The Autumn Statement: What Happened and What It Means
24 Nov 2023
The Autumn Statement
The Autumn Statement is an opportunity for the Government to implement fiscal policy changes to reflect their objectives, and respond to economic conditions. This year, inflation-driven wage growth has caused fiscal drag by pushing millions of workers into higher tax brackets, which left the Treasury with £25 billion of extra revenue. As such, cuts to tax rates appealing to the traditional Conservative base were always on the cards for this year’s autumn statement.
Much talk in the preceding weeks surrounded inheritance tax. Following backlash to leaks suggesting that the Autumn Statement would abolish inheritance tax entirely, which is only paid by the wealthiest 4% of citizens, the flagship policy announced by Chancellor Jeremy Hunt was a reduction in national insurance contributions, as well as a range of supply side policies.
This report will break down all of the important announcements, analysing what they mean both for businesses and for the next general election.
What was announced?
- Employee national insurance will be cut from 12% to 10%, and will be expedited to come into effect by the 6th of January. - Full expensing of certain types of investment against tax will be made permanent, providing an immediate tax reduction of 25% of the value of investments made.
- £4.5 billion of new investment to boost key manufacturing industries such as electric cars. - The National Living Wage will rise by almost 10%, reaching £11.44 for over-21 year-olds.
- Alcohol duty will be frozen until August 2024. - Benefits will rise by 6.7%, in line with September’s inflation figures, not the lower October figure as was rumoured.
- Jobseekers Allowance will be reformed such that after 18 months of receiving the benefit, claimants must take mandatory work experience.
- The planning application process will be reformed, meaning a full refund of application fees if local authorities take too long to process proposed developments, and additional funds to tackle the planning backlog.
- The national grid connection process will be reformed, supporting the adoption of electric vehicles and other innovative industries.
- The 75% reduction in business rates will be extended by one year for small retail and hospitality firms. - Business Rates will increase by September’s inflation figure of 6.7% for businesses who do not qualify for a reduction.
- Foreign Direct Investment will receive structural and financial support by improving the Office for Investment’s offer to important foreign investment partners.
Office for Budget Responsibility (OBR) Latest Figures Announcements:
Short-term growth forecasts have been revised up, but medium-term forecasts are lower than in the Spring Budget.
Debt-to-GDP ratio forecasts have improved, likely to peak at 97%.
Inflation forecasts have been downgraded, with inflation expected to average 2.8% over 2024, compared with Spring’s 0.9% estimate.
The unemployment forecast has risen from Spring, expected to peak at 4.6% of the workforce in the second quarter of 2025.
House prices are predicted to fall by 4.7% in 2024.
Autumn statement announcements could bring 78,000 new workers into the workforce.