Chancellor’s Autumn Statement – Full Transcript
Another government, another chancellor, another major fiscal statement. On Thursday, Jeremy Hunt charted the course for the next couple of years as the UK economy officially entered a recession. Only several weeks after the infamous mini budget was reversed and Trussnomics scrapped, the country is on a new trajectory.
Mr Speaker, in the face of unprecedented global headwinds, families, pensioners, businesses, teachers, nurses and many others are worried about the future. So today we deliver a plan to tackle the cost of living crisis and rebuild our economy. Our priorities are stability, growth and public services. We also protect the vulnerable, because to be British is to be compassionate and this is a compassionate Conservative government. We are not alone in facing these problems. But today we respond to an international crisis with British values. We are honest about the challenges, and we are fair in our solutions. Yes, we take difficult decisions to tackle inflation and keep mortgage rates down. But our plan also leads to a shallower downturn, lower energy bills, higher growth and a stronger NHS and education system.
Three priorities then today. Stability, growth and public services. I start with stability. Mr Speaker, high inflation is the enemy of stability. It means higher mortgage rates, more expensive food and fuel bills, businesses failing and unemployment rising. It erodes savings, causes industrial unrest and cuts funding for public services. It hurts the poorest the most and eats away at the trust upon which a strong society is built. The Office for Budget Responsibility confirms global factors are the primary cause of current inflation. Most countries are still dealing with the fallout from a once in a century pandemic. The furlough scheme, the vaccine rollout and the response of the NHS did our country proud, but they all have to be paid for. The lasting impact on supply chains has made goods more expensive and fuelled inflation, and this is being made worsened by a made in Russia energy crisis. Putin’s war in Ukraine has caused wholesale gas and electricity prices to rise to eight times their historic average. Inflation is high here, but higher in Germany, the Netherlands and Italy. Interest rates have risen here, but faster in the US, Canada and New Zealand. Growth forecasts have fallen here, but fallen further in Germany. The International Monetary Fund expect one third the world’s economy to be in recession this year or next. So the Bank of England, which has done an outstanding job since its independence, now has my wholehearted support in its mission to defeat inflation and I today confirm we will not change its remit.
But we need fiscal and monetary policy to work together, and that means the government and the Bank working in lockstep. It means in particular giving the world confidence in our ability to pay our debts. British families make sacrifices every day to live within their means, and so too must their government, because the United Kingdom will always pay its way. I understand the motivation of my predecessor’s mini budget, and he was correct — he was correct to identify growth as a priority. But unfunded tax cuts are as risky as unfunded spending, which is why we reverse the planned measures. As a result, government borrowing has fallen, the pound has strengthened, and the OBR says today that the lower interest rates generated by the government’s actions are already benefiting our economy and public finances. But Mr Speaker, credibility cannot be taken for granted. Yesterday’s inflation figures show we must continue a relentless fight to bring it down, including a rock solid commitment to rebuild our public finances. Richard Hughes and his team at the OBR today layout starkly the impact of global headwinds on the UK economy, and I’m enormously grateful to him and his team for their thorough work. The OBR forecast the UK’s inflation rate to be 9.1% this year and 7.4% next year. They confirm that our actions today help inflation to fall sharply from the middle of next year. They also judged that the UK, like other countries, is now in recession. Overall this year the economy is still forecast to grow by 4.2%. GDP then falls in 2023 by 1.4% before rising by 1.3%, 2.6% and 2.7% in the following three years. The OBR says higher energy prices explain the majority of the downward revision in cumulative growth since March. They also expect a rise in unemployment from 3.6% today to 4.9% in 2024, before falling to 4.1%. Today’s decisions mean that over the next five years, borrowing is more than halved. This year, we’re forecast to borrow 7.1% of GDP, or £177 billion, next year 5.5% of GDP or £140 billion, then by 2027/28 it falls to 2.4% of GDP, or £69 billion. As a result, underlying debt as a percentage of GDP starts to fall from a peak of 97.6% in 2025/6 to 97.3% in 27/28. I also confirm two new fiscal rules. The first is that underlying debt has fallen as a percentage of GDP by the fifth year of a rolling five year period. The second, that public sector borrowing over the same period must be below 