UK plunges into recession

In a gloomy financial statement, Chancellor Jeremy Hunt said the Office for Budget Responsibility had judged that the UK’s economy was shrinking.

The UK is officially in recession.

In a gloomy financial statement, Chancellor Jeremy Hunt said the Office for Budget Responsibility had judged that the UK’s economy was shrinking.

Mr Hunt, the nation’s finance minister, told the House of Commons that the UK’s GDP was expected to fall by 1.4 per cent next year, before returning to growth in 2024.

He added that inflation was expected to hit 9.1 per cent this year, and drop to 7.4 per cent next year.

Unemplyment is forecast to rise from 3.6 per cent to 4.9 per cent in 2024.

Borrowing will hit £177 billion ($314 billion AUD) - 7.1 per cent of GDP.

UK Chancellor Jeremy Hunt delivers his Autumn Statement (Photo by Handout / PRU / AFP)

Delivering the Autumn Statement on Thursday, he said the UK faced “unprecedented global headwinds”.

His plans will “tackle the cost of living crisis and rebuild our economy”, he claimed.

His new policies include bringing down the top threshold for tax, meaning people earning more than £125,000 ($221,000 AUD) will now pay 45% in tax.

Previously, the highest rate of tax only affected those earning more than £150,000 ($266,000 AUD).

“We’ll still have the most generous set of tax-free allowances of any G7 country,” Mr Hunt insisted.

Energy firms profiting amid the cost of living crisis will also face higher taxes on their profits, at 35 per cent, raising an estimated £14 billion ($24.8 billion).

Mr Hunt said the government had been forced to make “difficult decisions” to tackle inflation.

“[Inflation] erodes savings, causes industrial unrest, and cuts funding for public services,” he said.

“It hurts the poorest the most and eats away at the trust upon which a strong society is built.”

He added that the UK was facing “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 global headwinds, but with this plan for stability, growth and public services, we will face into the storm.”

And he said that “families make sacrifices every day to live within their means, so too must governments because the UK will always pay its way”.

Britain's Chancellor of the Exchequer Jeremy Hunt (Photo by JUSTIN TALLIS / AFP)

Mr Hunt has only been in the job for a matter of weeks.

He was appointed by former prime minister Liz Truss as she battled to save her job after her financial plans led the Pound to plunge and caused mortgage rates to soar.

She resigned and was replaced by Rishi Sunak, who kept Mr Hunt in his post.