Money Box Live: Autumn Statement Special

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BBC Sounds. Music, radio, podcasts. Hello, welcome to this Moneybox Live podcast special on what the autumn statement will mean for your pocket. The Chancellor, Jeremy Hunt, outlined some pretty significant changes. For pensioners, there was this. Today we honour our commitment to the triple lock in full. For those in a job we heard about tax cuts. I'm going to cut the main 12% rate of employee national insurance.

And the Chancellor said this was a positive plan for people and the economy. We are delivering the biggest business tax cut in modern British history. The largest ever cut. to employee and self-employed national insurance. and the biggest package of tax cuts to be implemented since the 1980s, an autumn statement for a country that has turned a corner, an autumn statement for growth, which I commend to the House.

So was it a positive statement for you? Well, in this podcast, we're going to dig into the detail and find out exactly what it means for your pocket. So what are the main headlines? What's the response been like so far? Well, Money and Work reporter Peter Roddick is at St George's Centre. in Netherfield near Nottingham. Peter, good afternoon. Busy afternoon.

Good afternoon, Phyllis. Yes, that's right. It's a little bit calmer now because the bingo's on and we've been moved outside to the cafe to not get in the way of the bingo. So a little bit calmer now. Well, give us the headlines then and tell us what people have been talking about there. What's important to them?

Yeah, so look, it's really important to remember we've got this energy price cap announced when coming tomorrow. So away from what the Chancellor had to say, really important to say lots of people here across the UK still worried about their gas and electricity bill for the winter, still really struggling with the cost of living. So what was there for people?

on the lowest incomes well on wages the government of course had already committed to lifting the minimum wage known as the national living wage um They confirmed last night and then today in the statement the exact level at £11.44, almost a 10% boost, and for the first time those over 21 will get the amount.

Really important. Remember, that is going to be a burden for small businesses. A local bakery boss here telling me it's companies like her that have to fund this announcement, not the government. Where the government will foot the bill, of course, is on benefits, working age benefits for 9 million people. Things like universal credit will go up by September's inflation rate.

That represents an average £470 a year. There have been reports they would go with a lower October rate, so significant there. And one thing lots of people I speak to in communities like this say that would help is on housing benefit. The local housing allowance essentially helps people on benefits pay their rent to a private landlord. It's been frozen.

Since 2020, it has now been unfrozen. The government says it will mean 1.6 million households getting an average of £800 each in support. So again, another significant announcement. Let's speak to Pete Rogers, local community organisation. I was speaking about that boost to benefits, but also to the minimum wage. That's something you've been campaigning for, a pay rise for people. Your reaction to today's announcement?

Yeah, thanks Peter. It's good news. Anything that puts more money into the pockets of... particularly the lowest paid people in our country, is a really, really good thing. And we applaud that. But certainly for us at Citizens UK, we're the home of community organising in the UK. We listen to communities, we bring them together, we find out what they care about.

And certainly an enduring cause for concern has been around low pay. And so the Living Wage Foundation and the Living Wage Movement is something we've been working on for over 20 years and over $3 billion. pounds has been put back into the pockets of the lowest paid people in our country. And I think as much as this is welcome, we have to acknowledge that the real living wage is calculated based on the cost of living.

And, you know, a basket of goods, what it costs to actually run your house and put food on the table. And so currently that's £12 an hour for people. So that's very different to £11.44. Very different to £11.44. And that might not sound that much, but if you think about a full-time worker, and this equates to... over a thousand pounds.

extra somebody uh on a real living wage and of course you know the living wage accredited employees there's over 14 000 across the uk now and they pay it to every workout over 18. so somebody you know even with the government announcement today if you're on if you're an

to 20 year old, you're getting £8.60 an hour. So this is £6,500 less than somebody earning a real living wage. And so we want to tackle the injustice of in-work poverty and there's 3.5 million people still trapped in in-work poverty and we can do more. And then on a human basis, you chat to people on a daily basis here in Nottingham. How are people feeling about the winter coming up? I think there's genuine concern.

