After the Chancellor's Autumn Statement on Wednesday 22nd November, we have a comprehensive list of the key points from the announcement. Of course, not every point on here may relevant to your personal finance, but this should serve to be a helpful summary. If you are a client (or prospective client) and have any further questions about what this could mean for you, please contact us.
1. PERSONAL TAX
• Hunt is aiming to cut the main 12% rate of employee national insurance contributions by two percentage points to 10%. This tax cut should take effect from 6 January 2024
• According to him, this will affect 28 million people (saving someone on the average salary £450)
2. PUBLIC SPENDING
• Government spending on public services will take a “responsible approach” and focus on “tackling waste”
• The Office for Budget Responsibility (OBR) states that the measures should result in a £19bn reduction in spending on public services - after accounting for inflation
3. GROWTH
• Forecasts from the OBR indicate the economy will grow by 0.6% this year and 0.7% next
• Allegedly, it is now 1.8% larger than it was before the Covid-19 pandemic
• GDP is estimated to grow 1.4% in 2025, 1.9% in 2026, 2% in 2027, and 1.7% in 2028
• In March, the OBR had forecast that the economy would shrink by 0.2% in 2023 before growing by 1.8% in 2024, 2.5 % in 2025, 2.1% in 2026, and then 1.9% in 2027
4. INFLATION
• According to the spending watchdog, inflation is expected to fall to 2.8% by the end of 2024. This is down from 11.1% last year when Hunt and PM Rishi Sunak took office
• The spending watchdog now expects inflation to stay “higher for longer” and that it will not drop to the Bank of England’s target of 2% until mid-2025. This is a year later than it expected in March
• The OBR states that higher inflation will keep interest rates elevated. It expects the central bank’s key interest rate to stick at about 4% until 2028, rather than drop to 3% (as it predicted in the spring)
5. WAGES & BENEFITS
• Hunt says he is making the biggest set of welfare reforms in a decade and will get a further 200,000 people into work
• People claiming benefits will face mandatory work experience if they do not find a job within 18 months
• As pre-announced, the “national living wage” will increase by more than a pound an hour from April to £11.44. It will also be extended to 21-year-olds
• Benefits will be increased by 6.7%. Additionally, there will be tougher requirements for those who claim them to look for work
• The state pension will be increased by 8.5%
• Hunt hopes to raise the local housing allowance in a measure worth £800 for some households next year. This allowance has previously been frozen since 2020
6. BORROWING
• Headline debt is to be worth 94% of GDP by the end of the forecast period - lower than the OBR forecast
• In cash terms, the OBR estimates that the budget deficit – the gap between spending and income – is 4.5% of GDP in 2023-24
• Overall, the OBR says that the course for borrowing in the next five years is “little changed” from March - any improvement has been wiped out by the chancellor’s new measures
7. BUSINESS TAX
• Hunt will make so-called full expensing permanent. This should allow businesses to offset investment in items, such as new IT equipment and factory machinery against tax
• The total package of measures will help increase business investment by about 1% of GDP
• Hunt declared his aim to reform taxes paid by self-employed people, and will abolish their “class 2” national insurance contributions (which count towards their state pension entitlements). This could potentially cut taxes for 2 million people. “Class 4” contributions will also be cut by one percentage point
• There will be a business rates discount for hospitality, retail, and leisure worth £4.3bn
8. ECONOMY
• There should be an extra investment of £4.5bn between 2025 and 2030 in manufacturing
• About £1m will go to aerospace companies and businesses that are working on green technologies
The article outlines just some of the details regarding the Autumn Statement of 2023. It does not represent financial advice. If you would like personalised financial advice, please contact a financial adviser.