Autumn statement 2022: what will it mean for the legal profession?

The chancellor, Jeremy Hunt, promised he would be delivering a difficult autumn statement of spending freezes, cuts and tax rises, and this is exactly what arrived. Amidst a whirlwind of changes to taxes and spending, we look at what it will mean for solicitors and law firms.
Jeremy Hunt delivers the government's autumn statement, 17 November 2022

Hunt outlined a perilous economic picture, confirming that the UK is now in a recession, and predicting unemployment would rise and living standards would drop.

Next year’s spending will be tight

Despite speculation ahead of the statement, departmental budgets were not changed, and the government has kept the 2021 spending review settlement in place.

But against high inflation, this still amounts to a real-terms cut for some areas of spending.

The Ministry of Justice’s budget is forecast to rise by 4% in 2023/24, yet the Office for Budget Responsibility has predicted an inflation rate of over 7%.

The government has clearly said departments will be on their own in managing the rising costs inflation will bring and will have to find efficiencies.

With a courts backlog of 63,000 cases, criminal legal aid firms collapsing and civil legal aid deserts growing across England and Wales, it’s hard to see where these can come from for the Ministry of Justice.

As inflation drains departmental budgets, this could have implications for the government’s response to the Independent Review of Criminal Legal Aid and any future work on civil justice.

We will continue to engage with ministers and show that increasing spending in these areas not only maintains access to justice and supports jobs, but often saves the government money further down the line, too.

This is a system at serious risk of failure which needs investment just to stand still.

The chancellor said “we will face the storm”, but our justice system may be knocked off its feet over the next two years if it is not properly supported.

Support for energy costs (but details to come later)

Following a previous announcement, Hunt confirmed the Energy Price Guarantee will change from April for individuals, rising from its current level to £3,000.

For businesses there will be support, but what this will look like and who will be eligible is yet to be decided.

We have argued since the guarantee was announced that support should be available for small businesses and high street law firms.

The government should not forget that law firms and others are being hit by the same high energy costs and inflation pressures as other high street businesses.

The chancellor confirmed a plan to support businesses would come by the end of the year and we will continue to push ministers to include law firms within it, so they can manage the high energy pressures we are all facing.

Taxes will rise

The autumn statement reiterated that not much in life is certain, but taxes certainly are.

The cut to stamp duty brought in by the previous chancellor has been made temporary and will now only last until March 2025.

For businesses, a package of business rates support worth £13.6bn over the next five years has been put in place. This will freeze multipliers, increase relief for retail, hospitality and leisure to 75%, and abolish downward caps.

The government also recommitted to more frequent revaluations of business rates.

Changes to tax will also affect individuals. Thresholds on income tax will be frozen until 2028, meaning many will pay more tax through fiscal drag, while the amount at which the top threshold of tax kicks in has been cut to £125,140.

To support lower earners, the minimum wage will rise to £10.40 an hour, one of its biggest ever increases.

The autumn statement has set out a difficult economic picture for law firms, the justice system and our wider economy.

We will continue to do all we can to support our members through the coming headwinds and to make sure our legal system remains world leading.

Find out more

Cuts to justice spending likely to lead to system failure: Law Society vice president Nick Emmerson sets out the likely consequences of the real-terms justice spending cuts.

How will the autumn statement impact solicitors, firms and clients? Our partner Armstrong Watson explores how you can stay on top of the changes.

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