'Mini-Budget' and Autumn Statement 2022

Context 

Following the COVID-19 pandemic in 2020 and Russia’s invasion of Ukraine in early 2022, there was a significant increase in inflation in many countries. When Liz Truss became Prime Minister of the UK on 6 September 2022, the economy had been performing poorly, with weak economic growth and inflation at a 40-year high of 10.1% in July. 

The ‘mini-Budget’ and its impact 

On 23 September, the new Chancellor of the Exchequer, Kwasi Kwarteng, delivered a fiscal statement on the government’s Growth Plan, commonly referred to by commentators as the ‘mini-Budget’. The government did not publish an independent forecast by the Office for Budget Responsibility (OBR) to accompany the mini-Budget.  

Kwarteng stated that the government’s aim was to achieve a trend rate of economic growth of 2.5% over the medium term. He announced tax cuts totalling almost £45bn a year. This included going back on plans to increase National Insurance from April 2023 to fund a new Health and Social Care Levy. First announced under the previous Prime Minister, Boris Johnson, the levy would have provided around £12bn a year for health and social care over the next three years. The mini-Budget also set out the costs of the government’s significant temporary measures to protect people from rising energy costs, announced earlier in September. 

The Institute for Fiscal Studies responded that ‘the Chancellor announced the biggest package of tax cuts in 50 years without even a semblance of an effort to make the public finance numbers add up’.  

The financial markets reacted negatively in the immediate period following the mini-Budget, with a significant and swift fall in the value of the pound and considerable dysfunction in the government bond market.  

Soon after, Kwasi Kwarteng resigned as Chancellor on 14 October and Liz Truss resigned as Prime Minister on 20 October. Rishi Sunak replaced Liz Truss as Prime Minister and Jeremy Hunt replaced Kwasi Kwarteng as Chancellor. 

Autumn Statement 

Jeremy Hunt delivered the Autumn Statement on 17 November 2022. In the statement, the government reversed most of the tax cuts set out in the mini-Budget. The government continued with the scrapping of the Health and Care Levy, but the Autumn Statement offset this by providing additional funding for the health and care system.  

The chancellor announced an extra £3.3bn a year in 2023/24 and 2024/25 for the NHS. He also announced the government’s commitment to publish a comprehensive workforce plan for the NHS in 2023 and that the government had commissioned an independent review into Integrated Care Boards (ICBs) by Patricia Hewitt. 

The Autumn Statement announced a two-year delay to planned reforms to the social care charging system, including a cap on the costs of care – first introduced in legislation in 2014. Instead, it allocated additional social care funding to local government to provide more care packages.