But I would say that this is nothing new. We know that people have been struggling with their bills, they've been struggling with in-work poverty for many years. And so I think about... You know, the care workers that we've been working with, you know, talking about almost a million people in our country work in that incredibly important industry and hundreds of thousands of them for many, many years have been on poverty pay. And so, you know, listen to them here.

stories of you know life through the pandemic you know putting their lives at risk you know going into to homes and and into kind of domiciliary places and being at risk but then also having to pick up those extra shifts in order to pay bills it's a lot

Pete, thank you so much for your time. Really appreciate it. I was chatting to Jane. A lady was just getting her chicken pie at the counter earlier. She was saying, you know, without places like this, she really wouldn't be able to cope. Not just...

you know last winter but the winter coming up too even with today's announcements and of course that's not just myself and people like pete and jane who who are pointing out those things the independent office for budget responsibility today still forecasting on average living standards still going to be way lower than pre-pandemic levels even with today's changes it is going to be a very challenging winter for lots of people

Peter, thank you. Both are Peter's. Our reporter, Peter Ruddock, and his guest, Peter Rogers, there. Thank you very much. Now, while Peter has been out hearing what people think of this statement, our experts have been hidden away. digging through the details. I'm joined today by Alice Hain, personal finance analyst at Best Invest, by tax expert Dawn Register, who's a partner at the accountancy firm BDO, and Sangeeta Chawla, a managing director at Standard Life. Good afternoon.

Good afternoon. Hi. Thank you very much for joining us. Dawn. Tax. Tax was heavily trailed. It was heavily featured. There had been lots of speculation. We might see a cut to income tax or to inheritance tax. But now we know it's national insurance. What did the Chancellor say? So this was the focus on rewarding work, as he mentioned during the speech, really focusing on cutting employees' national insurance. So it's important to say there's no cut for employers' national insurance.

focused on class one for employees. So that cut of the rate from 12% to 10%. It was widely trailed that it would be 1%, but actually it was 2% cut in the end. Everyone wants a rabbit out of a hat. Exactly. your rabbit and that was for the income from that people earn from £12,570 up to £50,000. £270. So for those earning more, there is a 2% Employees National Insurance that applies to those earning over £50,270. That still applies. That is unchanged.

And then, of course, the scrapping of Class 2 national insurance and the change to Class 4 national insurance for those people who are self-employed, which I think will be very welcome. And we might talk about that in a little bit, but I just want to stick with that. main national insurance change. Why do you think he might have picked national insurance over say income tax?

Well, I think it really does zoom in on workers. So it is just for those who are employed. So, for example, for everybody else filing tax returns, pensioners, those with savings and income, they will not... benefit from this this is just for national insurance obviously there's other measures for pensioners which I'm sure we'll come on to so this is really focused on still a lot of people 27 million people who will benefit from this but is it is really down to that message of

rewarding those people in work and those people on low and medium incomes only. It has to be said though that the impact of what we call fiscal drag is still there. so Personal allowance for income tax purposes has not changed that is still your twelve thousand five hundred and seventy pounds tax-free That is due not to change until 2028 and that does mean that actually more people are paying tax.

Some people will be paying tax simply because that is unchanged on the income tax threshold. The estimate is that an additional 3.2 million people will be into paying tax. as we've just said the living wage has gone up and also more people will be paying higher tax so the 40% bracket has not increased the threshold for that has not increased 2.6 million

million people are due to fall into that before 2028. Yes, this question of fiscal drag, as people's incomes increase and the rates remain frozen, then they get dragged into the higher rates. Keith's been in touch on that, he says.

One thing I have noticed but might have missed, the personal allowance has not been raised. So any pay rise, pension increase or benefits increase will just be taken back. And he says, in fact, someone on minimum wage might be worse off. Alice. Price rises are finally slowing. We heard last week inflation had fallen to 4.6% in October.

prices are still going up, but they've slowed down. And it's still, of course, way above the 2% target. Could there be a risk that tax cuts are inflationary themselves? Well, there's always that risk because you're putting more money into people's pockets and the risk is that they then go out and spend more of that money. But I think at the moment, we have a situation where people's finances are really, really stretched. We've had two years of a cost of living crisis.

