Jeremy Hunt will vow to ‘get Britain growing’ later today as he unveils the country’s ‘biggest ever’ business tax cut and new plans to ease the burden on working families.
Publishing his Autumn Statement on the economy, the Chancellor will try to rebuild the Tories’ reputation as a low-tax party with a targeted package of measures aimed at helping both business and families.
Among the plans set to be announced are a cut in National Insurance that will benefit 28million workers, a £10billion-a-year business tax break and significant rises in both benefits and the state pension.
Elsewhere, the Chancellor is not expected to raise duties on beer, wine and spirits, and pubs and bars are likely to have their 75 per cent business rates holiday extended, The Sun reports.
Mr Hunt is expected to declare that the economy is ‘back on track’ as part of his statement when he takes to the Commons later on Wednesday.
Jeremy Hunt (pictured) will today unveil modern Britain’s ‘biggest ever’ business tax cut as he sets out his new plans to boost the economy and ease the burden on working families
Publishing his Autumn Statement on the economy, the Chancellor (pictured) will try to rebuild the Tories’ reputation as a low-tax party with a targeted package of measures aimed at helping both business and families
The spotlight is on Jeremy Hunt for today’s Autumn Statement, in which he is expected to unveil swingeing tax cuts for both workers and businesses
Mr Hunt pictured preparing for the Autumn Statement with Treasury staff and advisors
Mr Hunt has also signed off an 8.5 per cent increase in the state pension, in line with the so-called ‘triple lock’, increasing the value of the new state pension by £17.33 a week – or more than £900 a year.
What to expect in Jeremy Hunt’s Autumn Statement
Chancellor Jeremy Hunt goes into the autumn statement preparing to cut taxes, boost the economy and – he hopes – salvage the Tories’ chances of seeing off a Labour landslide.
What is the autumn statement?
It is the Chancellor’s main platform for tax and spending announcements outside of the Budget and Mr Hunt will set out his plans in the Commons at around 12.30pm on Wednesday.
What can we expect?
The Treasury has already signalled a series of measures that will be in the speech, including a £320m plan to help unlock pension fund investment for technology and science schemes, reforms to speed up planning for energy infrastructure and cut bills for those living near pylons, a drive to increase public sector productivity and a new ‘back to work’ agenda to get people off welfare and into jobs.
What about taxes?
With the government’s goal of halving inflation now met, ministers can work on reducing the tax burden. Measures are likely to include tax breaks for businesses, but Rishi Sunak has also said he wants to ‘reward hard work’ – hinting at tax cuts for workers.
Can the Government afford tax cuts?
The tax burden is at a 70-year high after the Covid-19 pandemic and the Ukraine war, but national debt is still around 97.8% of gross domestic product (GDP), a measure of the size of the economy, and the Government has borrowed almost £100bn so far this financial year.
But this budget deficit is lower than forecast and Mr Hunt is expected to have some ‘headroom’ in order to meet his ‘fiscal rules’ of having debt falling in five years and for borrowing to be less than 3% of GDP in that year.
How much headroom has he got?
The figure will be disclosed in the Office for Budget Responsibility (OBR) forecasts published alongside the statement, but reports suggest it could be as much as £20 billion, freeing up Mr Hunt to cut taxes in the run-up to the general election next year in an effort to keep the Tories in office.
Good news for the Tories, then?
Not quite. Experts have cast doubt on how much ‘headroom’ there will be, given uncertainty around the figure.
The forecasts which indicate how much headroom there will be are based on Government plans for tax and spending and assumptions about economic growth which could vary wildly over the course of five years.
The plans in March’s Budget suggested a significant squeeze in public spending after the election, which may not be possible to deliver, and included revenues from increases in fuel duty which are likely to be scrapped given the freeze in the rate which has applied since 2011.
Despite the uncertainty, Mr Hunt seems likely to take advantage of the headroom which exists on paper to allow him some space for tax cuts.
The Chancellor will say that ministers are charting a new course on the economy and rejecting ‘big government’ in the wake of the Covid pandemic and a global spike in energy prices, which have driven both Government borrowing and the tax burden to record levels.
‘Conservatives know that a dynamic economy depends less on the decisions and diktats of ministers than on the energy and enterprise of the British people,’ he will say.
‘In today’s Autumn Statement for Growth, the Conservatives will reject big government, high spending and high tax because we know that leads to less growth, not more.’
Treasury sources said today’s package would be targeted at boosting Britain’s flagging economic growth rate.
The biggest ticket item will be a permanent extension of the so-called ‘full expensing’ scheme, which allows firms to offset the cost of capital investment against corporation tax.
Sources said the £10billion-a-year scheme was ‘the biggest business tax cut in modern British history’.
Most of today’s statement will focus on growth, including measures to encourage pension funds to invest in the UK and plans to offer families living near the pylons needed to upgrade the national grid up to £1,000 a year off energy bills.
Mr Hunt predicts the measures will ‘increase business investment in the UK economy by around £20billion a year over the next decade’.
