Chancellor's 2023 Autumn Statement announcement

Chancellor Jeremy Hunt today delivered a more eventful Autumn Statement than expected. A 2% cut to national insurance for employees was the headline tax change as Hunt utilised a fiscal windfall of about £26bn.

Jeremy Hunt has announced tax cuts for businesses and workers worth about £20bn in an “autumn statement for growth”. The chancellor said an improved outlook for the public finances meant that he could cut national insurance from 12% to 10% and offer firms a tax cut to increase investment.

Responding to demands from business leaders to support investment and boost productivity, the chancellor announced a permanent extension to “full expensing” – a policy that allows companies to claim tax relief on investment, worth more than £10bn a year.

Among the measures Hunt announced in response to having a more-generous-than-expected fiscal headroom is an increase to the national living wage for 23-year-olds and over to £11.44 per hour.  (An increase of £1.02 from the current rate of £10.42). It will also be extended to 21-year-olds. The government says that’ this is a pay boost worth more than £1,800 a year for a full-time worker. 

State pension payments are to rise by 8.5% to £221.20 a week, worth almost an extra £900 a year. The triple lock will be "honoured in full".

Work to establish a pension pot for life scheme will be begin, providing workers with the option to nominate the fund their employer pays into, which can follow them as they move throughout their working life.

A further £500m will be invested over the next two years to fund further "innovation centres to help make us an AI powerhouse", Mr Hunt said.

In addition, a new, simplified tax relief for research and development will combine the existing R&D Expenditure Credit and SME schemes.

Through that merged scheme, Mr Hunt said he will also cut the rate at which loss-making companies are taxed from 25% to 19%.

The full expensing scheme - currently due to expire in 2026 - will be made permanent. This allows firms to write off the entire cost of spending on new machinery and equipment, while also saving 25p from every pound spent on other types of investment.

The Office for Budget Responsibility (OBR) has forecast inflation will fall from the current 4.6% to 2.8% by the end of next year. It also forecast modest expansion in the economy of 0.6% this year and 0.7% in 2024. Despite the headline cut to national insurance the OBR also insisted the overall tax burden is rising and the real fall in living standards is the deepest since records began.

Summary of the measures

• The main rate of employee national insurance contributions is cut by two percentage points from 12% to 10%. (from 6 January 2024).
• Abolishing class 2 national insurance contributions (NIC) 
• Cutting class 4 NIC.
• A permanent extension of the full expensing capital allowance scheme.
• National living wage increased for 23-year-olds and over to £11.44 per hour.  It will also be extended to 21-year-olds. 
• Freeze all alcohol duty until 1 August 2024.
• Increase state pension by 8.5%.
• Benefits will be increased by 6.7%.
• The work capability assessment will be changed to assume that more of those with physical disabilities are able to work from home.
• Confirmation of the new merged research and development (R&D) scheme.
• Freeports extended for another five years.
• 75% business rate discount for retail, hospitality and leisure extended until 2025.
• Tax relief for visual effects expenditure.
• The local housing allowance has been unfrozen.
• There will be more support to help those who are disabled or sick into work, as widely trailed pre budget.

Regulators

The government is keen to encourage investment and is consulting on an economic regulation framework with the aim of greater private investment. It is also consulting on stronger guidance on regulators ‘Growth Duty’, extending it to cover Ofgem, Ofwat and Ofcom and a steer to the Competition and Markets Authority.

The was also a name check for the Financial Reporting Council (FRC), welcoming its focus on the UK’s corporate governance and stewardship regime to support growth and enhance the UK’s international competitiveness. The government has updated the FRC’s remit to promote competitiveness and growth while enhancing public trust and corporate governance.

What was missing?

Missing from the Autumn Statement was any further news on Stamp Duty Land Tax (SDLT) or inheritance tax. There is much less support for energy bills than last year, with the energy rebate not being repeated.

“It is reassuring to hear the Chancellor credit the contributions of the FRC and the overall corporate governance ecosystem of the UK, for its role in building trust and stability in the economy. Especially after the King’s Speech disappointingly omitted any mention of the long-awaited Audit reforms.” - David Mortimer, Head of External Affairs, CGIUKI