3% of GDP. And the plan I’m announcing today meets both rules. Today’s statement delivers a consolidation of £55 billion and means inflation and interest rates end up significantly lower. We achieve this Mr Speaker in a balanced way. In the short term, as growth slows and unemployment rises, we will use fiscal policy to support the economy. The OBR confirm, that because of our plans, the recession is shallower and inflation is reduced. Unemployment is also lower, with about 70,000 jobs saved as a result of our decisions today. Then once growth returns, we increase the pace of consolidation to get debt falling. This further reduces the pressure on the Bank to raise interest rates, because as Conservatives we do not leave our debts to the next generation. So Mr Speaker, this is a balanced path to stability, tackling inflation to reduce the cost of living and protect pensioners’ savings while supporting the economy on a path to growth. But it means taking difficult decisions. Anyone who says there are easy answers is not being straight with the British people. Some argue for spending cuts, but that would not be compatible with high quality public services. Others say savings should be found by increasing taxes. But Conservatives know that high tax economies damage enterprise and erode freedom. We want low taxes and sound money but Conservatives know sound money has to come first because inflation eats away at the pound in people’s pockets even more insidiously than taxes. So it’s just under half of the £55 billion consolidation coming from tax and just over half from spending. This is a balanced plan for stability.
I turn first to our decisions on tax. I have tried to be fair by following two broad principles. Firstly, we ask those with more to contribute more, and secondly, we avoid the tax rises that damage growth. Although my decisions today do lead to a substantial tax increase, we have not raised headline rates of taxation, and tax as a percentage of GDP will increase by just 1% over the next five years. I start with personal taxes. Asking more from those who have more means that the first difficult decision I take on tax is to reduce the threshold at which the 45p rate becomes payable from £150,000 £125,140 pounds. Those earning £150,000 or more will pay just over £1200 more in tax every year. We’re also taking difficult decisions on tax free allowances. I’m maintaining at current levels the income tax personal allowance, higher rate threshold, May national insurance thresholds and the inheritance tax thresholds for a further two years taking us to April 2028. Even after that, we’ll still have the most generous set of tax free allowances of any G7 country. I’m also reforming allowances on unearned income. The dividend allowance will be cut from £2000 to £1000 next year and then to £500 from April 24. The annual exempt amount for capital gains tax will be cut from £12,300 to £6000 next year and then £3000 from April 24. These changes still leave us with more generous allowances than countries like Germany, Ireland, France and Canada. Because the OBR forecast half of all new vehicles will be electric by 2025, to make our motoring tax system fairer, I’ve decided that from then electric vehicles will no longer be exempt from vehicle excise duty. Company car tax rates will remain lower for electric vehicles, and I’ve listened to industry bodies and will limit rate increases to one percentage point a year for three years from 2025.
The OBR expects housing activity to slow over the next two years, so the stamp duty cuts announced in the mini budget will remain in place but only until the 31st of March 2025. After that I will sunset the measure, creating an incentive to support the housing market and the jobs associated with it by boosting transaction during the period the economy most needs it. I now turn to business taxes. While I decided to freeze the employers’ next threshold until April 2028, we will retain the employment allowance at its new higher level of £5000. This means 40% of all businesses will pay no NICs at all. The VAT threshold is already more than twice as high as the EU and OECD averages. I will maintain it at that level until March 26. My right hon. friend the Prime Minister successfully negotiated a landmark international tax deal to make sure multinational corporations, including big tech companies, pay the right tax in the countries they operate. I will implement these reforms, making sure the UK gets our fair share. Alongside further measures to tackle tax avoidance and evasion, this will raise an additional £2.8 billion by 27/28. I’ve also heard concerning reports of abuse and fraud in R and D tax relief for SMEs, so I’ve decided today to cut the deduction rate for the SME scheme to 86% and the credit rate to 10% but increase the rate of the separate R and D expenditure credit from 13% to 20%. Despite raising revenue, the OBR have confirmed that these measures have no detrimental impact on the level of R and D Investment in the economy. Ahead of the next budget we’ll work with industry To understand what further support R and D intensive SMEs may require.
