Jeremy Hunt – 2022 Financial Statement in the House of Commons

The financial statement made by Jeremy Hunt, the Chancellor of the Exchequer, in the House of Commons on 16 November 2022.

Introduction

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 government.

We are not alone facing these problems but today our plan reflects British values as we respond to an international crisis.

We are honest about the challenges and fair in our solutions.

Yes, we take difficult decisions to tackle inflation and keep mortgage rises down.

But our plan also leads to a shallower downturn; lower energy bills; higher long-term growth; and a stronger NHS and education system.

Stability

Three priorities then today: stability, growth and public services.

I start with stability.

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 fueled inflation.

This has been 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 of the world’s economy will 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 to identify growth as a priority.

But unfunded tax cuts are as risky as unfunded spending which is why we reversed the planned measures quickly.

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 benefitting our economy and sound public finances.

But credibility cannot be taken for granted and yesterday’s inflation figures show we must continue a relentless fight to bring it down, including a rock solid commitment to rebuild the public finances.

Richard Hughes and his team at the OBR today lay out starkly the impact of global headwinds on the UK economy and I am 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 judge 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 are 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% of GDP in 2025-26 to 97.3% in 2027-28.

I also confirm two new fiscal rules: the first is that underlying debt must fall 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.

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 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 protected 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 the inflation to reduce the cost of living and protect pensioner savings whilst supporting the economy on a path to sustainable 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 sound money has to come first because inflation eats away at the pound in people’s pockets even more insidiously than taxes.

So, with just under half of the £55 billion consolidation coming from tax, and just over half from spending, this is a balanced plan for stability.

Tax

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 most 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 to £125,140.

Those earning £150,000 or more will pay just over £1200 more in tax every year.

We are also taking difficult decisions on tax-free allowances.

I am maintaining at current levels the income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds for a further two years taking us to April 2028.

Even after that, we will still have the most generous set of tax-free allowances of any G7 country.

I am also reforming allowances on unearned income.

The dividend allowance will be cut from £2,000 to £1,000 next year and then to £500 from April 2024.

The Annual Exempt Amount for capital gains tax will be cut from £12,300 to £6,000 next year and then to £3,000 from April 2024.

These changes still leave us with more generous allowances overall than countries like Germany, Ireland, France, and Canada.

And, because the OBR forecasts half of all new vehicles will be electric by 2025…

…to make our motoring tax system fairer I have decided that from April 2025 electric vehicles will no longer be exempt from Vehicle Excise Duty.

Company car tax rates will remain lower for electric vehicles and I have listened to industry bodies and will limit rate increases to 1ppt 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 31st March 2025.

After that, I will sunset the measure, creating an incentive to support the housing market…

…and all the jobs associated with it…

…by boosting transactions during the period the economy most needs it.

I now turn to business taxes.

While I have decided to freeze the Employers NICs threshold until April 2028, we will retain the Employment Allowance at its new, higher level of £5,000. 40% of all businesses will still pay no NICs at all.

The VAT registration threshold is already more than twice as high as the EU and OECD averages. I will maintain it at that level until March 2026.

My RHF the PM successfully negotiated a landmark international tax deal to make sure multinational corporations – including big tech companies – pay the right tax in the countries where 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 2027-28.

I have also heard concerning reports of abuse and fraud in R&D tax relief for SMEs.

So I have 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&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&D investment in the economy.

Ahead of the next Budget, we will work with industry to understand what further support R&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 any such tax should be temporary, not deter investment and recognise the cyclical nature of energy businesses.

Taking account of this, I have decided that from January 1st until March 2028 we will increase the Energy Profits Levy from 25% to 35%.

The structure of our energy market also creates windfall profits for low-carbon electricity generation so, from January 1st, we have also decided to introduce a new, temporary 45% levy on electricity generators.

Together these taxes raise £14 billion next year.

Finally, I turn to business rates.

It is an important principle that bills should accurately reflect market values so we will proceed with the revaluation of business properties from April 2023.

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, benefitting around 700,000 businesses.

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.

Public Spending

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 will protect them as much as we can as we deliver our plan for stability and growth.

We have to take difficult decisions on the public finances.

So we are going to grow public spending – but we’re going to grow it more slowly than the growth of the economy.

For the remaining two years of this Spending Review, we will protect the increases in departmental budgets we have already set out in cash terms.

And we will 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 plans for schools and the NHS, I start with two other areas of spending.

DWP

The Department for Work and Pensions has a critical role in supporting people into work.

I am proud to live in a country with one of the most comprehensive safety nets anywhere in the world…

…but also concerned that we have seen a sharp increase in economically inactive working age adults of 630,000 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 PM has asked the Work and Pensions Secretary to thoroughly review issues holding back workforce participation due to conclude early in the new year.

Alongside this, I am also committed to helping people already in-work to raise their incomes, progress in work, and become financially independent.

That is why 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 have also decided to move back the managed transition of people from Employment and Support Allowance onto Universal Credit to 2028…

…and will invest an extra £280m in DWP to crack down on benefit fraud and error over the next two years.

The Government’s review of the state pension age will be published in early 2023.