So are people going to be racing out to the shops with a little bit of extra money that they have in their back pocket? Probably not. They're probably going to be looking to pay down debt, perhaps build up a rainy day pot, or perhaps just kind of shore up their finances just to make sure they're really on.

top of things or pay for things that they might have needed but haven't been able to get so far so I don't think there's going to be a sort of huge inflationary drive from what the chances brought in today but also because you know the tax cuts are fairly minimal and as we've already discussed you know tax thresholds are staying the same so we're still looking at having you know

The data reveals that the tax burden on the British public is still due to rise higher than at any point since the Second World War. So we're still looking at a very heavy tax burden. So I don't think there's going to be a... big inflationary push from the measures that are outlined today. Thank you. I'll tell you what, let's take a look at pensions now because there's good news for Lynne from Liverpool who was worried about the triple lock. Leave it where it is, we need it.

prices of fuel and food and yeah we've paid our dues over the years we've always worked and paid into the system never last but not so now in our old age i think we should be Comfortable. Things haven't come down to me. When you go to the supermarkets, they're still going up. Well, Lynne, here is what the Chancellor said about that.

It's been a lifeline for many during a period of high inflation. There have been reports that we would uprate it by a lower amount to smooth out the effect of high public sector bonuses in July. But that would have been particularly difficult for one million pensioners whose only income is from the state. So instead, today, we honour our commitment to the triple lock in full.

So that means the state pension will rise by 8.5% from April next year. Sangeeta, you can hear, can't you, how much it means to Lynn there. Just run us through what the triple lock is, what this actually means. Thanks very much. Yeah, so the triple lock is a commitment that was put in place back in 2010 for people receiving a state pension. And it's the highest of average earnings, CPI, or 2.5%. And based on the average earnings that came out in September of this year, that was the 8.5%.

And that is the rate that the Chancellor has confirmed will be given to state pension. So pensioners will receive that amount in April of next year. CPI, I should say, Consumer Prices Index, one of the measures of inflation. One of the measures of inflation. Apologies, yes. Okay, so how much then will the state pension be worth now it's having this 8.5% rise? So on a weekly basis, that brings people up to... £221.20, and it gives pensioners an extra £900 per year.

And that is very helpful for the 12 million people that are currently receiving a state pension in this country.

A lot of those, many more people will be joining them every year that goes on. And there was an announcement on benefit rises too. Here's the Chancellor again. The government has decided to increase universal credit and other benefits from next April by 6.7% in line with September's inflation figure, an average increase of £470 for £5.5 million. households next year. Alice will that make a big change for people? Absolutely I mean

6.7% for people on benefits is lower than what pensioners would receive. You've got to remember that pensioners are on a fixed income. They haven't got that opportunity to perhaps go and find a better job. So the idea with benefits is that you're on it.

for a short period of time if you're hunting for a job or or that it supports you if you're on a low income but the idea is as well that you would eventually hopefully unless you've got you know you're at home for illness reasons that you would be able to go out and find a better job with a better um wage so

It will definitely deliver that kind of boost that people need. These are tough times. 6.7% is very much needed. Steve has tweeted to say, not impressed. As a retiree, I won't benefit from national insurance reductions. And as I'm not yet 66.

get the state pension. My work pension only went up by its cap of 5% but I'm paying more tax due to frozen allowances. Lots and lots of different experiences, different reactions to this autumn statement. Sangeeta, one of the things we saw that might affect people... in retirement are these plans to consult on a pot for life, a retirement pot for life. Can you explain what the thinking is there?

The government is trying to sort of help people by simplifying the way they manage their pensions. So one of the ways that you can do that is obviously by encouraging people to group all their pensions. That's obviously consolidating them into one place. And what they're really worried about is all the very small pots that people accumulate through their employment life.

And on average, people change employers seven or eight times. So they want to reduce that complexity from a people perspective. And they're very much focused on the smaller micro amounts that are held. And this will help people by being able to manage their money.

a bit more effectively by actually giving them confidence that they have money that they didn't really realise. So that's the positives of it. There's a lot of complexities around administering that that they haven't worked through and I don't think we've heard any of the details yet.

So we're looking forward to working on the next round of consultation on that. And it sounded like you might have to be quite proactive and proactively move your pension pot with you when you changed employers. And I don't know that our experience on Moneybox is... that people are terribly proactive about their pensions. We've got a question about national insurance from Claire in New York, who's self-employed. Hello, Moneybox.

