Autumn Statement 2023: on the Hunt for growth
- Shunil Roy-Chaudhuri, Personal Finance and Investment Writer
- 22 November 2023
- 5 mins reading time
Last year’s Autumn Statement was designed to boost economic growth through unfunded tax cuts, but led to the demise of Liz Truss’s premiership. Today’s Autumn Statement from chancellor Jeremy Hunt is also designed to support economic growth, but through more conventional means.
The government has had a relatively high tax take in recent months, reflecting higher wages and inflation at a time when tax bands have remained unchanged. Moreover, inflation has recently fallen, and stood at 4.6 percent in October, creating a more favourable economic backdrop.
This provided Hunt with the opportunity to reduce National Insurance (NI) in the 2024/25 tax year. NI is levied on most employers, employees and self-employed people and the chancellor believes this measure can incentivise working people and thus both reduce taxes and support the economy.
The chancellor brought the NI rate down from 12 percent to 10 percent, with the measure coming into effect on 6 January 2024. And, for the self-employed, he reduced the Class 4 NI rate from 9 percent to 8 percent and abolished Class 2 NI (charged at £3.45 a week). He added that the National Living Wage would rise by 9.8 percent, to £11.44 an hour. But these measures won’t come into effect until April 2024.
Hunt also announced some perhaps more controversial changes. First he is introducing work capability assessments to encourage people unable to go to work due to health conditions to engage in home-working. Second he announced plans to remove benefits from long-term unemployed people who won’t take mandatory job positions. In Hunt’s view, these measures can support both employment and economic growth.
Funding UK manufacturing
The chancellor also announced a £4.5 billion investment in the five years to 2030 to boost British manufacturing. And he highlighted industries where he believes the UK is or could be world leading for government funding. These include automotive, aerospace, life sciences and clean energy.
As part of this approach, Hunt is introducing a ‘growth fund’ in the British Business Bank that could enable UK pension funds to invest in British start-up companies. He also announced measures to speed up business planning applications with local authorities.
Hunt’s measures also include extending 100 percent tax-free write-offs on companies’ spending on machinery and equipment beyond the previous 2024/25 tax-year deadline. The chancellor said this measure is the biggest business tax cut in UK history and added that it will increase annual investment by around £3 billion a year.
Pension changes
Turning now to pensions, the chancellor announced plans enabling employees to choose the pension funds they want to invest in, rather than simply being assigned to their employers’ pension choices. This would enable employees to pay into the same pension fund when they move jobs rather than take out a new pension every time they change role.
Meanwhile the state pension triple lock took account of recent one-off cost-of-living payments in wage packets and will rise by 8.5 percent from April 2024. The triple lock guarantees the state pension goes up by the highest of 2.5 percent, the inflation rate or average earnings growth. Hunt also said state benefits will from April rise in line with the September’s inflation figure of 6.7 percent.
Katie Nutting, Personal Wealth Adviser at Schroders Personal Wealth, pointed out: ‘There had been talk about a change to inheritance tax rules, with many hoping for an increase in the current thresholds. But that didn’t make it on to the agenda this time around.’
The chancellor has sought to use this Autumn Statement to try to boost economic growth. But Hunt announced that, at present, the Office for Budget Responsibility, expects only modest UK economic growth, of 0.7 percent in 2024 and 1.4 percent in 2025.
Steve Mann, Head of Investment Specialists at SPW, said: ‘Share and bond markets took the Autumn Statement in their stride, with little reaction in either. This is in stark contrast to the Autumn Statement during Liz Truss’s tenure.’
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