved Restart scheme, providing 12 months of intensive, tailored support including coaching, CV and interview skills, plus training sessions.

Claimants who are still unemployed after 12 months on Restart will be required to accept a time-limited mandatory work placement.

If a claimant refuses to accept without good reason, their Universal Credit claim will be closed. This model will be rolled out gradually from 2024.

Cigarettes & booze

Aside from the government’s plans for a smoke-free generation (prohibiting the sale of tobacco products to anyone born after January 1, 2009), from today, duty rates on all tobacco products will increase in line with inflation +2% .

For hand-rolling tobacco, an extra 10% tax increase will be added, meaning it will increase in line with inflation + 12% this year.

Confirming the Brexit pubs guarantee, the chancellor confirmed that all duty on alcohol will be frozen until 1st August 2024, meaning there will be no increase on beer, cider, wine or spirits.

Clean energy

The UK is currently a world leader in the deployment of offshore wind – and plans to create new offshore wind farms are underway, including floating wind farms in the Celtic Sea.

A further £2 billion is being set aside for a target of zero emissions in the automotive sector.

Overall growth

Last autumn, the Office for Budgetary Responsibility forecast that the economy would shrink 1.4%.

But it has grown and is now 1.8% larger than it was pre-pandemic, meaning the UK economy has grown faster than those of Spain, Portugal, France, Italy, the Netherlands, Germany and Japan.

It’s predicted to grow 0.6% this year and 0.7% next year.

 

Key takeaways

  • National living wage rises from £10.42 to £11.44 an hour
  • Pensions up 8.5% or £900 a year
  • National Insurance cut from 12% to 10% from January 6, 2024, meaning a worker earning £35,000 a year will be £450 better off