The Chancellor of the Exchequer, Jeremy Hunt, addressed the House of Commons on 22 November 2023 to give his Autumn Statement. He had a lot to say, with 110 measures in the full Autumn Statement.
The main points are summarised below:
- The Office for Budget Responsibility (OBR) expects the economy to grow by 0.6% in 2023 and then by 0.7% in 2024, 1.4% in 2025, 1.9% in 2026, 2% in 2027 and 1.7% in 2028. These forecasts represent a downgrade on the last set of OBR forecasts, which suggested higher growth in 2024 of 1.8%, for example.
- Debt is continuing to fall and the OBR forecasts that it will be 92.8% of GDP in 2028/29.
- Inflation has fallen to 4.6% and it is expected to be 2.8% by the end of 2024, before reaching the target rate of 2% in 2025. This is a longer timeframe than previously thought.
- Benefits will increase by 6.7% next year, in line with the inflation rate in September 2023. This applies to benefits such as Universal Credit.
- There will be £4.5billion of support for manufacturing from 2025-30, which includes the aerospace sector and life sciences. In addition, £500million of funding will be invested over the next two years to support more innovation centres. This is being done with the aim of boosting the UK’s AI capabilities.
- In seeking to reduce the number of adults out of work, the Chancellor announced that if someone claiming benefits has not found employment after 18 months of seeking a job, they will be required to undertake a mandatory work placement. If they do not engage with this process, their benefits will be stopped.
- A tax break for businesses which allows them to offset investment in machinery, IT and equipment against corporation tax is being made permanent.
- Business rate relief is being extended for another year, as is the 75% discount on business rates (up to £110,000) for companies in the retail and hospitality sector.
- Local authorities will be able to recover the full costs of major business planning applications. In return this will be required to meet guaranteed faster timelines and fees will be automatically refunded if a timeline is not met.
- The main employee National Insurance Rate will be cut from 12% to 10% as of 6 January 2024. For someone earning the average salary of £35,000, this will save them an estimated £450 a year.
- New Investment Zones will be developed in the West Midlands, Greater Manchester, the East Midlands and Wrexham & Flintshire. The Chancellor stated that they will generate more than £3billion in private investment and create 65,000 new jobs.
- There will be new devolution deals for a number of areas, including Surrey.
When concluding his Autumn Statement, the Chancellor emphasised the tax breaks being made for businesses and the reduction in National Insurance, saying that “Lower tax means higher growth.”
Commenting on the Autumn Statement, Richard Cook, Senior Director – Economics, said: “The Chancellor is obviously championing the tax cuts announced in the Autumn Statement, however, if you look at the numbers in more detail you will see that we are still faced with the biggest tax burden since the Second World War. The OBR is forecasting that taxes as a share of GDP will hit almost 38% by 2029. Alongside this, the OBR’s latest growth forecasts are a downgrade on the last set of figures. Neither of these points aligns with the “lower tax means higher growth” statement of the Chancellor.
“Falling inflation is obviously going to be very welcome, although interest rates may not come down as quickly as people hope because the 2% inflation target is going to take longer than expected to reach. This could impact on a number of sectors, notably housebuilding.
“The fact we have a growing economy is clearly a positive thing but I’m skeptical as to how balanced this growth is. The North and Midlands are still underperforming compared with the South when you look at regional GDP data and I’m not convinced of the extent to which the announcements in the Autumn Statement will address this.
“The Chancellor’s intention to speed up major business planning applications is welcomed. However, any fees generated by the planned fast-track service must be ring-fenced for the purpose intended – to fund local authority planning departments. It will be important to see the details, particularly around the refund process discussed as the financial risk associated with this could act as a significant deterrent any new powers being used by local planning authorities.”
If you would like to find out more about the contents of this article, please contact us.