Defence and international commitments

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 first hand 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 frontline of that fight – the brave people of Ukraine.

The United Kingdom has given them 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 that 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 is necessary to revise and update the Integrated Review, written as it was before the Ukraine invasion.

I have 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 will not be possible to return to the 0.7% target until the fiscal situation allows.

We remain fully committed to the target and the plans I have set out today assume that ODA spending will remain around 0.5% for the forecast period.

As a percentage of GNI, we were the third highest donor in the G7 last year and I am proud that our aid commitment has saved thousands of lives around the world.

I look forward to working closely with my RHF 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 can confirm that despite the economic pressures we face, we remain fully committed to the historic Glasgow Climate Pact agreed at COP26 including a 68% reduction in our emissions by 2030.

Education

I turn to education. 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 RHF the Prime Minister has always been deeply committed.

Thanks to the efforts of successive education ministers, particularly my RHFs from Surrey Heath and Bognor Regis, we have risen 9 places in the global league tables for maths and reading since 2015.

I still, however, have concerns that not all school leavers get the skills they need for a modern economy.

Our current Education Secretary left school at 16 to become an apprentice, and knows first hand 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 and my RHF the Education Secretary on the implementation of our skills reforms programme.

But as we raise the skill levels of our school leavers, I want 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 around £1.7 billion.

But according to certain estimates this would result in up to 90,000 children from the independent sector switching to state schools, giving with one hand and taking away with another.

So instead of being ideological I am going to be practical.

Because this government wants school standards continue to rise for every single child, we’re going to do more than protect the schools budget – we’re going to increase it.

I can announce today that next year and the year after, we will invest an extra £2.3 billion per year in our schools.

Our message to heads and teachers and classroom assistants today is thank you for your brilliant work, we need it to continue…

…and in difficult economic circumstances, we are investing more in the public service that defines all of our futures.

Health and Social care

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 frontline and how much they are 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 the case for a long-term workforce plan.

I have listened carefully to his proposals and believe they have merit.

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 will need in 5, 10 and 15 years’ time…

…taking full account of the need for better retention and productivity improvements.

I have 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 work incredibly hard. But even outside the pandemic, the increasing number of over 80s is putting massive pressure on their services.

I also heard the very real concerns from local authorities about their ability to deliver the Dilnot reforms immediately…

…so 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.

I have therefore decided to allocate for adult social care additional grant funding of £1 billion next year and £1.7 billion the year after.

Combined with the 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.

How we look after our most vulnerable citizens is not just a practical issue but speaks to our values as a society…

…so today’s increase in funding will allow the social care system to help deliver an estimated 200,000 more care packages over the next two years…

…the biggest increase 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 am asking it to join all public services in tackling waste and inefficiency.

We want Scandinavian quality alongside Singaporean efficiency, both better outcomes for citizens and better value for taxpayers.

That does not mean asking people on the frontline, often exhausted and burned out, to work harder, which would not be fair.

But it does mean asking challenging questions about how to reform all our public services for the better.

With respect to the NHS I have asked former Health Secretary and Chair of the Norfolk and Waveney 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 operates efficiently with appropriate autonomy and accountability.

I have also had discussions with NHS England about the inflationary pressures on their budget.

I recognize 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 an extra £3.3 billion.

The Chief Executive of the NHS, Amanda Pritchard, has said this should provide sufficient funding for the NHS to fulfil its key priorities and shows the government is serious about its commitment to prioritise the NHS.

That is why today we commit to a record £8 billion package for our health and social care system – a government putting the NHS first.

And, Mr Speaker, the NHS and schools in Scotland, Wales and Northern Ireland face equivalent pressures so the Barnett consequentials of today’s decisions mean…

…an extra £1.5 billion for the Scottish Government; £1.2 billion for the Welsh Government, and £650m for the Northern Ireland Executive.

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 are going to sustain our public services and avoid a doom loop of ever higher taxes and ever lower dynamism, we need economic growth.

So today I also outline our three priorities for growth.

Growth

Mr Speaker,

You cannot borrow your way to growth. Sound money is the rock on which long term prosperity rests – but it is not 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 RHF friend the Prime Minister identified the keys to doing this – people, capital and ideas.

Today’s increase in the education budget demonstrates our commitment to people and skills and I now outline three further growth priorities – energy, infrastructure and innovation.

Energy

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 we 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 the energy supply so unless we radically change our approach we will both bankrupt our economy and harm our planet.

Over the long term, there is 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 or anyone else can use energy to blackmail us; and energy efficiency to reduce demand and climate impact as much as possible.

Britain is a global leader in renewable energy.

Last year nearly 40% of our electricity came from offshore wind, solar and other renewable sources.

Since 2010, our renewable energy production grew faster than any other large country in Europe.

We need to go further, with a major acceleration of home-grown 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 I can today announce that the government will proceed with the new 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 6 million homes for over 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 energy efficiency is just as important.

So today, we set our country a new 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 saving from our national energy bill or £450 off the average household bill.

This must be a shared mission with families and businesses playing their part – but so will the government.

In this Parliament, we’re 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 commitment to the British people is, over time, to remove this single biggest driver of inflation and volatility facing British businesses and consumers.

