On Thursday, 17th November, Chancellor of the Exchequer Jeremy Hunt delivered his Autumn Statement in a speech to the House of Commons. His statement comes at a time of significant economic challenge for the UK. A range of factors – including high inflation and steep borrowing costs – have contributed to a considerable gap between the funds the government recieves in revenue and its spending.
In response, Hunt’s proposals aim to prioritise economic stability and ensure that national debt falls as a percentage of gross domestic product (GDP) within five years.
Measures announced
The following measures were outlined during Hunt’s speech:
Personal Taxes
- Income and inheritance tax thresholds will be frozen for another two years—until 2028.
- The dividend allowance will be cut from £2,000 to £1,000 in 2023 and then to £500 from April 2024.
- The annual exempt amount for capital gains tax will be cut from £12,300 to £6,000 in 2023 and then to £3,000 from April 2024.
- The threshold for the 45p additional rate of tax will be cut from £150,000 to £125,140.
Business Taxes
- Windfall tax on major oil and gas producers will be raised to 35% from 25%. Additionally, a new, temporary Energy Generator Levy will be applied to the returns being made by energy generators.
- The employment allowance will be retained at its new, higher level of £5,000 until March 2026.
- Business rates multipliers will be frozen in 2023-24; relief for retail, hospitality and leisure sectors will be extended. Furthermore, additional support will be provided for small businesses. These specific measures amount to a £13.6 tax cut for businesses over the next five years.
Health and Education
- Adult social care will be allocated £2.8 billion in funding over the next two years to help free up hospital beds.
- The NHS budget will increase by an extra £3.3 billion in each of the next two years.
- Core schools’ budgets will increase by an extra £2.3 billion per year from 2023-25.
Overall, Hunt confirmed that public spending will continue to grow, albeit more slowly than the growth in the economy.
Cost-of-Living Support
- The government’s Energy Price Guarantee will increase in April from £2,500 to £3,000.
- New cost-of-living payments will be introduced: £900 to households on means-tested benefits, £300 to pensioner households and £150 to individuals on disability benefits.
- The “national living wage” will rise to £10.42 an hour next year beginning in April (a 9.7% increase).
- Benefits, including Pension Credit, will rise 10.1%, in line with September’s inflation figure.
Impact on the Economy
The government’s Autumn Statement has been independently verified by The Office for Budget Responsibility (OBR), which predicts that inflation will decline to 7.4% by the middle of next year in response to the measures. However, the OBR has cautioned that the UK is already technically in a recession, and the economy is expected to contract 1.4% in 2023.
Conclusion
The proposals set out in the government’s Autumn Statement aim to tackle the cost-of-living crisis and rebuild the economy, focusing on three main pillars: stability, growth and public services. According to Hunt, the plan should “lead to a shallower downturn; lower energy bills; higher long-term growth; and a stronger NHS and education system.”
However, the newly announced measures will have implications for both individuals and businesses. As such, it’s wise to fully understand any potential ramifications by reading the Autumn Statement in full on the government’s website.
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