Jeremy Hunt tells Commons: 'UK is now in recession'

They also expect a rise in unemployment, with 505,000 more people expected to be out of work next year, up from 1.2 million at present to 1.7 million at its peak. 

Mr Hunt told MPs: “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%.”

The Chancellor said he would need to take “difficult decisions.”

He also announced a raft of unexpected spending on schools, health and social care in England, which, he said, would mean Barnett Consequentials for Scotland of £1.5bn over two years.

However, the SNP said inflation meant the Scottish Government's budget was already worth £1.7bn less than it was last year. 

Other key commitments in the Autumn Statement, included a promise to protect the pensions triple lock, meaning a 10.1% increase from next year, a hike of £870.

Benefits will also rise by inflation. 

The national living wage will be increased from £9.50 to £10.42 from April 2023.

The government’s energy price guarantee will be kept for another year, at an average of £3,000 for a typical household, up from £2,500 at present.

There will be one-off payments of £900 to households on means-tested benefits, £300 to pensioner households, and another £150 for individuals on disability benefits.

Mr Hunt told MPs: “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.”

He said his three priorities would be “stability, growth and public services.”

On personal taxes, Mr Hunt said he would reduce the threshold at which the 45p rate becomes payable in England from £150,000 to £125,140.

Income tax personal allowance, higher rate thresholds, National Insurance and inheritance tax thresholds have all been frozen until April 2028

Tax-free allowances for dividend and capital gains tax are also due to be cut next year and in 2024.

The Chancellor also announced an increase in the Energy Profits Levy and a new windfall tax on the profits of energy generators. 

He told the Commons: “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 many 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%.”

On a windfall tax on electricity generators, he said: “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 £14bn next year.”

From 2025, electric vehicles will have to pay road tax from April 2025. The Chancellor said he wanted to make motoring taxes “fairer.”

He said the defence budget would remain at “at least 2% of GDP” and that would “not be possible to return to the 0.7% target” on aid spending. 

There was a promise of £6bn on energy efficiency in 2025.

Labour's shadow chancellor Rachel Reeves said the Government has adopted the “Bobby Ewing strategy” by trying to pretend the mini-budget of Kwasi Kwarteng and Rachel Reeves was a “bad dream”.

She told MPs: “The Chancellor and Prime Minister are trying to convince us that Britain faces problems that are nothing to do with them, that the mini-budget – which imposed a Tory mortgage premium, put pensions in peril and trashed our reputation around the world – was all just a bad dream.

“It’s their Bobby Ewing strategy. Downing Street as Dallas. Old cast members return as if nothing has happened, with tangled plotlines to keep the audience.

“But the truth is it has lost all credibility and everyone knows it is long past time that this series was cancelled.

“And the problem for the British people is this: this is not a dream, this is the every day nightmare of Tory Britain.

“The Conservatives would have us believe that they are not responsible for the last 12 years of failure. In doing so they take the British people for fools.”

The SNP's Shadow Chancellor Alison Thewliss pointed out that Mr Hunt was "the seventh chancellor in seven years."

"His predecessor managed to crash the economy in 26 minutes, but this chancellor has spent the past 53 minutes trying to patch up those mistakes.

"The reality is that we will be all living with the disastrous consequences of Trussonomics for some time to come.

"He's brought forward new targets because he's failing to meet the old ones. And his difficult choices are of nothing compared to what many of our constituents face."

Ms Thewliss told MPs: "Now the Chancellor says that Scotland will get £1.5bn in Barnett Consequentials but yet the Scottish Government budget is worth £1.7bn less than when it was introduced last December.

"So Scotland is being shortchanged yet again."

The Glasgow Central MP said the £6bn for energy efficiency was coming too late. 

She said the UK Government had "ignored the problem."

"And now they say today, wait until 2025. It's not even jam tomorrow. It's huddle under a blanket for three years until we get to you. It's absolutely ludicrous."