Autumn Statement 2023 – Jeremy’s National Hunt for growth

The Chancellor delivered his ‘Autumn Statement for growth’ in what could be seen as the Conservative’s first significant move to close Labour’s current 20-point lead in the polls, by moving towards the traditional values of a low tax, high growth, economy.

The headline tax giveaway was a cut in national insurance, for both self-employed and employed individuals. For the self-employed, class 2 national insurance will be abolished, whilst the class 4 main rate will reduce from 9% to 8%, both measures effective from 6 April 2024. For the employed, employee’s class 1 national insurance will reduce by 2%, from 12% to 10%, but this time with effect from 6 January 2024, which will no doubt leave payroll processors and software houses concerned about the speed with which changes will need to be made to systems.

Whilst welcome, it should not be forgotten that the freezing of the personal allowance and basic rate bands, coupled with high wage inflation, has resulted in people paying much higher tax than they would have paid, had those bands increased in line with inflation.

Adding to the stress levels for those providing payroll services was the announcement that employees joining a new employer can request that pension payments are made into their existing personal pension scheme, rather than a company scheme, which could make administration quite unwieldy over time.

From a company tax perspective, the Chancellor announced that ‘full expensing’, where unlimited capital investment in new plant and machinery can be deducted in full for corporation tax purposes, will be made permanent; whereas, when announced in the spring, it was intended to be a temporary measure until 2026.

Again, a welcome extension to the scheme, but for the vast majority of businesses, the annual investment allowance of £1 million per year more than covers intended investment, so only the largest companies will benefit. However, the hope is that this will encourage approximately an extra £3 billion of investment each year, with a consequential benefit to economic growth.

The merger of the two R&D tax relief schemes, which is to go ahead from April 2024, was confirmed as still proceeding, despite many in the profession feeling, for the majority of companies, it is a backward step.

Extensions were announced for business rates reliefs, including the 75% discount for the retail and hospitality sectors and a freeze on the small business multiplier, both for a further year. As an early Christmas present, alcohol duties will be frozen until 1 August 2024.

It was identified that artificial intelligence was at the heart of future growth, so £500 million was set aside for investment in supercomputing centres, whilst further investment zones and freeports were announced in the West Midlands, East Midlands, Greater Manchester and Wrexham, and an extension for the tax benefits of those from five to ten years.

To encourage the unemployed back into work, reforms will be made to the benefits system, ultimately resulting in a complete cut off in benefits if failing to engage in the job seeking process and turning down mandatory work placements after a period of 18 months. Some may see this as draconian, but others as a positive step towards ‘if you can work, you should work’.

The Chancellor had previously announced that tax cuts would only be made when it was sustainable to do so. Given the OBR forecasts for growth are lower than those predicted in March, and debt levels at 94% of GDP (albeit lower than the 100% originally predicted), to many this will be seen as a desperate attempt to bring back traditional Conservative voters.

At the start of Jeremy’s National Hunt for growth, the Autumn Statement felt more Point to Point, than Gold Cup standard, but perhaps he has left more up his sleeve for announcements in March, which will surely see them set out their stall for the final furlong to the General Election.

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