This Autumn Statement was the final opportunity for the Prime Minster to shift the political dial before Christmas. After many ‘resets’, since he took office, his hope was that this tax cutting, sound money update to the House of Commons by the Chancellor would cement the Conservatives as a ‘sensible administrator’ in stark contrast to the Truss mini-budget last year and the borrowing for clean energy projects planned by Rachel Reeves under a potential Labour Government.
It was clear that this was a pre-election statement, with supply side economic reforms and measures to increase productivity taking precedence within the fiscal headroom that the Chancellor had at his disposal. The Chancellor made sure that sound finances were prioritised and that any cuts to taxes were accounted for through welfare cuts.
Attracting £20 billion in business investment over five years.
Full expensing becomes permanent.
£4.5 billion over five years targets strategic manufacturing sectors.
Alcohol duty remains frozen until August 1st, 2023.
An increase in public sector productivity growth by at least 0.5% each year.
Skills development includes £50 million for engineering and growth sector apprenticeships.
Planning reforms offer faster processing timelines for major business applications, backed by a 'prompt service or your money back' approach.
A £320 million plan for Mansion House Reforms aims to drive innovation, providing an extra £1,000 annually for people's pension pots and supporting pension funds in investing in high-growth companies.
A £500 million investment over two years supports innovation centres to position the UK as an AI powerhouse.
For small businesses, measures include reduced invoice deadline regulation to 30 days from 55, and an extended 75% business rates discount for hospitality.
For Workers and Non-workers
The National Living Wage will rise over a pound to £11.44.
National Insurance will decrease by 2% to 10%.
Class two National Insurance for the self-employed is abolished.
Class 4 National Insurance is reduced by 1% to 8%.
If those who can work are not in employment after 12 months, they will have six months to find employment before benefits are removed.
The Chancellor also announced further support to get those with long-term mental health and disability challenges in to employment.
The politics Many industry groups and trade bodies have praised this Statement a ‘step in the right direction’ that also ‘backs British business’. The Federation of Small Business said that full expensing and business rates discounts could be transformative in getting the high street back on its feet. The Confederation of Master Builders however has lamented the Statement for not going far enough on planning reform to stimulate a construction boom. The Institute for Government also took a balanced analysis of the Statement, again emphasising that the Chancellor did what he could with ‘headroom’ that he had.
Despite all of the spin from No.11 however, it is not all good news... with many of the Chancellor’s own party saying the Statement did not have the bells and whistles that were promised, and that the revised outlook on growth and inflation will make the next General Election even more difficult.
Former Minister Jacob Rees-Mogg was among the most vocal critics of the Prime Minster this week, focusing his attention to the Prime Minister’s many ‘resets’ this year. Starting with the Net-Zero rollback, his Conference speech where he cancelled HS2, his reshuffle, his 5 (new) objectives for growth announced this week which got little traction, and the Autumn Statement. Backbenchers such as Rees-Mogg are now anxious that none of this has moved the dial in opinion polling, fearing that the country has very much made up its mind about the Prime Minster.
Many Conservative backbenchers welcomed the tax cuts announced in the Autumn Statement, echoed by the Federation of Small Business. However, the positive headlines were quickly lost once news outlets dug deeper in to the detail. Following the Statement, economists observed that the tax cuts due to come in to force in January 2024 will be offset by sticky inflation at 5% and fiscal drag as a result of tax brackets being kept as they are. The latest migration figures of 765,000 immigrants this year alone also absorbed much of the airspace.
Economic growth forecasts were also revised down over the next five years, and while taxes are coming down in real terms, the cost of living is expected to be continually high until 2025. Despite an initial forecast of a 1.4% recession, economic growth outpaced the Euro area, growing 1.8% larger than pre-pandemic levels. Revised projections indicate a 0.7% growth next year and 1.4% in 2025. Therefore, it is likely that the next General Election will be fought under very trying living standards for the electorate, under a possible backdrop of the Prime Minister having failed four of the five missions that he set himself at the beginning of 2023.
And speaking of elections. The Autumn Statement delivered on Wednesday was the clearest sign yet that a May election could be under consideration. No.10’s election guru has told Conservative MPs to expect an Autumn election, but be ready by May. Additionally, we learned yesterday that No.11 is keen to bring the 2024 budget (which typically take place in March) to February. This budget is likely to be the ‘bobby dazzler’ on taxes that the Government believe voters and business are looking for.