Jeremy Hunt warns the UK must 'pay our way' as he prepares to unveil austerity

Jeremy Hunt warned the UK must ‘pay our way’ today as he prepares to unveil ‘eye-watering’ austerity measures next week.

The Chancellor said he will present a ‘plan which protects the most vulnerable’ in his Autumn Statement.

But amid signs that public spending will increase by just 1 per cent from 2025 rather than 3.7 per cent as previously anticipated, Mr Hunt insisted the most important thing is to balance the books and control inflation.

He also pointed to the disastrous mini-Budget by predecessor Kwasi Kwarteng as evidence of what happens when the government did not ‘show how we were going to bring our debts down over the medium term’.

The intervention came as figures showed the UK economy going into reverse in the third quarter of the year, raising the prospect that the country is already in recession.

Although the 0.2 per cent fall between July and September was not as bad as many feared, the single-month figure for September was particularly dire.

Chancellor Jeremy Hunt said he will present a ‘plan which protects the most vulnerable’ in his Autumn Statement

The intervention came as figures showed the UK economy going into reverse in the third quarter of the year, raising the prospect that the country is already in recession

Mr Hunt also pointed to the disastrous mini-Budget by predecessor Kwasi Kwarteng (pictured with Liz Truss) as evidence of what happens when the government did not ‘show how we were going to bring our debts down over the medium term’

The ONS estimate for the third quarter was not quite as bad as the Bank of England’s forecasts last week implied – although it will be subject to revision

What to expect in the Autumn Statement?

SPENDING

Triple-lock on state pensions could be kept
Benefits could be uprated in line with inflation, rather than the lower wages figures as had been mooted
Apart from health, departments face spending allocations far below the rate of inflation
Two-year delay to the flagship social care costs cap
Public sector pay could be capped at just 2 per cent next year
Questions over major investment programmes such as nuclear plants and HS2

TAXES

Income tax thresholds could be frozen for two more years until 2027-28, dragging millions deeper into the system
Top rate threshold could be reduced, or the rate itself could be increased from 45p to 50p
Requirement for councils to hold referendum on tax increases above 2.99 per cent could be dropped
Inheritance tax threshold could be held in another ‘stealth’ revenue-raiser
Investment zones championed by Liz Truss abandoned
Tax rates on share dividends could be increased and the tax-free allowance for dividends cut
Capital gains tax reliefs and allowances, paid on shares and second homes, could be trimmed
Pensions lifetime allowance could be frozen for another two years to 2027-28 at just over £1millionits current rate of £1,073,100

The Bank of England has warned that the country faces the longest recession on record.

Speaking to broadcasters, Mr Hunt said it was imperative to ‘present a plan to the country to tackle the root cause of the issues we face – which is inflation – and a plan which protects the most vulnerable, and that is what I must do next Thursday’.

He pointed out that around a third of the world’s economy was expected to be in recession this year or next amid soaring energy price.

‘There is some choice over the rules, or the fiscal rules, that you choose to follow, but there isn’t uncertainty about a basic choice we make as a country, which is whether we’re going to pay our way,’ Mr Hunt said.

‘And if we don’t give that certainty to the world, what we’ll see is higher interest rates, higher inflation, more instability, and more worries for families and businesses.

‘And that’s why it’s so important to show the world that we are a country that pays our way.’

Mr Hunt went on: ‘If we are going to bring down debt over the medium term and give people confidence we are paying our way as a country, then yes, there is a very substantial gap in our national finances

He said it was ‘not just us’, adding: ‘These are global factors, partly because of what’s happening in Ukraine, partly because of the pandemic, but all of us are having to come to terms with and the sooner we do that, the quicker we can give families and businesses hope that there is a way through the very difficult challenges we face.’

Cutting the planned 3.7 per cent annual increase in public spending after 2025 to as little as one per cent would save around £25billion a year.

The Home Office, Ministry of Justice, transport and local authorities are likely to be the hardest hit by the plans, which will be formally announced in the Autumn Statement.

Economists have warned that the plans would mean slashing the budgets for unprotected departments to peak austerity levels last seen in 2018.

In his Spring Statement as chancellor, Mr Sunak planned 3.7 per cent public spending growth in the three years after 2025 – two per cent to compensate for inflation, and the rest for real-terms growth.

A Treasury source said the Chancellor’s plans would mean six years of spending restraint, despite the risk of a recession.

The Autumn Statement is also set to feature sweeping tax rises, with all workers facing paying more to the Exchequer.

Public spending cuts are expected as Mr Hunt (left) and PM Rishi Sunak (right) look to fill a £60billion hole in the UK’s finances

Kwarteng: I warned Truss on mini-Budget

Kwasi Kwarteng has revealed he warned Liz Truss about going too far and too fast with her tax-cutting agenda, urging her to ‘slow down’ if she wanted to keep her job.

The former chancellor said he told then-Prime Minister it was ‘mad’ to fire him days before she departed No 10 herself.

In his first interview since being sacked last month, Mr Kwarteng also praised Rishi Sunak as a ‘very credible’ prime minister but warned him over the impending tax rises in next week’s Autumn Statement.

He told TalkTV: ‘We tried to do too much too quickly. Too much too fast. I think the strategic goal was right. But I think we should have had a much more measured approach’.

He said he bore ‘some responsibility’ for the timetable of the mini-budget, but that Ms Truss ‘was very much of the view that we needed to move things fast. But I think it was too quick’, he added.

‘Even after the mini budget we were going at breakneck speed. And I said, “You know, we should slow down, slow down”.’ She said, “Well, I’ve only got two years” and I said, “You will have two months if you carry on like this”. And I’m afraid that’s what happened’.