Autumn Statement 2023

Autumn Statement 2023

Autumn Statements are normally about government spending – tax matters are left for the Budget in the Spring.  Not this time.  The Chancellor has announced a cut of employees’ National Insurance contributions from 12% to 10%, and he intends to use emergency legislation to bring it in by January.

This looks like a sign that the government is planning a Spring election.  We’d expected a later election to give time for the economy to improve, but the latest forecast from the Office of Budget Responsibility predicts lower growth next year – just 0.7%, along with a 4.7% fall in house prices.  The Chancellor chose to cut NI rather than tax because he thinks it will increase growth without fuelling inflation.

Ironically it’s inflation that has given Mr Hunt his forecast extra £27 billion in tax receipts by 2028, as increased wages and fixed thresholds have pushed more people into the higher tax brackets.  He’s now giving some of this back – but the OBR warns that even after the changes, the tax burden will be the highest since the war.

NI for the self-employed is being cut too, from 9% to 8%, but not until April, and their flat rate ‘Class 2’ NI contributions are to be abolished.  This is not as easy as it appears, because the Class 2 contributions are what the state pension is based on at the moment, and can be paid voluntarily for years when profits are otherwise too low – the last attempt to get rid of them had to be abandoned.

The other measure to stimulate growth will be that ‘full expensing’ of capital expenditure by businesses will be made permanent.  As it was always planned to run to 2026, only businesses with big long-term investment plans will need to take any action for now.

On the spending side, he’s avoided leaving any pre-election hostages to fortune by uprating pensions and benefits in line with the higher September inflation figures.  The same cannot be said about public spending, but the Chancellor believes he knows which issues resonate most with the voters.

Finally, in echo of the late 1980s, it’s proposed that at least part of the state’s remaining shareholding in the Nat West Bank, about 38%, will be disposed of by a retail offer to small investors.  Is there a new generation of Sids out there?