The Sun reports that levies on beer, wine and spirits will be frozen and that a 75 per cent business rates holiday for pubs and bars may be extended, giving publicans a much-needed boost.
The Chancellor is also expected to reduce the rate of national insurance for employees and the self-employed, which would benefit 28million workers, The Times reported last night.
A one percentage point cut would cost £5billion and save those earning £50,000 around £380 a year.
However, with National Insurance thresholds frozen until April 2028, critics have accused the Government of imposing a ‘stealth tax’ on people that will see them paying more NI contributions should wages increase.
Reductions in personal taxation are expected to be modest, with more to follow in March’s Budget.
Treasury Chief Secretary Laura Trott indicated that workers could be in line for a tax cut on Tuesday, telling the BBC’s Today programme the Government would focus on ‘cutting taxes for individuals’.
Mr Hunt will tell MPs: ‘The Conservatives will reject big government, high spending and high tax because we know that leads to less growth, not more.’
With the Bank of England forecasting a stagnant economy in 2024, Mr Hunt will insist his plan can deliver growth and reduce the national debt.
‘After a global pandemic and energy crisis, we have taken difficult decisions to put our economy back on track,’ he will say.
‘We have supported families with rising bills, cut borrowing and halved inflation. The economy has grown. Real incomes have risen.
‘Our plan for the British economy is working. But the work is not done.
‘Conservatives know that a dynamic economy depends less on the decisions and diktats of ministers than on the energy and enterprise of the British people.’
Ministers have ditched plans to squeeze benefit payments, meaning they will rise by 6.7 per cent next year based on the September inflation rate.
There had been suggestions of using the October inflation rate of 4.6 per cent as a baseline for benefit increases – a move that would have saved the government £3bn.
But Mr Hunt will unveil a ‘carrot and stick’ package of measures designed to encourage two million working age people to get a job.
Mr Hunt has also signed off an 8.5 per cent increase in the state pension, in line with the so-called ‘triple lock’, increasing the value of the new state pension by £17.33 a week – or more than £900 a year
The Autumn Statement comes hot on the heels of a hike in the National Living Wage by more than one pound an hour
Borrowing in October was more than the £13.7billion expected by the Office for Budget Responsibility (OBR) watchdog – the first time it has overshot the official forecasts this financial year
Public sector net borrowing stood at £14.9billion last month, £4.4billion more than a year earlier and the highest on record outside of Covid
More polls have painted a bleak picture of the Conservatives’ prospects, with Redfield & Wilton Strategies putting Labour 19 points ahead
The scope for tax cuts was given a boost yesterday after official figures showed borrowing was £16.9billion lower than expected.
Bank governor gives green light to policies
The Bank of England’s governor yesterday effectively gave the green light to tax cuts in today’s Autumn Statement.
Asked whether such a move could stoke inflation, Andrew Bailey told MPs he would ‘wait and see’ what Jeremy Hunt would announce.
But he said he took comfort from the fact that the Office for Budget Responsibility will have run the rule over the Chancellor’s plans.
That contrasts with Liz Truss’s tax-cutting mini-Budget last year when the lack of OBR oversight was seen as a key reason behind the ensuing market chaos.
Mr Bailey made the remarks when pressed by Labour MP Angela Eagle during an appearance before the Commons Treasury committee.
The Office for National Statistics said it stood at £98.3billion for the April to October period – higher than at the same period last year but lower than the £115.2billion forecast by the Office for Budget Responsibility in March.
The news came as the Treasury announced plans to increase the National Living Wage by more than a pound an hour from next April.
The rate – which will also be extended to 21-year-olds for the first time – will rise from £10.42 to £11.44.
National minimum wage for 18 to 20-year-olds will also increase by £1.11 to £8.60 per hour, the Government has said.
Apprentices will have their minimum hourly rates boosted, with an 18-year-old in an industry like construction seeing their minimum hourly pay increase by over 20 per cent, going from £5.28 to £6.40 an hour.
There will also be a drive to get millions of people off benefits and back to work. Earlier this month, we reported on plans to impose tougher sanctions on those who claim unemployment benefits.
The Department for Work and Pensions plans to withdraw free prescriptions and dental treatment from those who refuse to engage with efforts to find them a job.
Across Britain, 1.57million people are in receipt of Jobseekers Allowance, Universal Credit or both – the Chancellor’s plans are expected to target around 1.1million of those, including those with long-term health conditions.
The wealth of tax cuts come as the Tories try to stave off a Labour landslide in the next general election, which could take place in autumn next year.
Polling has consistently put Labour ahead in the polls with a double-digit lead. The most recent YouGov polls earlier this month put Labour 23 percentage points ahead of the Tories on 44 per cent.
Another poll found that 32 per cent of voters believed Sir Keir Starmer would be the best prime minister, versus 22 per cent for Mr Sunak.
And recent polling for the Mail found that Labour was more likely to be thought of as a party of low taxes compared to the Conservatives.