The Brief: In his Autumn Statement, UK Chancellor Jeremy Hunt has announced large tax hikes and spending cuts. Some highlights in his speech include stamp duty cuts will remain until 2025 to support the housing market, a 35% levy on oil and gas companies for the next six years, and a reduction in the income tax threshold to £125,140 from £150,000 for the top 45% rate.
Why It Matters: After Hunt’s speech, the Office for Budget Responsibility (OBR) has published its economic forecasts, which include housing values expected to fall by 9% over the next two years and will remain below current levels in the next five years, and the UK recession to last for more than a year. It also added that living standards will fall by 7% until 2024. Financial Times reported that the market reacted positively after Hunt’s speech.
Finanze Foresights: Hunt said that he is confident that the looming UK recession would be shallower as a result of the fiscal decisions that they will be implementing, and expects that inflation will fall sharply in the middle of 2023. Furthermore, Hunt confirmed the OBR’s findings that the country is already in recession. Today’s speech and OBR’s statements have set a different tone in the markets compared to Kwarteng’s mini-Budget fiasco where he and Truss chose not to publish the OBR’s forecasts along with the former chancellor’s speech. Although the OBR’s estimates, especially for housing values, may not always be accurate, it should influence the government’s policies to get the market to withstand the economic headwinds that will keep housing prices lower than its current levels until 2028.
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