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.

What was announced?

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

• Business rate relief standard multiplier will rise in line with inflation, though the small business multiplier freeze will continue for another year.
• 75% business rate discount for retail, hospitality, and leisure extended for another year.
• Full expensing for business investment made permanent.
• Any company bidding for large government contracts required to show evidence for invoice payment within 45 days, then 30 days.
• All alcohol duty frozen until 1^st August 2024.
• Call for evidence to expand film and high-end TV tax credit.
• New R&D tax relief combining existing schemes and lowering rate for loss-making SMEs from 25% to 19%.

Personal Taxation

• Self-employment taxation reform – Class 2 National Insurance abolished. Entitlement and credit access provided in full.
• Class 4 National Insurance cut from 9% to 8% from April.
• National living wage and national minimum wage hiked.
• Main 12% rate of employee National Insurance for income between £12,570 and £50,270 cut by 2% to 10%. Coming in from 6^th January via legislation.
• Consult on giving savers the legal right to have employers pay into their existing pension pot if they want.

Housing and Levelling Up

• Local authorities can recover full costs for business planning applications if timelines are fast. Otherwise, money is paid back.
• £110 million for nutrient mitigation schemes.
• £32 million for “busting” planning backlog and building in Cambridge, London, and Leeds.
• £450 million for local authority housing fund.
• Increasing local housing allowance. Extra £800 for some households.
• Consult on allowing any house can be converted into 2 flats provided the exterior remains unaffected.
• Freeport & investment zones tax reliefs extended from 5 to 10 years. Opportunity fund announced to encourage more investment.
• 3 new manufacturing investment zones announced in the Midlands.
• 2^nd investment zone in Wales.
• Funding for regeneration projects and small projects in Scotland, Northern Ireland, and Wales.

Education

• £7 million for educational organisations to tackle antisemitism.
• £3 million for an anti-racist security trust.
• £50 million funding into apprenticeships in key growth sectors.

Welfare

• £1.3 billion spent on helping 700,000 people with health conditions find jobs.
• £1.3 billion extra help for unemployed.
• If after 18 months jobseekers haven’t got job, they will be entered into a programme for mandatory job placement. After 6 months the benefits will be stopped if no job. 

Energy

• Government to publish response to Winser Review, setting out how it intends to speed up grid connections to drive energy security.

Technology

• £500 million over 2 years to fund AI innovation centres.
• £5 million to Imperial College to start a Fleming Centre.

Has Hunt pulled a rabbit out the hat?

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.

Labour will remain unmoved by Hunt’s throw of the dice

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]