Next, windfall taxes. I have no objection to windfall taxes if they are genuinely about windfall profits caused by unexpected increases in energy prices. But, I know the hon members opposite are getting excited at the talk of windfall taxes. Can I just say that any such tax should be temporary, not deter investment and recognise the cyclical nature of energy businesses? So taking account of this, I’ve decided that from January 1st until March 28 we will increase the energy profits levy from 25 to 35%. A structure of our energy market also creates windfall profits for low carbon electricity generation. So from January 1st, we’ve decided to introduce a new temporary 45% levy on electricity generators. Together these measures raise £14 billion next year. Finally, I turn to business rates. It’s an important principle that bills should accurately reflect market values. So we will proceed with the revaluation of business properties from April 23. But I will soften the blow on businesses with a nearly £14 billion tax cut over the next five years. Nearly two thirds of properties will not pay a penny more next year, and thousands of pubs, restaurants and small high street shops will benefit. This will include a new government funded transitional relief scheme, as called for by the CBI, the British Retail Consortium, the Federation of Small Businesses and others benefiting around 700,000 businesses. Mr. Speaker, our plan for the cost of living delivers lower inflation, lower mortgage rates, a shallower downturn and lower unemployment, but it also involves public spending discipline. So I turn next to how we protect public services through a challenging period. The Prime Minister’s vision for this country has at its heart a strong NHS and world class education. We know that a strong economy depends on strong public services, so we will protect them as much as we can as we deliver our plan for stability and growth. We do have to take difficult decisions on public finances, so we’re going to grow public spending, but we’re going to grow it more slowly than the growth in the economy. For the remaining two years of the spending review will protect increases in departmental budgets we’ve already set out in cash terms and then grow resource spending at 1% a year in real terms in the three years that follow. Although departments will have to make efficiencies to deal with inflationary pressures in the next two years, this decision means overall spending in public services will continue to rise in real terms for the next five years.
Before I turn to our plan for schools and the NHS, I start with two other areas of spending. The Department for Work and Pensions has a critical role in supporting people into work, and I am proud to live in a country with one of the most comprehensive safety nets anywhere in the world. But I’m also concerned that we’ve seen a sharp increase in economically inactive working age adults of around 630,000 people since the start of the pandemic. Employment levels have yet to return to pre pandemic levels, which is bad for businesses who cannot fill vacancies and bad for people missing out on the opportunity to do well for themselves and their families. So the Prime Minister has asked the work and pensions secretary to do a thorough review of issues holding back workforce participation to conclude early in the new year. Alongside this, I’m also committed to helping people already in work to raise their incomes, progress in work and become financially independent. So we will ask over 600,000 more people on universal credit to meet with a work coach so that they can get the support they need to increase their hours or earnings. I also decided to move back a managed transition of people from employment and support allowance onto universal credit till 2028, and will invest an extra £280 million in DWP to crackdown on benefit, fraud and error over the next two years. The Government’s review of the state pension age will also be published in early 2023.