My RHF the Business and Energy Secretary will publish further details on our energy independence plans and launch a new Energy Efficiency Taskforce shortly.

Infrastructure

Mr Speaker,

If a modern economy needs secure, clean and affordable energy – it also needs good roads, rail, broadband and 5G infrastructure.

Such connections allow wealth and opportunity to spread which is why infrastructure is our second growth priority.

Thanks to decisions by this 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 am 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.

This means that although we are not growing our capital budget as planned, it will still increase from £63 billion four years ago to £114 billion next year and £115 billion the year after – and remain at that level..

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. East West Rail. 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 mission is to level up economic opportunity across the country.

And that too, needs investment in infrastructure.

So I will proceed with round 2 of the levelling up fund, at least matching the £1.7 billion value of Round One.

We will 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 have shown the power of civic entrepreneurship.

But 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 are 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 £600 billion investment over the next five years means the largest investment in public works for forty years.

Our children and grandchildren can be confident that this Conservative government is investing in their future.

Innovation

Energy and infrastructure…and now our third growth priority – innovation.

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 sciences largest technology sectors in Europe.

Thanks to successive Conservative governments, we remain a science superpower and I salute the work of former Chancellor George Osborne, my RHF from Tunbridge Wells and my HF the Science Minister and 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 it 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 step 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 technology, life sciences, green industries, financial services and advanced manufacturing.

And I have asked the Chief Scientific Adviser Sir Patrick Vallance who did such a brilliant job in the pandemic, to lead new work on how we should change regulation to better support safe and fast introduction of new emerging technologies.

The second lesson of Nigel Lawson’s Big Bang is that 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 have listened to requests from businesses and today I’m removing import tariffs on over 100 goods used by UK businesses in their production processes, from car seat parts to bicycle frames.

I will also change our approach to investment zones which will now focus on leveraging our research strengths, to help build clusters for our new growth industries.

My RHF the Levelling Up Secretary will work with Mayors, Devolved Administrations and local partners to achieve that with the first decisions announced ahead of the Spring budget.

I have also heard some speculation that we might cut the research and development budget today.

I believe that would be a profound mistake.

In 2017, we announced a target to invest 2.4% of our GDP in R & 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 will increase public funding for R&D to £20 billion by 2024-5 as part of our mission to make the United Kingdom a science superpower.

And finally Nigel Lawson’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 investment across our economy, I can also announce we are 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, then. 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 also remember another great national quality, British compassion.

The final part of our plan protects the most vulnerable. It is to that I now turn.

Protecting the Most Vulnerable

Strong public finances are not just to make accountants happy.

It is because we took difficult decisions in 2010 that we could afford record funding increases for the NHS, the landmark furlough scheme, and now the Energy Price Guarantee.

Today the discipline we have shown means we can provide targeted support to help our most vulnerable citizens with the cost of living.

Energy Support

One of the biggest worries for families is energy bills, and I pay credit to my predecessor the Rt Hon Member for Spelthorne and the former Prime Minister the Rt Hon Member for South West Norfolk for their leadership in this area.

This winter, we will stick with the 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 will 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 through next year, this will still mean an average of £500 support for every household in the country.

At the same time, for the most vulnerable we will 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 will also provide an additional £1 billion of funding to enable a further twelve-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 am today doubling the amount of support from £100 to £200, which will be delivered as soon as possible this winter.

Before the end of this year, we will also bring forward a new targeted approach to support businesses from next April.

Vulnerable people and pensioners

I want to go further to support people most exposed to high inflation.

Around four million families live in the social rented sector – almost one fifth of households in England.

Their rents are set at one per cent 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 clearly be unaffordable so today I can announce that this government will cap the increase in social rents at 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 the National Living Wage which has been a giant step to eliminating low pay.

So today I am 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 is expected to benefit over two million of the lowest paid workers in the country and keeps us on track for our target to reach two thirds of median earnings by 2024.

And it is the largest cash 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 uprate 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.

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 will also exceptionally increase the benefit cap with inflation next year.

Finally, Mr Speaker, I have talked a lot today 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.

To support the poorest pensioners, I have decided to increase pension credit by 10.1% which is worth up to £1470 for a couple and £960 for a single pensioner in our most vulnerable households.

But the cost of living crisis is harming not just poor pensioners but all pensioners so because we have taken difficult decisions elsewhere in this statement, I can today announce that we will fulfil our pledge to the country to protect the pensions Triple Lock.

So, in April, the state pension will increase in line with inflation, an £870 increase which represents the biggest ever cash increase in the state pension.

To the millions of pensioners who will benefit from this measure I say – now and always, this government is on your side.

Conclusion

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 commitment to our plan today with British resilience and British compassion.

Because of the difficult decisions we take in our plan…

We strengthen our public finances…

…bring down inflation.

…and protect jobs.

We build the first state backed nuclear power station for 30 years.

And continue the biggest programme of capital investment for 40 years.

We protect standards in schools.

….cut NHS waiting times.

…fund social care.

…cap energy bills.

…support those on benefits.

We 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.

It 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…

… I commend this statement to the House.