On Wednesday, the Chancellor delivered the Autumn Statement, setting out how the Government will drive growth in the decade ahead, while ensuring borrowing lowers and inflation continues to fall.
In January 2023, the Prime Minister set out his five priorities for government, three of which related to the economy: to halve inflation; grow the economy; and reduce debt. Since then, inflation has halved, the economy has recovered quicker from the Covid-19 pandemic than first thought, and debt is on track to fall.
Thanks to the stability this has brought, the Government is now able to focus on the long-term decisions required to strengthen our economy. To that end, the Autumn Statement centred on five key areas:
- reducing debt;
- cutting tax and rewarding hard work;
- building domestic sustainable energy;
- backing British businesses; and
- delivering world-class education.
It also contained the biggest package of tax cuts to be implemented at a fiscal event since the 1980s.
Key points on the economy:
- Growth is expected to rise by 0.6% this year and 0.7% next year, followed by 1.4% in 2025, 1.9% in 2026, 2% in 2027 and 1.7% in 2028. Revised figures from the ONS now show that the economy is 1.8% larger than pre-pandemic.
- Unemployment is forecast to rise to 4.6% in the middle of 2025 before falling back to its structural rate of 4.1% at the end of the forecast horizon.
- Inflation fell to 4.6% last week and will continue to fall to 2.8% by the end of 2024, and to the 2% target in 2025.
- Underlying debt is forecast to be 91.6% of GDP next year, 92.7% in 2024-25, 93.2% in 2026-27, before declining in the final two years of the forecast to 92.8% in 2028-29.
- Borrowing as a percentage of GDP is forecast to continuing falling in every single year, from 4.5% in 2023-24, to 3.0% in 2024-25, 2.7% in 2025-26, 2.3% in 2026-27, 1.6% in 2027-28 and 1.1% in 2028-29.
Key announcements for our area
- Tax cuts for over two million workers in the East Midlands equating to over £320 a year, ensuring hard work is rewarded.
- National Living Wage increases for 240,000 workers in the East Midlands, ending low pay.
- Business rates cuts for over 14,800 businesses across the East Midlands through Retail, Leisure and Hospitality Relief, helping to support small businesses.
- Local Housing Allowance rises for 41,000 families in the East Midlands, helping those on the lowest income with the cost of housing.
- An extension to the window that Freeports Tax Relief can be claimed in the East Midlands Freeport, encouraging long-term investment in the area.
I hope that the following summary of the Chancellor's announcements, which expands on the above, is helpful to local residents.
Cutting Taxes and Rewarding Hard Work
To achieve this, the Government is:
- Delivering a 9.8% increase to the National Living Wage (NLW) to £11.44 an hour, benefiting 2.7 million workers. For a full-time worker on the NLW, this equates to a boost of over £1,800 a year.
- Cutting the main rate of National Insurance Contributions (Class 1) from 12% to 10% for 27 million working people. Class 1 is paid by employees under State Pension age earning £12,570 or more a year. For the average worker earning £35,000 a year, this equates to a £450 tax cut.
- Abolishing an entire class of National Insurance Contributions (Class 2) and cutting the top rate of National Insurance Contributions (Class 4) from 9% to 8%. Class 2 and 4 are paid by self-employed people earning profits of £12,570 or more a year. From April 2024, no self-employed person will have to pay Class 2 NICs, saving those earning £28,000 a year an average total of around £350.
Combined, these tax cuts combined will benefit hardworking people, with:
- a hard-working family with two earners on the average income £900 better off;
- a senior nurse with five years of experience £600 better off;
- the average police officer over £630 better off;
- a typical junior doctor over £750 better off;
- a typical self-employed plumber over £410 better off; and
- a typical teacher £630 better off.
Tackling Low Pay and Supporting People into Work
To achieve this, the Government is:
- Tackling long-term unemployment by strengthening support for those who want to work whilst toughening sanctions for those who are not looking hard enough for it. These reforms, which apply to existing and new claimants, mean no one will be able to be on unemployment benefits for an extended period, without doing everything they can to find a job. To enforce this, the Government will:
- Toughen sanctions for people not looking for work to highlight that those who can work must engage with the support available or face sanctions.
- Expand Additional Jobcentre Support, testing how intensive support can help claimants into work who remain unemployed or on low earnings after seven weeks into their Universal Credit claim.
- Rollout mandatory work placements for those who have not moved into work by the end of their Restart course.
