Who are the real winners and losers from Hunt’s ‘compassionate conservatism’?

The lengthy lead in to Jeremy Hunt’s 17th November Autumn Statement saw the ‘difficult decisions’ and ‘tough choices’ soundbites aired relentlessly across the media. In tandem with these ‘tough but necessary decisions’ warnings, was an eyebrow raising rebranding of the Tories as the Party of ‘compassionate conservatism’.

After all the hype, just how well does Hunt’s claim that the steps taken within the Autumn Statement will enable a “stronger and fairer” United Kingdom stand up?

This blog sets out the impact of the Autumn Statement on social security payments, discusses the fairness of the tax burden decisions contained within the statement and highlights missed opportunities to create a fairer system.


The uprating of the state pension ‘triple lock’ by the September 2022 CPI rate of 10.1% was not a surprise, as to do anything else would have been political suicide. However, the uprating of benefits to the same figure was a welcome measure, as over the last few weeks there had been little reassurance given in this area.

This uprating will result in 10 million working age families and nearly 12 million pensioners benefiting from a 10.1% rise in their benefits and pensions.

Benefit Cap

There was also a long overdue rise in the benefit cap. This cap was introduced by the Conservative led coalition government in 2013, and justified by claims the cap was required due to “general economic conditions” and “to ensure the overall affordability of the welfare system”. The cap was reduced in 2016 and had been frozen in cash terms from that year. This controversial cap to benefits affected around 130,000 households, the vast majority of these families with children. As a result of the benefit cap, most of these families did not receive the £20 uplift to Universal Credit during the pandemic.

The table below shows the cap limits from its introduction in 2013 to April 2023.

Benefit Cap 2013Benefit Cap 2016Autumn Statement
rise in cap (from April 2023)
Outside of London£26,000£20,000£22,020
Sources: https://www.gov.uk/government/publications/autumn-statement-2022-cost-of-living-support-factsheet/cost-of-living-support-factsheet https://researchbriefings.files.parliament.uk/documents/SN06294/SN06294.pdf

As you can see from the table above, even with the uprating of the cap in line with CPI inflation announced in the Autumn statement, the cap remains below the level of the 2013 cap in cash terms. The reduction in 2016 (along with an introduction of two tiers) and the subsequent freezing of the cap until April 2023, have resulted in inflation eroding the value of the benefits awarded at the level of the cap. The table below shows what the level of the cap would be if it had been uprated by CPI each year from the lower 2016 level.

Benefit Cap 2016Benefit Cap from April 2023Cap if uprated by CPI annually
from 2016 to October 2022
Families in London£23,000£25,323£28,835-£5,835
Families outside London£20,000£22,020£25,074-£5,074
Source: Bank of England CPI Inflation Calculator https://www.bankofengland.co.uk/monetary-policy/inflation/inflation-calculator

According to House of Commons Library research, due to the rise in the cap from April 2023, an additional 45,000 families will avoid being trapped by the cap. However, the benefit cap, along with the pernicious ‘two child limit’ has increased the level and depth of poverty experienced across the UK, particularly among families with children.

Hunt talked about how inflation “hurts the poorest most”, but neglected to mention how since 2010, the Tories either froze benefits or limited them to a 1% rise, meaning that the poorest in our society suffered from inflation more than anyone due to the very actions of his government.

Child benefit

In 2010 child benefit (for the first child) was paid at £20 per week. Due to freezes or a 1% uprating limit, it remained largely static until 2020, rising to £21.80 in 2022/3. It has been announced that from April 2023 child benefit will rise to £24.00 per week. However, if child benefit had been uprated by CPI since 2010, this amount would be £28.23 per week.

Free School Meals provision

Children of parents who receive Universal Credit are entitled to free school meals provided household income (not including benefits) is less than £7,400 a year after tax. This threshold has been frozen since 2018 and the Child Poverty Action Group estimates that around 800,000 children in poverty do not qualify for free school meals. This threshold was not referred to in Hunt’s Autumn Statement. A briefing note from the ‘Food Foundation on the need to extend free school meal provision can be read here.

Social Rent

Since 2019 social housing rents have been capped at CPI +1%. With the September 2022 CPI rate of 10.1%, this would have resulted in potential social rent increases of 11.1% from April 2023. In light of this exceptionally high increase which would result in many social renters experiencing financial hardship, the government decided to launch a consultation and suggested three cap levels 3%, 5% and 7%.

The government’s preferred option was to set the cap at 5% as in their opinion this would provide a balance between protecting households against an excessive increase in rent and the income of housing associations. The consultation closed on 12th October and at the time of writing (23rd November), the responses to the consultation had not been published.

