Chancellor Jeremy Hunt has today delivered the much-anticipated autumn statement, which sets out the Government’s tax and spending plans for the year ahead.
The Office for Budget Responsibility (OBR) will also publish updated economic forecasts and an assessment of the Government’s financial circumstances for the next five years.
I watched the Chancellor’s speech live and here are the top five key points from the statement:
Business tax
The Chancellor claimed today’s statement included the “largest business tax cut in modern British history.”
He said that the practice of ‘full expensing’ for businesses will be made permanent, allowing businesses to offset investment in things such as new machinery and IT services against tax.
Mr Hunt also said he wants to reform tax for self-employed people.
The Government will abolish the ‘second class’ national insurance contribution system for self-employed workers, which count towards their state pension entitlements, cutting taxes for two million people.
There will be a business rates discount for the hospitality retail and leisure worth £4.3 billion, which will be good news for the tourism sector in Cumbria.
Economic growth
The Chancellor says forecasts from the OBR show the economy will grow by 0.6 per cent this year and 0.7 per cent in 2024.
Mr Hunt said the UK economy is now 1.8 per cent per cent larger than it was before the Covid-19 pandemic.
GDP will grow 1.4 per cent in 2025, 1.9 per cent in 2026, 2 per cent in 2027 and 1.7 per cent in 2028.
Earlier this year, the OBR had forecast the economy would shrink by 0.2 per cent in 2023, before growing by 1.8 per cent in 2024, 2.5 per cent in 2025, 2.1 per cent in 2026 and 1.9 per cent in 2027.
The Chancellor says the forecasts show the Government is on track to deliver its pledges to raise business investment, get more people into work, reduce inflation next year and increase GDP.
Given this may be the last financial statement before a likely General Election in 2024, today’s statement on economic growth is an optimistic assessment based on the forecast from the OBR.
Cut in National Insurance
The main rate of national insurance for employees will be cut from 12 per cent to 10 per cent from 6th January 2024.
It is currently charged at 12 per cent on earnings between £12,571 and £50,271 and two per cent on anything above that.
The Chancellor said that self-employed workers will benefit from savings of £350 a year on average.
The Government may be able to say that they have achieved their aim of eradicating low pay through their national living wage policy, but people working in lower paid jobs may not feel the full benefits of these tax cuts for some time.
Wages and pensions
The Chancellor said he is making the “biggest set of welfare reforms in a decade” and will get 200,000 more people into employment.
People claiming benefits will be required to complete mandatory work experience placements if they do not find a job within 18 months. Benefits for unemployed people will increase by 6.7 per cent but there will be tougher requirements for those claiming unemployment benefit.
The national living wage will increase by more than one pound an hour from April 2024 to £11.44 per hour for people aged 21 and over.
Mr Hunt also said the state pension will be increased by 8.5 per cent.
These measures may well impress voters and Conservative MPs with concerns about the Conservative’s being out of touch with ordinary working people, but following years of decreased investment in public services and healthcare, it will be for voters to decide if the measures are enough to keep Rishi Sunak’s Government in power.
Inflation
Inflation is expected to fall to 2.8 per cent by the end of 2024 according to the OBR, down from 11.1 per cent when Mr Hunt and Rishi Sunak took office in 2022.
Inflation is likely to stay higher for longer and will not drop to the Bank of England’s target of two per cent until 2025, a year later than expected. Higher inflation will also mean interest rates remain high, likely at around four per cent until 2028.
The Government will celebrate the reduction in inflation but still has much to do to achieve economic stability and improve consumer confidence.
