Jeremy Hunt says the government has taken difficult decisions to put the economy back on track and halve inflation, but “the work is not done”. His priorities are to avoid big government spending and high tax, and instead cut taxes and reward those working hard. He set out 110 “growth measures” in the Autumn Budget.
The main 12% rate of employee national insurance that we currently pay is going to be reduced to 10%. The Chancellor is bringing this tax cut forward to January 2024, whereas his other points will be implemented from April, for the new tax year. This reduction in National Insurance will save someone on the average UK salary of £35,000 around £450 a year.
Jeremy Hunt is making some large welfare reforms – he says they are the biggest in a decade and will bring a further 200,000 people into the workforce. Although he is increasing benefits by 6.7%, the requirements to claim them will be more stringent; those people not having found work within 18 months will have to partake in mandatory work experience and there will be consequences for those that choose not to participate. Additionally, the National Living Wage is increasing to £11.44, and will now also apply to 21-year-olds.
The State Pension was increased in line with the Triple Lock and so will see an increase of 8.5% in April 2024. There was some speculation before the Autumn Statement that this would not happen as it is prohibitively expensive to continue with the Triple Lock, but the Chancellor did not make any changes at this time.
Inflation has fallen significantly over the last year, which Mr Hunt sought to portray as the Prime Minister having completed his pledges. However, the OBR expects inflation to stay ‘higher for longer’ and not to reach the 2% target until 2025. It also expects the central bank’s base interest rate to remain around 4% until 2028.
In better news, the chance of the UK entering a recession is almost negligible, as there has been better than expected GDP growth. However, because there has been no shrinkage, we are now starting from a higher base line and so growth moving forwards is not expected to be as rapid as first thought.
The Chancellor has made full expensing permanent for businesses, meaning that new technological equipment and machinery purchased can have full tax-relief. He claims this will help increase business development by 1% of GDP. For those that are self-employed he also abolished the Class 2 National Insurance contributions and will cut Class 4 contributions by 1%, together this will make a saving of around £350.
With regard to the wider economy, Jeremy Hunt has said he will invest further in manufacturing and green technologies, and create more investment zones to increase job opportunities around the UK. To raise more funds to offset the debt level, the government will also explore options to sell their stake in Natwest, look at further diverse ways to encourage foreign investments in the UK and start an enquiry into how to create a ‘lifetime Pension pot’ which would prevent loss of pension pots when workers move jobs (meaning money would not be lost and sat unclaimed).