The first page of the government’s Impact Assessment re the proposals for capping social rent. The full Impact Assessment can be read here: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1100981/Annex_D_-impact_assessment-_social_housing_rents_consultation.pdf

However, it seems that lobbying by housing associations has been successful as Hunt announced that the rent cap for social housing would be set at 7%, the highest of the three options put forward – and going against the government’s preferred option. You can read the views of G15, a group of London’s largest housing associations – and who were against any form of social rent ceiling here. This is yet another example of government heads being turned by corporate lobbyists at the expense of the most vulnerable people in our communities.

Energy Price Guarantee

The decision by the government to continue with the Energy Price Guarantee (EPG), albeit at a higher level for another 12 months from April 2023 is certainly welcome. However, the rise in the ‘cap’ to £3,000 and the accompanying increase in the price per unit of energy will result in further financial stress for many households.

Prepayment meter customers (there are approximately 4.3 million electricity and 3.4 million gas prepayment households in the UK) are particularly vulnerable as they do not have the ability to spread their energy costs over the year. The number of households ‘self disconnecting’ was increasing before the pandemic and is likely to have risen considerably since the recent hike in energy prices.

Longer term solutions will need to be found, both in terms of cost of living support and better insulated homes reducing energy demand. Overall with a number of caveats, the government has a good record on the former – and a dreadful record on the latter. I understand that in the longer term, beyond the EPG currently due to end in April 2024, the government is looking at ‘social tariffs’ for vulnerable households.

One quick fix would be to abolish standing charges for prepayment customers. These charges, currently capped at 37p a day for electricity and 51p a day for gas customers result in credit steadily seeping away no matter how frugal the customer is and, in what is a real kick in the teeth to those in financial hardship, continue to apply even when the customer has self disconnected.

FuelEnergy Price Guarantee rates from 1st October 2022Standing charge per year
GasStanding charge 37.51p per day£137
ElectricityStanding Charge 51.41p per day£188
Source: https://www.moneysavingexpert.com/utilities/what-are-the-price-cap-unit-rates-/#prepayment

Disturbingly, there is recent evidence that energy suppliers have been treating prepayment customers very poorly, including switching smart meters to prepayment mode without notice (Ofgem’s Standards of Conduct stipulate 7 days’ notice is required) and vulnerable customers being cut off. This shocking behaviour has taken place in spite of previous guidance issued to the energy suppliers by Ofgem regarding their approach to prepayment customers.

It is disappointing that Ofgem, the independent energy regulator, whose responsibilities include ensuring fair treatment for all consumers, continues to let energy suppliers off the hook. It is time we had an energy regulator that truly stood up for energy consumers, rather than championing the interests of the energy suppliers.

National Living Wage

The increase in both the National Living Wage (for those 23+) and the National Minimum Wage (for those 16+) was another welcome move from the Chancellor, finally breaking the £10 an hour barrier.

National Living/Minimum Wage rates (current and from April 2023) Source: https://www.gov.uk/national-minimum-wage-rates

However, as the table above shows, there is a significant variation in the hourly rate dependent upon age, which inevitably leads to cases of younger employees getting paid less for carrying out exactly the same job. This goes against any sense of fairness or justice, surely a mainstay of Tory compassionate conservatism. The Trade Union Congress is campaigning for £15 a hour minimum wage and are calling for all workers, regardless of age, to be eligible for the same minimum wage. On the same principle of equal pay for equal work, if you are old enough to work, then surely you should have a right to vote on how the workplace is impacted by government. It is time to follow the lead of Scotland and Wales and give 16 year olds the vote.


The freezing of the tax thresholds, known as ‘fiscal drag’ or ‘stealth tax’ in day to day language will raise significant revenue for the government. Politically it is popular as it does not involve any raising of the tax rates, but as wages increase, more people either start paying tax for the first time as they exceed the personal allowance, or enter a higher rate tax bracket.

Tax as a share of Gross Domestic Product (GDP) is forecast to increase above 37%, the highest level since the 1940s. The outlook on living standards is dire with the next two years seeing the biggest fall in disposable income in generations.

Lowering the 45p threshold

The lowering of the 45p rate threshold (what a change from the days of Truss and Kwarteng) to £125,400 (from £150,000) sounds like a progressive tax, where those with the broadest shoulders take on the greatest burden until you realise that this will result in the same flat rate increase of £1,250 for those earning £150,000 or £1.5 million. The government does not expect a significant increase in revenue from this change, significantly less than £1 billion a year, but again politically, it does have the advantage of not being seen as a tax rise.

