With an eye to the forthcoming General Election, Chancellor of the Exchequer Jeremy Hunt introduced his Autumn Statement as a “Statement for Growth”. However, the announcement of 110 measures designed to support businesses, cuts to NICs, and increases to the state pension and the minimum wage could not detract from the intensifying burden borne by UK taxpayers.
- The medium-term economic outlook has deteriorated
- The main rate of NICs was cut to 10%
- The ISA system is set to be simplified
With an eye to the forthcoming General Election, Chancellor of the Exchequer Jeremy Hunt introduced his Autumn Statement as a “Statement for Growth” . However, the announcement of 110 measures designed to support businesses, cuts to National Insurance contributions (NICs), and increases to the state pension and the minimum wage could not detract from the intensifying burden borne by UK taxpayers. Meanwhile, with no changes to inheritance tax, no “British ISA”, and no uplift to ISA allowances, the Autumn Statement raised fresh speculation over the timing of the election and over what next year’s Spring Budget might bring.
“The UK’s tax burden is set to increase to a post-WW2 high of 37.7%”
Fiscal drag: the UK’s tax burden is set to increase to a post-WW2 high of 37.7% . Because the Government froze personal taxation thresholds until 2028 in November 2022’s Budget, an additional four million people will become taxpayers by 2028-29; meanwhile, another three million will have to pay the higher rate of 40% and a further 400,000 will have to pay the top rate of 45%. According to the Office for Budget Responsibility (OBR), “living standards … are forecast to be 3.5% lower in 2024/25 than their pre-pandemic level”. Although this is an improvement on previous forecasts, it still represents the largest reduction in real living standards since records began in the 1950s.
Higher for longer: the outlook for inflation has deteriorated since the March Budget. Inflation is expected to ease to 2.8% by the end of next year, subsiding below its target 2% rate during 2025. The OBR upgraded its forecast for economic growth this year, but downgraded its longer-term forecasts. It now expects the UK economy to expand by 0.6% in 2023, 0.7% in 2024, 1.4% in 2025, 1.9% in 2026, 2% in 2027, and 1.7% in 2028. The OBR also warned that the impact of higher interest rates, higher gilt rates, and inflationary pressures will continue to drive up the cost of servicing Government debt until it peaks at £122.5 billion in 2028/29. Debt interest spending is forecast to reach its second-highest level (after 2022/23) since the Second World War.
National Insurance: the Chancellor announced a raft of changes to NICs. The main rate was cut from 12% to 10% from 6 January 2024, while Class 2 NICs – paid by the self-employed with profits over £12,570 – will be scrapped from April 2024. Class 4 NICs will be cut from 9% to 8% from April 2024.
Pensions and the National Living Wage: the State Pension will rise by 8.5% to £221.20 per week from April 2024. The Government is set to launch a consultation on whether employees should have the right to require their employer to pay into a chosen pension pot, potentially allowing savers to have a single pension pot for life. The National Living Wage will rise by 9.8% to £11.44 from April 2024 and the age threshold will be reduced from 23 to 21.
Business & manufacturing: the practice of “full expensing” – allowing companies to deduct the cost of new equipment and machinery from profits – was made permanent. Business rate relief for firms in retail, hospitality and leisure sectors was extended for another year. Elsewhere, the Chancellor announced £4.5 billion of targeted funding to support investing into sectors including digital technology, green industries, clean energy, life sciences, and aerospace, and £500 million over two years to fund Artificial Intelligence (AI) innovation centres.
“It’s time to get Sid investing again”: the Government intends to sell its remaining stake in NatWest by 2026 and will launch a sale of shares to retail investors over the next 12 months.
Reforms to the ISA system: Individual Savings Accounts (ISAs) are set to be simplified, allowing savers to have multiple ISA subscriptions from April 2024 and allowing partial in-year transfers between ISA providers. The ISA reporting system is to be digitalised, and the types of investments available within ISAs were expanded to include Long-Term Asset Funds (LTAFS), open-ended property funds with extended notice periods, and holdings in certain fractional shares. The Chancellor did not announce any increase to current annual ISA allowances or – despite considerable speculation – reveal the introduction of a new “British ISA” (or BRISA).
A mixed reaction: the British Chambers of Commerce (BCC) hailed the Autumn Statement as “a step in the right direction”, hailing “some welcome remedies at a time when businesses of all sizes need certainty and security from the Government in the difficult months ahead”. However, the British Retail Consortium (BRC) warned that the Chancellor had “sold out” retailers and consumers. The Institute for Fiscal Studies (IFS) described it as “an event focused on medium-term growth as well as a pre-election giveaway”, but nevertheless stressed: “Public finances haven’t meaningfully improved. The growth outlook has weakened. Inflation is expected to stay higher for longer.”