Our security at home depends on our security overseas, so I turn next to defence and other international commitments. The privilege of being this country’s foreign secretary showed me firsthand the enormous respect in which this country is held, because the United Kingdom is and has always been a force for good in the world. Nothing sums that up more than the courage of our armed forces, men and women who risk their lives every day in defence of our territory and our belief in freedom. Alongside them, I salute the citizens of another country right on the front line of that fight today, the brave people of Ukraine. The United Kingdom has given their military support worth £2.3 billion since the start of Putin’s invasion, the second highest contribution in the world after the United States, which demonstrates our commitment to democracy and open societies remains steadfast. In that context the Prime Minister and I both recognise the need to increase defence spending. But before we make that commitment it’s necessary to revise and that the integrated review written as it was before the Ukraine invasion, and I’ve asked for that vital work to be completed ahead of the next budget and today confirm we will continue to maintain the defence budget at least 2% of GDP to be consistent with our NATO commitment. Another important international commitment is to overseas aid. The OBR’s forecasts show a significant shock to public finances, so it won’t be possible to return to the 0.7% target until the fiscal situation allows. We remain fully committed to that target, and the plans that I’ve set up today assume that ODAS spending will remain around 4.5% for the forecast period. As a percentage of GNI, we were the third highest owner in the G7 last year and I am proud our aid commitment to save thousands of lives around the world. So I look forward to working closely with my right honourable friend, the member for Sutton Coldfield, now rightly back in his place in Cabinet to make sure we continue to play a leadership role in tackling global poverty. The United Kingdom has also been a global leader on climate change, cutting emissions by more than any other G20 country. But with the existential vulnerability we face, now would be the wrong time to step back from our international climate responsibilities. So I also confirm that despite the economic pressures, we remain fully committed to the historic Glasgow climate pact agreed at COP 26 including a 68% reduction in our own emissions by 2030.
I turn to education. Mr Speaker, being pro education is being pro growth. But providing our children with a good education is not just an economic mission, it’s a moral mission, one to which my right honourable friend, the Prime Minister has always been deeply committed. Thanks to the efforts of successive Conservative education secretaries, particularly my right honourable friends from Surrey Heath and from Bognor Regis, we have risen nine places in the global league tables for maths and reading in the last seven years. I still, however, have concerns that not all school leavers get the skills they need for a modern economy. But for the first time ever, this country has a Conservative education secretary who left school at 16 to become an apprentice and knows firsthand why good skills matter. There are many important initiatives in place, but as Chancellor, I want to know the answer to one simple question. Will every young person leave the education system with the skills they would get in Japan Germany or Switzerland? So I have appointed Sir Michael Barber to advise me on my right honourable friend, the education secretary, on the implementation of our skills reform programme. As we raise the skill levels of our school leavers, I want also to ensure that even in an economic crisis, the improvement in school standards continues to accelerate. Some have suggested putting VAT on independent school fees as a way of increasing core funding for schools, which would raise about £1.7 billion. But according to certain estimates, that would result in up to 90,000 children from the independent sector switching to state schools, giving with one hand only to take away with another. So instead of being ideological, I’m going to be practical. Because we want school standards to continue to rise for every single child, we’re going to do more than protect the school’s budget, we’re going to increase it. and I can announce today next year and the year after, we will invest an extra £2.3 billion. Our message to heads and teachers and classroom assistants is thank you for your brilliant work, we need it to continue and in difficult economic circumstances, a Conservative government is investing more in a public service that defines all our futures.
