Jeremy Hunt
Britain's Chancellor of the Exchequer Jeremy Hunt. Image Credit: AFP

London: The British government on Thursday unveiled an emergency budget featuring billions in tax increases in a bid to restore trust and stability in the UK economy and help millions struggling to cope with a deepening cost-of-living crisis.

Treasury chief Jeremy Hunt said state pensions and welfare will rise to match inflation and announced targeted measures to help the country’s poorest people. But personal finances for millions will worsen, with higher income taxes and fewer government subsidies next year to help with soaring energy bills.

A look at the main measures announced by Hunt:

Income taxes to go up

More high-earners will be paying the top rate of income tax, with the threshold dropping from those earning 150,000 pounds a year to people earning 125,140 pounds ($147,790) or more.

Help on energy bills to continue, but reduced

The government will continue to cap the amount people pay for household energy bills to help ease the pain of skyrocketing gas and electricity prices. But people will have to pay more starting in April, when the cap goes up from 2,500 pounds per year for the average household to 3,000 pounds ($3,535) per year. The measure will last until April 2025.

Windfall tax expanded

The windfall tax on profits of oil and natural gas companies like Shell and BP will increase from 25 per cent to 35 per cent starting in January.

Hunt said the energy profits levy, introduced by Prime Minister Rishi Sunak earlier this year, will go up until March 2028. The windfall tax also will be extended to electricity generators, which will face a temporary 45 per cent levy from January.

Combined, the levies are expected to raise 14 billion pounds for the government next year.

Rise in welfare benefits and state pensions

State pension payments and benefits will increase by 10.1 per cent to catch up with soaring inflation. Millions of families receiving state support with spending such as child care and housing will receive more cash next year, Hunt said.

The most vulnerable people, including the disabled and pensioner households, also will get 150 to 900 pounds more to help with the cost-of-living crisis.

Minimum wage increase

The national living wage will increase by 9.7 per cent to 10.42 pounds an hour starting in April, giving a pay boost to an estimated two million workers.

Hunt said the increase, which applies to workers 23 or older, was the biggest-ever cash increase for the statutory rate.

Public spending

Hunt said government departments’ spending will grow “slower than the economy”, though scheduled public spending will be protected until 2025. He did not spell out what specific cuts will be made after that.

He committed to an increase of 3.3 billion pounds a year for the next two years for public health spending and said spending on schools also will go up by 2.3 billion.

Defense budgets will be maintained at 2 per cent of national income, and overseas aid spending will be kept at 0.5% for the next five years, below the 0.7 per cent budget.