Lower-than-expected inflation has given Jeremy Hunt some fiscal wiggle room, hence the gamut of crowd-pleasing announcements, especially around National Insurance and other elements of personal taxation.
The mood music coming out of No.10 in recent months has been that an autumn 2024 election was a likely bet, yet, with today’s announcements, Hunt has introduced an element of doubt into proceedings. With those National Insurance changes coming into effect in January next year, the door marked May election has not been definitively closed.
Jeremy Hunt said that the economy is “back on track” and that his package of measures – well over 100 – would help turbocharge that incipient growth. Split across three sections – Reducing Debt, Cutting Taxes and Rewarding Work and Backing British Business – what were the Chancellor’s key announcements?
Business Taxation and Support
Housing and Levelling Up
By Rachel Cairnes, MHP Account Director
Today’s Autumn Statement was one of the few remaining opportunities for the Prime Minister to draw a dividing line with Labour, whilst demonstrating the Conservatives have an election-winning vision for the future of the country.
The 110 measures announced by the Chancellor, Jeremy Hunt, are an attempt to unite the Tory Party and appeal to voters by standing on a traditional Conservative platform. In Hunt’s words, the party believes “big government, high-spending and big tax” will lead to “less growth not more”.
On personal taxes, 27 million people are set to benefit from a 2% reduction in national insurance (NI), from 12% to 10%, and Class 2 NI will be abolished for the self-employed. For business, Hunt announced “the largest business tax cut in modern British history” by making full expensing permanent and extending the 75 per cent business rates discount for hospitality, retail and leisure for another year, at a cost of £4.3 billion.
Hunt had previously argued that the poor state of the public finances made reducing the tax burden ‘virtually impossible’. As inflation fell to 4.6 per cent last week, and with the UK’s ‘improved’ fiscal position (the result of a higher-than-anticipated tax take from squeezed middle-Britain) the government feels it is now in a position to ‘change gear’.
Figures from the Office for National Statistics (ONS) released yesterday, show the UK borrowed more than forecast or expected last month, bringing public sector net borrowing to an eyewatering £14.9 billion – £4.4 billion more than was borrowed in October the year before. Although the Chancellor said government borrowing is set to fall every year for the next five years, questions remain as to how “sustainable” today’s tax cuts will be unless serious attempts are made to reduce government spending.
Although a highly charged issue, welfare reform tends to be popular with the public. Alongside a 6.7 per cent increase in universal credit and other benefits, in line with the inflation rate for September, the government’s Back to Work Plan will remove benefits and increase the monitoring of welfare recipients in an attempt to bring 200,000 people into the workforce.
Other headline announcements include an increase in the state pension by 8.5%, a freeze on alcohol duty until August 2024 and major reform of the planning sector to speed up the processing of applications.
The Conservatives need a lead of at least three points in the polls for them to win a surprise 1992-style election victory. It may be that Hunt’s tax cuts will swing public opinion in the party’s favour, similar to Nigel Lawson’s ‘bribes budget’ of 1987.
Given the immediacy of some of the measures announced, especially around National Insurance, tongues are already wagging that the Conservatives could be teeing up for a spring election.
Yet in the current cost-of-living crisis, the measures are unlikely to reduce the financial burden on households in the immediate term, meaning it’s more likely too little too late.
By Joshua Kaile, MHP Associate Director and former Labour Political Advisor
For all the ‘giveaways’ from the Chancellor today, the headline takeaway is that economic growth has hit a dead end.
The independent Office for Budget Responsibility (OBR) has forecast the UK economy to grow by just 0.7% in 2024, down from 1.8%.
That is a significant blow to the Conservative’s hopes ahead of a General Election and one that Labour will be pouncing on in the days and weeks to come.
The Labour Party has been leading the debate on economic growth ever since Rachel Reeves became Shadow Chancellor. It’s why Labour set as its first mission for Government the target of securing the highest sustained growth in the G7.
Just last week the Shadow Chancellor set out Labour’s plans for a sweeping review of the UK’s pension system in order to unlock billions of pounds of pension funds to invest in UK businesses. The party has also been bold in saying it will ‘get Britain building again’ in order to help restore economic stability and secure the economy.
Labour’s argument has been that economic growth is vital both for the future of the country and for improving living standards for people in all corners of the UK. As the OBR also set out today, living standards are forecast to be 3.5% lower in 2024-25 than pre-pandemic.
This would be the largest reduction since records began in the 1950s. With a General Election set to be fought on economic responsibility and the cost-of-living crisis, the Government will be hoping that today’s announcements put money back in people’s pickets to help them feel better. In contrast, Labour will continue to make the case that households feel worse off after 13 years of Tory-led Governments and the only way to change the economy for the better is to change the Government.
If you would like to get in touch with the team, please contact Head of Public Affairs, Tim Snowball, at [email protected]
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