- Helping those who are long-term sick, but able to work, find jobs by reforming the Work Capability Assessment to reflect greater flexibility and availability of home working after the pandemic. This will only apply to new claimants and
Helping with the Cost of Living
To achieve this, the Government is:
- Maintaining the Triple Lock and boosting pensions by 8.5% to ensure dignity in older age for those who have worked their entire lives. The basic state pension, new state pension and pension credit standard minimum guarantee will be increased by 8.5% in April 2024. Targeted support for those struggling with energy costs will also be provided through schemes such as the Warm Home Discount and the Winter Fuel and Cold Weather payments.
- Increasing Local Housing Allowance rates to cover the lower 30% of local rents. In April 2024, the Local Housing Allowance rate will be raised to support the most vulnerable with housing costs, meaning 1.6 million families will on average be £800 better off in 2024-25. This is something I have been calling for following discussions with Citizens Advice and our local councils.
- Uprating all working age benefits by 6.7%. By September 2023, all working age benefits will be increased in full for 2024-25. This is 3.0 percentage points higher than forecasted earnings for 2024-25 and will help 5.5 million households who receive Universal Credit with an average increase of £470 a year.
- Freezing alcohol duty until August 2024. It would have been normal practice to uprate alcohol duty in line with inflation but, to do so, would have added 3p to the duty of a pint of beer or 18p to a bottle of wine, putting more pressure on the hospitality sector.
Backing British Business
To achieve this, the Government is:
- Cutting business taxes by £11 billion by permanently enabling businesses to offset investments against their tax bills. This is the biggest business tax cut in modern British history and means that, for every pound a business invests, its taxes will be cut by up to 25p. Companies can now permanently claim 100% capital allowances on qualifying main rate plant and machinery investments, which will generate £3 billion of additional business investment each year, and £14 billion over the next five years. This announcement builds on the 2021 introduction of the super-deduction, which has led to the UK now having the fastest investment growth in the G7, and means that the UK is the only G7 nation to have full, permanent business expensing.
- Freezing the business rates multiplier for small businesses for a fourth consecutive year. One million British businesses will benefit from this, and it will mean that an independent shop not benefitting from existing reliefs, with a rateable value of £50,000, will see savings of £1,650 next year.
- Extending Retail, Hospital and Leisure Relief, protecting small businesses in our high streets and town centres. This means that a typical independent pub with a rateable value of £31,600 will get around £11,800 off their final business rates bill. Combined with the small business multiplier being frozen, this equates to £12,800 of support.
- Ending the scourge of late payments, supporting small businesses’ cash flow. A condition will be introduced that any company bidding for large government contracts have to demonstrate that they pay their own invoices within an average of 45 days, which will be reduced further to 30 days in the coming years. This is a positive step forward, but I will continue to make the case for protections for small businesses in this regard.
- Making £4.5 billion available in strategic manufacturing sectors. This will be available to the auto, aerospace, life sciences and clean energy sectors for five years from 2025 to enable the UK to seize growth opportunities through the transition to net zero.
- Extending the window that Freeports Tax Relief can be claimed in the East Midlands Freeport, encouraging long-term investment in the area. The window for claiming relief will be extended from five to ten years to maximise the programme’s impact. This is something I have previously called for having spoken with our freeport about it, as well as Teeside’s Freeport when I visited there as a Member of the Business and Trade Select Committee.
- Creating a new £150 million Investment Opportunity Fund to ensure Investment Zones and Freeports can respond nimbly as investment opportunities arise. This fund will be available over five years.
Infrastructure and Planning
The Government is:
- Reforming our planning system to tackle the delays faced by businesses in building infrastructure. Changes include: cutting consent times for Nationally Significant Infrastructure Projects to two and a half years as soon as possible; introducing plans for a new premium planning service for major applications; enabling guaranteed faster decisions in exchange for a fee and refunds where this is not met; and designating more nationally significant low-carbon energy projects as a critical national priority.
- Investing £110 million in areas affected by ‘nutrient neutrality’ rules. To help build 40,000 homes over five years, £110 million will be given to local planning authorities affected by ‘nutrient neutrality rules’ to deliver their own nutrient off-setting credit markets. Nutrient neutrality constraints are currently affecting over 100,000 homes, with a further 16,000 affected every year.
If you would like to read the Budget documents, they can be found here.
You can watch the Chancellor’s speech here.
If you would like any further information about anything I have mentioned above, please do send me an email at: jane.hunt.mp@parliament.uk
Promoted by Jane Hunt of 18 Pinfold Gate, Loughborough, LE11 1BE