Mr Speaker, the service we depend on more than any other is the NHS. As a former health secretary, I know how hard people are working on the front line and how much they’re struggling after the pandemic. The biggest issues are workforce shortages and pressures in the social care sector. So today I address them both. On staff shortages, the former chair of the Health and Social Care Select Committee put forward a case for a long term workforce plan. He even wrote a book about it, which I’ve read. I’ve listened carefully to his proposals and I believe they have merits. So the Department of Health and Social Care and the NHS will publish an independently verified plan for the number of doctors, nurses and other professionals we’ll need in 5, 10 and 15 years time taking full account of the need for better retention and productivity improvements. I’ve also listened to extensive representations about the challenges facing the social care sector. It did a heroic job looking after children, disabled adults and older people during the pandemic. Its 1.6 million employees worked incredibly hard. But even outside the pandemic, the increasing number of over 80s is putting massive pressure on their services. I also have very real concerns from local authorities, particularly about their ability to deliver the Dilnot reforms immediately. So I will delay the implementation of this important reform for two years, allocating the funding to allow local authorities to provide more care packages. I also want the social care system to help free up some of the 13,500 hospital beds that are occupied by those who should be at home. So I’ve decided to allocate for adult social care additional grant funding of £1 billion next year and £1.7 billion the year after. Combined with savings from the delayed Dilnot reforms and more council tax flexibilities, this means an increase in funding available for the social care sector of up to £2.8 billion next year and £4.7 billion the year after. That’s a big increase, but how we look after our most vulnerable citizens is not just a practical issue, it speaks to our values as a society. So today’s decision will allow the social care system to deliver an estimated 200,000 more care packages over the next two years, the biggest increase in funding under any government of any colour in history. The NHS budget has been increased to record levels to deal with the pandemic, and today I’m asking the NHS to join all public services in tackling waste and inefficiency. We want Scandinavian quality alongside Singaporean inefficiency, both better outcomes to citizens and better value for taxpayers. That does not mean asking people on the front line, often exhausted and burned out, to work harder, which would not be possible or fair. But it does mean asking challenging questions about how to reform all our public services for the better. So with respect to the NHS, I’ve asked former health secretary and chair of the Norfolk unwavering integrated care system Patricia Hewitt to help me and the Health Secretary achieve that by advising us on how to make sure the new integrated care boards for NHS bodies operate efficiently and with appropriate autonomy and accountability. I’ve also had discussions with NHS England about the inflationary pressures on their budgets. I recognise that efficiency savings alone will not be enough to deliver the services we all need. So because of difficult decisions taken elsewhere today, I will increase the NHS budget in each of the next two years by £3.3 billion. The Chief Executive of the NHS Amanda Pritchard has said that this should provide sufficient funding for the NHS to fulfil its key priorities. She said it shows the government is serious about its commitment to prioritise our NHS. 3.3 billion for the NHS, £4.7 billion for social care, a record £8 billion package for our health and care system. That is a Conservative government putting the NHS first.
Mr Speaker, the NHS and schools in Scotland, the NHS and schools in Scotland, Wales and Northern Ireland face equivalent pressures. So the Barnett consequential of today’s decisions mean an extra £1.5 billion for the Scottish government, £1.2 billion for the Welsh government, £650 million for the Northern Ireland Executive. That is more resources for the schools and hospitals in our devolved nations next year, the year after and every year thereafter. Mr Speaker, our support for public services means that despite needing to find £55 billion in savings and tax rises, we are protecting the amount going into public services in real terms over the five year period. But if we’re going to sustain our public services and avoid a doom loop of ever higher taxes and ever lower dynamism, we need economic growth. So I now turn — well they’ve never been interested in growth, but we on this side of the House are.
Thank you, Mr Speaker. So let’s start with a difficult message for the party opposite. You cannot borrow your way to growth. Sound money is the rock upon which long term prosperity rests, but it isn’t enough on its own. Our plan is designed to build a high wage, high skill economy that leads to long term prosperity. In his Mais lecture, my right hon friend, the Prime Minister identified the keys to doing this people, capital and ideas. Today’s increasing the education budget demonstrates our commitment to people and skills, and I now outline three further growth priorities; energy, infrastructure and innovation. Cheap, low carbon reliable energy must sit at the heart of any modern economy. But Putin’s weaponisation of international gas prices has helped drive the cost of our national energy consumption right up. This year will be spending an extra £150 billion on energy compared to pre pandemic levels, equivalent to paying for an entire second NHS through our energy bills. In 2019, a third of global emissions came from energy supply. So unless we act radically to change our approach, we’ll both bankrupt our economy and harm our planet. Over the long term there’s only one way to stop ourselves being at the mercy of international gas prices; energy independence combined with energy efficiency. Energy independence so neither Putin nor anyone else can use energy to blackmail us, and energy efficiency to reduce demand and climate impact as much as possible. Now Britain is a global leader in renewable energy. Last year nearly 40% of our electricity came from offshore wind, solar and other renewables. Since 2010, our renewable energy production has grown faster than any other large country in Europe. But we need to go even further with a major acceleration of homegrown technologies like offshore wind, carbon capture and storage and, above all, nuclear. This will deliver new jobs, industries and export opportunities, and secure the clean, affordable energy we need to power our future economy and reach net zero. So today I can announce the government will proceed with a new nuclear power plant at Sizewell C. Subject to final government approvals the contracts for the initial investment will be signed with relevant parties, including EDF, in the coming weeks. This will create 10,000 highly skilled jobs and provide reliable low carbon power to the equivalent of six million homes for 50 years. Our £700 million investment is the first state backing for a nuclear project in over 30 years and represents the biggest step in our journey to energy independence.