I'm in my early 60s and I'm in receipt of my civil service pension on which I pay basic rate income tax. I also do a small amount of work as a self-employed person and fill out a self-assessment form each year for HMRC. I pay Class 2 National Insurance contributions voluntarily in order to ensure I receive my full state pension in May 2027. If I no longer have to pay, or do I no longer have to pay,

Class II National Insurance on the basis that I am self-employed in order to receive full state pension. Thank you. Thank you. Right, Sangeeta, a lot of people who aren't self-employed might not understand what class two national insurance contributions are. Can you quickly explain that and then address Claire's question? Well, there's the... The different rates of Class 2 and Class 4 really come down to the income levels that you earn. And by abolishing Class 2, what it really means is that...

those people who are self-employed all receive an immediate benefit by not having to pay that amount of money. And I think the Chancellor referred to a saving of £191 for... all those people and then class four is subject to a higher income threshold and you have obviously fewer people that will benefit from that but that's what it comes down to. I don't know Dawn you may want to elaborate on that. Yes, so it is correct that you would now not need to pay Class 2, so that is an immediate...

abolition. And he was quite clear in the speech that that would not affect state pension entitlement. So that is good news. On the class four, it was less of a reduction, it seems to me. that he's trying to bring together the two rates. So class one is now 10% and the class four, so if you're self-employed, is now 8% over time. And that's for income. So for Claire, if she's... earning over the £12,570 up to the £50,270 of self-employed earnings.

still need to be paid under Class 4. Okay, but essentially it's simplifying and reducing some national insurance for self-employed people. Okay, so that's national insurance dealt with. Working age benefits, as we've heard, they're going to rise in line with inflation. There was also some pretty tough talk from the Chancellor on getting unemployed people into work. If after 18 months of intensive support, job seekers have not found a job...

we'll roll out a programme requiring them to take part in mandatory work placement to increase their skills and improve their employability. And if they choose not to engage with the work search process for six months... We will close their case and stop their benefits. Well, here's what Bex Gilbert from the anti-poverty charity Turn To Us told us just before we came on air. Pushing people into any job rather than the job that's right for them could end up making their health worse.

emphasising the punishments people could face, including axing some people's benefits completely, is going to frighten and worry people who are already struggling. Every day we get around 250 calls from people needing information and support. They're skipping meals and getting into debt. pay household bills and rent. A compassionate approach centres understanding, dignity and respect it wouldn't remove all support for people with the most complicated challenges.

Alice, if cutting benefits is the stick one of the carrots here is this rise in minimum wage. Can you tell us what we're seeing there and how significant that is? Well, the minimum wage is going to increase by more than a pound to £11.44 per hour from April next year. And at the moment, it's £10.42. So that's...

That's an increase of 9.8%. But the really big thing is that it's also going to apply to 21 and 22 year olds for the first time. So it means that a full time worker aged 23 on the wage would receive a rise worth.

1800 and for a 21 year old that's an effective rise of 2300 so that's a big jump in income and you know young people are very very important for the workforce they're the starting engine of of of you know getting people out there and getting them into work and it's very very important that they're paid adequately and that they can afford to pay their bills.

Thank you very much. Now, we're getting lots of questions in on those changes on national insurance and pensions. We've had this in from small business owner Natalie. Hi, this is Natalie from Buttercup Bus Vintage Campus. As a small business owner working in the event sector, and I could see that the autumn statement made the announcement of the abolishment of the class two national insurance contract.

contributions and then going on to also cut by one percent the class four national insurance class four contributions. I'm an employer and an employee but not self-employed myself. I thought it'd be quite interesting to get some information on what they actually meant. It'd be great to get some more information there. Thank you very much.

I like the simplicity of Natalie's question there, what it actually meant. Dawn, we've talked a bit about what it means for people who are working, whether they're self-employed, whether they're employed. What does it mean for their bosses, for small business owners like Natalie? Yes, so if you're an employer, well, one of the changes we haven't mentioned is that you're...

