Chancellor of the Exchequer, Jeremy Hunt, presented his Autumn Statement in the House of Commons to Parliament on 22 November 2023. With much anticipation surrounding Mr Hunt’s pledges in the current uncertain economic climate, many businesses across the UK will be pleased to see a focus on getting people back into work and boosting economic growth.
Mr Hunt presented his Autumn Statement in three parts, by firstly reflecting on The Office for Budget Responsibility (OBR) forecasts to show progress made thus far, before addressing future growth measures and concluding with proposals to ‘make work pay’.
Growth measures for businesses
“The Chancellor announced that he was putting in place 110 measures to help grow the economy. He said that some of these were ‘difficult decisions’, in order to put the economy back on track following the Coronavirus pandemic. The overall message was clear: a commitment to raising business investment, getting people back to work, increasing productivity, increasing public funding, and continuing to reduce inflation. The Chancellor noted that he was committing to a number of supply side reforms to continue ‘backing British business’.
“Much of the Chancellor’s growth plans focused on investment. Mr Hunt committed a total of £4.5 billion to the manufacturing industry up to 2030, including £975 million for aerospace firms and £960 million for new green industry firms. Mr Hunt commented that the UK is the third largest technology sector of the world, and that Artificial Intelligence will be at the heart of future growth. He said that he would commit to spending a further £500 million on AI over the next two years, so that the UK would become ‘an AI powerhouse’.
“Mr Hunt had already announced earlier this month that he was committing to spend almost £1 billion creating 12 investment zones in eight areas across the UK. He confirmed in today’s statement that he would be announcing three further investment zones in England, as well as a second investment region in Wrexham, Wales. Mr Hunt described each of the investment zones as ‘mini Canary Wharfs’.
“It was widely anticipated prior to the Autumn Statement that there would be a number of tax cuts, as the Chancellor had some unexpected ‘fiscal headroom’ following more favourable inflation figures as of late. Mr Hunt did confirm that he would be freezing small business rates relief, and extending 75% business rates discount in the retail, hospitality and leisure industries. There was also a focus on the self-employed, with an announcement that Class 2 National Insurance would be abolished all together.
“Perhaps the most significant of the announcements relating to businesses was in relation to capital expenditure. Earlier this year in March, the Government announced ‘full capital expensing’, whereby companies would be permitted to spend on capital costs, including new equipment, and fully deduct up to £1 million of this spending from taxable profits per year. This measure was introduced in order to encourage capital investment and soften the blow caused by an increase in corporation tax rates, first introduced by now Prime Minister Rishi Sunak as Chancellor in 2021. This measure was due to end in March 2026, however, as anticipated, Mr Hunt announced as part of his Autumn Statement that this would now be a permanent change. He said that this would now be affordable, following the decrease in inflation, borrowing and debt. Mr Hunt concluded by describing as the ‘largest British tax cut in modern history’.
“In concluding his announcement of the growth measures to be implemented, the Chancellor said that the overall impact of these changes was an increase in the UK economy by £20 billion. He described this as the ‘biggest ever boost in modern times’.”
Impact for employers and employees
“With inflation much lower than forecast, higher tax receipts and growth in the economy better than forecast, Chancellor Jeremy Hunt has used his Autumn statement to give back more money to hard working employees and the self-employed.
“The National Living Wage will be increased by 9.8% from £10 per hour to £11.44 per hour and this applies to everyone over 21 years old. This is welcome boost to workers at the younger end of the working age band.
“He has introduced from 6 January 2024 a 2% cut in employee national insurance contributions for those employees earning between £12,570 to £50,270 per annum. This will represent an average saving of £415 per annum for those on a salary of £35,000 per annum.
“Employees will also have an opportunity to request that their employers pay pension contributions into a scheme of their choice rather than into a company scheme, which means that they can carry with them to each employment in their career their own pension fund which they want to grow. It will be interesting to see how employers will make their schemes more attractive. Employer pension contributions are a useful way to give tax free remuneration to employees in the form of pension contributions rather than as taxable cash.
“Finally the self-employed will no longer have to pay class 2 fixed NICs. The class 4 NICs rate will be cut by 1% from 9% to 8% for those earning between £12,500 to £50,270.
“All in all, these measures will be welcomed by workers and employees, going some way to relieving pressure due to the cost of living crisis.”