But Mr Speaker, energy efficiency is just as important. So today we set our country a new national ambition. By 2030 we want to reduce energy consumption from buildings and industry by 15%. Reducing demand by this much means in today’s prices a £28 billion savings from our national energy bill, or £450 of the average household bill. This must be a shared mission, with families and businesses playing their part. But so will the government play our part. In this Parliament we are already planning to invest in energy efficiency a total of £6.6 billion. Today I’m announcing new funding from 2025 of a further £6 billion, doubling our annual investment to deliver this new national ambition. Our commitments to the British people is over time to remove the single biggest driver of inflation and volatility facing British businesses and consumers. So my right honourable friend, the business and energy secretary will publish further details on our energy independence plans and launch a new energy efficiency task force shortly.
Mr Speaker, if a modern economy needs secure, clean and affordable energy, it also needs good roads, rail, broadband and 5G infrastructure. Such connections matter because they allow wealth and opportunity to spread to every corner of the country. And that is why infrastructure is our second growth priority. Thanks to decisions by this Conservative government, right now workers right across the country are building or maintaining thousands of miles of roads and railways, installing mobile masts and broadband cables to connect the remotest parts of rural Britain, building and repairing hospitals and constructing new wind turbines in the North Sea. When looking for cuts, capital is sometimes seen as an easy option, but doing so limits not our budgets but our future. So today I can announce that I’m not cutting a penny from our capital budgets in the next two years and maintaining them at that level in cash terms for the following three years. That means that although we’re not growing our capital budget as planned, it will still increase from £63 billion 4 years ago to £114 billion next year, £115 billion the year after and remain at that level, more than double what it was under the last Labour government. Smart countries build on their long term commitments rather than discard them. So today I confirm that because of this decision alongside Sizewell C we will deliver the core Northern Powerhouse Rail, HS2 to Manchester and East West Rail and the New Hospitals Programme and Gigabit Broadband rollout. All these and more will be funded as promised, with over £600 billion of investment over the next five years to connect our country and grow our economy.
Our national Conservative mission is to level up economic opportunity across the country and that too needs investment in infrastructure. So I will also proceed with round two of the levelling up fund, at least matching the £1.7 billion value of round one. We’ll also drive growth across the UK by working with the Scottish government on the feasibility study for the A75, supporting the Advanced Technology Research Centre in Wales and funding a trade and investment event in Northern Ireland next year. But to unlock growth right across the country, we need to make it easier for local leaders to make things happen without banging on a Whitehall door. Our brilliant mayors like Andy Street and Ben Houchen have shown the power of civic entrepreneurship. We need more of this inspirational local leadership, so today I can announce a new devolution deal that will bring an elected mayor to Suffolk and deals to bring mayors to Cornwall, Norfolk and an area in the North East to follow shortly. We’re also making progress towards trailblazer devolution deals with the Greater Manchester Combined authority and West Midlands Combined Authority, and soon over half of England will be covered by devolution deals. Taken together, that’s £600 billion investment in our future frowth represents the largest investment in public works for 40 years, so our children and grandchildren can be confident that this Conservative government is investing in their future.