Capital Gains Tax

It is a similar story with the Chancellor’s reductions in the annual exempt amounts for capital gains, reducing from £12,300 currently, to £6,000 in 2034 and £3,000 in 2024.

The rate of Capital Gains Tax paid is 10% for basic rate taxpayers and 20% for higher rate taxpayers. As the rates of CGT are not changing, just the thresholds, there is a relatively small increase in the tax liability, even for higher rate tax payers. For example from 2024 a higher rate tax payer would face a maximum extra charge of £1,860 compared to the amount payable today.

In simple terms, the subject can be researched in detail here, the differential between the tax on income and the tax on capital gains encourages rich individuals to game the system and declare their income as capital gains and thus pay a substantially lower rate of tax on that income. A far more progressive policy would have been to align the CGT and income tax rates. This alignment of the rates, which would clearly impact the most wealthy tax payers in the UK, was proposed by the Office of Tax Simplification. Of course, I am sure the two events are not connected, but it should be noted that the ill-fated Truss/Kwarteng ‘Growth Plan’ of September 2022 announced that the Office of Tax Simplification would be abolished. Hunt has not reversed this decision. It seems that those who suggest a fairer tax system pay a heavy price.

National Insurance Upper Earnings threshold

While, as with income tax, the National Insurance thresholds were frozen there still remains the substantial reduction in the National Insurance rate from 12% to 2% at the Upper Earnings Limit threshold set at £50,284. This is a significant tax break for the most well off in the UK and means that the richest tax payers are contributing a significantly smaller percentage of their income on National Insurance than those on lower incomes.

Bank Surcharge

This is an additional tax levied on the profits of banks on top of Corporation Tax. Currently, Corporation Tax is at 19% and the Bank Surcharge is set at 8% – a combined rate of 27%. When he was Chancellor, Rishi Sunak had set out in the Spring 2022 budget a plan to increase Corporation Tax to 25% in April 2023 and reduce the Bank Surcharge to 3% – an effective combined rate of 28%.

Hunt ditched the shortlived Truss/Kwarteng plan to maintain the 19% rate of corporation tax. However, he had the option to maintain the Surcharge at 8% leading to an effective combined rate of 33% but chose to reduce the rate to 3%, aligning with Sunak’s previous decision, a net increase in the bank surcharge of just 1%. Along with the abolishment of the cap on bankers’ bonuses, the favourable treatment towards the banks (the surcharge allowance has been increased from £25 to £100 million) suggests a budget geared to benefit bankers rather than those struggling just to get by.

Fossil Fuel extraction tax break

While the levy on the oil and gas sector has been increased by 10% and extended to 2028, the gaping loophole of the super deduction for investment in oil and gas extraction remains.


While there have inflation linked rises to benefits that will certainly benefit the poorest in the UK, this should be viewed on the back of a sustained reduction in the value of those benefits in the preceding 12 years of a Conservative-led government. High inflation levels, which disproportionally impact poorer households, mean that the inflation linked rise in benefits will result in poorer people continuing to tread water, rather than being hauled out of poverty.

Hunt may spin his measures on benefits as compassionate conservatism, but I would argue that his compassion extends to the most wealthy in our society, rather than to the most vulnerable. It is the measures that were not adopted in Hunt’s Autumn Statement that show where the government’s priorities are. There were no measures to tackle tax avoidance by ‘non doms’; no change on the charitable status of private schools; no change in the dividend tax rates to align with income tax rates; no mention of a financial transaction tax. While we will all pay more taxes in the coming years and experience a reduction in living standards not experienced since the late 1940s, the wealthiest individuals and corporations will barely feel a ripple.

The need for a wealth tax has never been greater.

Julian Vaughan

24th November 2022

Sources and further reading:

Wealth tax Commission: A Wealth tax for the UK https://warwick.ac.uk/fac/soc/economics/research/centres/cage/news/a-wealth-tax-for-the-uk.pdf

Autumn Statement 2022: Policy Costings https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1118364/Autumn_Statement_2022_Policy_Costings_.pdf

The Institute for Fiscal Studies: Autumn Statement response https://ifs.org.uk/articles/autumn-statement-2022-response

Votes at 16 All Party Parliamentary Group Report 2019 https://docs.wixstatic.com/ugd/3cfd42_0b5279727e6c4f5b9b32c8b88b873f90.pdf

Energy (Oil and Gas) Profits Levy – 21st November https://www.gov.uk/government/publications/changes-to-the-energy-oil-and-gas-profits-levy/energy-oil-and-gas-profits-levy

Rent Cap on Social Housing Consultation Announcement: August 2022 https://www.gov.uk/government/news/rent-cap-on-social-housing-to-protect-millions-of-tenants-from-rising-cost-of-living

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