With the economy flatlining and an election looming, Jeremy Hunt announces a bigger-than-expected £20 billion giveaway, including cuts to business tax and National Insurance.
In what might perhaps be the last roll of the dice, the Chancellor of the Exchequer, Jeremy Hunt, promised a fairly wide-ranging set of tax cuts and reforms for business and individuals. With the Treasury now in a better fiscal position compared to the March budget, there must have been pressure from the Prime Minister to offer something to an electorate that, on current polling, they fear losing.
- Freeze on all alcohol duties until August next year – welcome relief to distillers that are losing market during the cost-of-living squeeze.
- Working benefits, including Universal Credit, will increase by 6.7% in 2024 – the higher inflation-proofed estimate of what could have been awarded instead.
- State Pension increases by 8.5% - again, more fiscal largesse from the Chancellor given he could have used a lower inflation adjustment.
- The Office of Budget Responsibility have downgraded UK GDP growth by some margin for next year, from 1.8% (in their March estimate) to 0.7% now. A stagnant labour force post Brexit is clearly impacting their assessment. Given that growth is directed by the size of labour and its productivity, Hunt has only one side of that equation he can try to tweak, and he is trying to increase productivity. But that is the age-old problem across many economies, and any solution remains elusive.
- The 75% discount on business rates for the hospitality sector will continue for another year – a reflection on their beleaguered state as consumers continue to re-trench, but it will come as some relief for companies in this field.
- Big tax breaks for business as capital spending investment shifts to permanent full expensing. The obvious winners will be those upgrading UK networks, be it fibre for digital networks or those in green technologies, such as offshore wind farms. Hunt is clearly trying to induce global flows back into the UK.
- National Insurance rates have been cut from 12% to 10% for employees - the biggest tax effect for individuals in today’s autumn statement. This probably won’t be viewed favourably by inflation hawks (notably Bank of England Governor Andrew Bailey).
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