Along with energy and infrastructure, our third growth priority is innovation. Mr Speaker, we have a national genius for innovation. Britain is the land of Newton, Darwin, Fleming, Faraday, Franklin, Gilbert and Berners Lee, the home of three of the world’s top 10 universities, the country with the largest life science and technology sectors in Europe. Thanks to successive Conservative governments, we remain a science superpower. And I salute the work of the former Chancellor George Osborne, my right honourable friend from Tunbridge Wells and my honourable friend the science minister, the member for Mid Norfolk, for laying the vital foundations to make this possible. 21st century economies will be defined by new developments in artificial intelligence, quantum technologies and robotics. But we need to be better at turning world class innovation into world class companies. So as a former entrepreneur — I had to get that in somewhere — I want to combine our technology and science brilliance with our formidable financial services to turn Britain into the world’s next Silicon Valley. We learned from the success of Nigel Lawson’s Big Bang in 1986 that smart regulatory reform can spur investment from all over the world. So today, using our Brexit freedoms, I confirm the next steps in our supply side transformation. By the end of next year, we will decide and announce changes to EU regulations in our five growth industries; digital, life sciences, green Industries, financial services and advanced manufacturing. I’ve asked the Chief Scientific Officer, Sir Patrick Vallance, who did such a brilliant job in the pandemic, to lead our work on how to do this. The second lesson of Nigella Lawson’s Big Bang is the most important driver of global success is not tax subsidies but competition. So we will legislate to give the Digital Markets Unit new powers to challenge monopolies and increase the competitive pressure to innovate. To further spur competition, I’ve listened to requests from businesses and today I am removing import tariffs on over 100 goods used by UK businesses in their production processes, from car seat parts to bicycle frames. I’ll also change our approach to investment zones which will now focus on leveraging our research strengths by being centred on universities in left behind areas to help build clusters for our new growth industries. My right hon friend the levelling up secretary will work with mayors, devolved administrations and local partners to achieve this with the first decisions announced ahead of the spring budget.
I’ve heard some speculation that we might cut the research and development budget today, but I believe that would be a profound mistake. In our 2017 manifesto, we announced the targets to invest 2.4% of our GDP in R and D, and the latest ONS data suggests the UK is close to meeting that target. I want to go further, so today I protect our entire research budget and confirm that we’ll increase public funding for R and D to 20 billion by 2024/2025 as part of our mission to make the United Kingdom a science superpower. And finally Nigel Wilson’s Big Bang inspires us today, but nearly 40 years on we must stay true to its mission to make the UK the world’s most innovative and competitive global financial centre. So to further support investments across our economy, I also announce that we’re publishing our decision on Solvency II, which will unlock tens of billions of pounds of investment for our growth enhancing industries. Three priorities for growth; energy security, investment in infrastructure and a plan to turn the United Kingdom into the world’s next Silicon Valley. Transforming British intellectual genius into British commercial success.
But alongside British genius, we must remember another great national quality, British compassion.