National insurance for your employees needs to change on the 6th of January. And that's quite a surprise, actually, to make an in-tax year change. Normally he would... wait till the 6th of April but I think he wants to give more money in people's pockets straight away so therefore as an employer if you've got any employees even you know one two three small number as a small business you've got to get

that change processed ready for January. So it is an immediate saving for your employees. I think the design of it is to maybe... deal with rate wage inflation so the employees aren't constantly are asking for wage rises so there's a desire there but but the self-employed are not impacted by that so i mean would would a self-employed business uh incorporate uh their their business so set up a company instead

And that's the difference. So you have to look at that. If you're just running your own business with no employees, then you have to look as you're... listener rightly said just to the class two and the class four national insurance

It's interesting, actually. We had a tweet from Colin from Stockport asking when various measures take effect so that he can know when they'll affect him. And most of them will come into force. Some of them are being consulted on. Some will come into force at the start of the new tax year.

Particular change coming from the 6th of January is very unusual. Thank you. Alice, there had been some expectations, there had been some headlines, in fact, that there would be a big shake-up around savings, maybe a change to individual savings accounts or ISAs. Buried away, I eventually found it, in the autumn statements paperwork is a change to ISIS. It wasn't exactly fireworks. Tell me what the difference is going to be.

Yeah, it was a bit of a damp squib. We were really hoping for some kind of really major reforms to change the ISA landscape. But the big change that we're looking at is that... the government's going to allow multiple subscriptions to ISAs of the same type each year because at the moment you can only subscribe to one cash ISA, one stocks and shares ISA, one innovative finance ISA or one lifetime ISA and that's going to change so you'll be able to have

several accounts they're also going to allow the ability to hold fractional shares in an ISA and that's really beneficial for people who uh you know younger generation often like to invest in really really expensive stocks trendy stocks that they've heard about so that that will make sure that they can have those types of things like apple tesla etc inside their isa and then having the

access to multiple, being able to open several different accounts is very useful for customers, perhaps somebody with a cash asset that wants to open an account within a higher rate because that's become available or for somebody with a stocks and shares item they want to have an iso with a different provider again they can take advantage of that there's also going to be um

partial transfers of iso funds in the air between providers from april 2024 and that will kind of make it much smoother process if you know bearing in mind the changes that are coming into force i think a lot of the issue around the isa reforms today is that there was it's kind of what wasn't in there is the is the big issue is you know it was particularly just

disappointing that the ISTA allowance is going to remain frozen at £20,000 per adult. It's been stuck at that since 2017 to 18 tax year. And if you're going to put the real value of the allowance in, then it should be at least £20,000. 25,760 and that adjusts the effect of inflation. I do expect that some people would feel pretty happy if they could save anything anywhere near 20 grand a year into their ISA. Alice, thank you. Dawn, was there anything standing out as missing from the audience?

statement that you'd perhaps been hoping for or expecting? Disappointed that there wasn't any change to the high income child benefit charge. Many of us in the profession have said that this is overly complicated. The £50,000... threshold hasn't changed since 2013. This is where you lose it if you earn above £50,000 and lose it completely above £60,000. Correct and that seems to contradict his message of rewarding work because this severely impacts working parents.

particularly the marginal rate of tax that then impacts them if you're earning say £50,000 to £60,000. Also the need to file self-assessment tax returns if you are subject to that charge.

a long time on our wish list, couldn't we? But the Chancellor might have spoken for more than 52 minutes, but I only get half an hour in the podcast. And that is the end of this week's Moneybox Live. Huge thanks to everyone who's been in touch. And thanks to our panel. I was joined by Alice Hayne from Best In...

Paul Lewis will be back with Moneybox on Saturday at midday with his take on the autumn statement. Definitely not one to miss. You can get in touch with him, with me or with the team here. by emailing moneybox at bbc.co.uk and please do include a phone number.

In this podcast, the reporter was Peter Ruddock. The producer was Sarah Rogers. Production coordinator, Luke Smithhurst. And studio manager, Chloe Wilson. Our editor is Jess Quayle. I'm Felicity Hanna. And this was a BBC News money and work production for BBC. Hello, this is Marian Keyes. And this is Tara Flynn.

We host a podcast you might like for BBC Radio 4 and BBC Sounds called Now You're Asking. Each week we take real listeners' questions about life, love, lingerie, cats, dogs, dentists, pockets, or the lack of anything really. Thank you. When Vivint Smart Security gives you a smarter way to protect and its smart thermostats give you a smarter way to save, well, that's a smarter way to live. Get the smarter home system that just gets you at Vivint.com.