So this final part of our plan protects the most vulnerable, and it’s to that I now turn. Mr Speaker, strong public finances aren’t just to make accountants happy. It’s because we took difficult decisions in 2010 that we could afford record funding increases for the NHS, the landmark furlough scheme, the energy price guarantee. Today, the discipline that we’ve shown means we can provide targeted support to help our most vulnerable citizens with the cost of living. One of the biggest worries for families is energy bills, and I pay tribute to my predecessor the right honourable member for spell form and the former Prime Minister, the right honourable member for South West Norfolk for their leadership in this area. This winter, we will stick with their plan to spend £55 billion to help households and businesses with their energy bills, one of the largest support plans in Europe. From April, we’ll continue the energy price guarantee for a further 12 months at a higher level of £3000 per year for the average household. With prices forecast to remain elevated throughout next year, this will mean an average of £500 support for every household in the country. At the same time for the most vulnerable, we’ll introduce additional cost of living payments next year of £900 to households on means tested benefits, £300 to pensioner households and £150 for individuals on disability benefit. We’ll also provide an additional £1 billion of funding to enable a further 12 month extension to the Household Support Fund, helping local authorities to assist those who might otherwise fall through the cracks. And for those households who use alternative fuels such as heating oil and LPG to heat their homes, I’m today doubling the amount of support from £100 to £200 which will be delivered as soon as possible this winter. And before the end of the year we’ll also bring forward a new targeted approach to support businesses from next April. But I want to go further to support people most exposed to high inflation. Around 4 million families live in the social rented sector, almost 1/5 of households in England. Their rents are set at 1% above the September inflation rate, which means that on current plans, they are set to see rent hikes next year of up to 11%. For many that would just be unaffordable. So today I can announce that this government will cap the increase in social rents to a maximum of 7% in 2023/24. Compared to current plans that is a saving for the average tenant of £200 next year. This government introduced — I thought they cared about the most vulnerable — this government introduced the National Living Wage, which has been giant step in eliminating low pay. So today I’m accepting the recommendation of the Low Pay Commission to increase it next year by 9.7%. That means from April 2023 the hourly rate will be £10.42 which represents an annual pay rise worth over £1600 to a full time worker. It’s expected to benefit over two million of the lowest paid workers in our country and keeps us on track for our target to reach two thirds of median earnings by 2024. It is the largest increase in the UK’s national living wage ever.
Mr. Speaker, there have also been some representations to keep the uplift to working age and disability benefits below the level of inflation, given the financial constraints we face, but that would not be consistent with our commitment to protect the most vulnerable. So today I also commit to operate such benefits by inflation with an increase of 10.1%. That is an expensive commitment costing £11 billion. But it means 10 million working age families will see a much needed increase next year, which speaks to our priorities as a government and our priorities as a nation. On average, a family on universal credit will benefit next year by around £600 and to increase the number of households who can benefit from this decision, I’ll also exceptionally increase the benefit cap with inflation next year. Finally Mr Speaker, I’ve talked a lot about British values of compassion, hard work, dignity, fairness. There is no more British value than our commitment to protect and honour those who built the country we live in. So to support the poorest pensioners, I’ve decided to increase the pension credit by 10.1% which is worth up to £1470 for a couple of £960 for a single pensioner in our most vulnerable pension — on our most vulnerable households. But the cost of living crisis is harming not just our poorest pensioners, but all pensioners. So because we’ve taken difficult decisions elsewhere today, I can also announce that we will fulfil our pledge to the country to protect the pensions triple lock. In April, the state pension will increase in line with inflation, an £870 increase, which represents the biggest ever increase in the state pension and to the millions of pensioners who will benefit from this measure I say now and always, This government is on your side.
Mr Speaker, there is a global energy crisis, a global inflation crisis and a global economic crisis. But the British people are tough, inventive and resourceful. We have risen to bigger challenges before. We aren’t immune to these headwinds. But with this plan for stability, growth and public services, we will face into the storm. There may be a recession made in Russia, but there is a recovery made in Britain. And we commit to our plan today with British resilience and British compassion. Because of the difficult decisions we take today, we strengthen our public finances, bring down inflation, protect jobs and build the first state backed nuclear power station in 30 years. We will continue the biggest programme of capital investment for 40 years, protect standards in schools, cut NHS waiting times, fund social care, cap energy bills, support those on benefits. We will protect workers with the biggest ever increase in the national living wage and our pensioners on the triple lock with the biggest ever increase in the state pension.
This is a balanced plan for stability, a plan for growth and a plan for public services. It shows that you don’t need to choose either a strong economy or good public services. With the Conservatives and only with the Conservatives, you get both, and I commend this statement to the House.