Hunt pulls his punches as statement falls short of predictionsby
While the pre-match mood music trailed tax cuts in a wide range of areas, at the dispatch box itself the Chancellor delivered measures that primarily tinkered around the edges in an Autumn Statement that was high on volume but low on genuine reform.
The run-up to the 2023 Autumn Statement featured a media blitz including more leaks, interviews and hints than seen before at any previous Budget.
Not only was Chancellor of the Exchequer Jeremy Hunt seen here, there and everywhere but his favourite backseat driver, Rishi Sunak also weighed in explaining his determination to cut taxes but only in return for “hard work”.
In the wake of last year’s disastrous edition, which led to the downfalls of Kwasi Kwarteng and Liz Truss, both Hunt and Sunak were adamant that there should be no unfunded tax cuts.
In this year’s Autumn Statement Hunt promised “the biggest business tax cut in 50 years” — quite a change from the austerity talk of the past year with tax cutting unaffordable and completely off the agenda
Given the expectation of a general election towards the end of 2024, it would seemingly make little sense to give away much-needed cash 12 months before, in gestures that could be inflationary and might well be forgotten long before the big day, rumoured to be around Halloween next year.
Last-minute giveaways inevitably form part of the package of any government seeking re-election, which many felt would culminate in a raft of high-profile tax cuts in next March’s Budget. However, in the week leading up to today’s Autumn Statement, there were suggestions from those in power and others in the know of a plethora of tax-friendly measures in a wide range of areas.
Beyond the rumours, there was one formal announcement a day early. This confirmed that, following recommendations by the Low Pay Commission, the National Living Wage will increase to £11.44 per hour and be extended to 21-year-olds. While welcome news for the low-paid, this change will put a further burden on many struggling companies which will presumably either need to cut staff or pass the increase on to customers.
What did we get in the 'Autumn Statement for Growth'?
In what is almost certain to be his final Autumn Statement, predictably Jeremy Hunt actually ignored or bypassed almost all of the measures that had been bandied around over the previous few days. After all, while tax revenues have been higher than expected, given this government’s phobia about inflation and the backseat driver’s keenness to reward hard work, few really fitted the bill.
If the Chancellor had any doubt about the level of anticipation, on the Radio 4 Today Programme that morning, no fewer than four BBC political and economic commentators had reminded him of the fiscal drag on tax thresholds that would be taking an estimated £50bn out of taxpayers’ pockets per year by 2028. To quote from political editor Chris Mason, “The reality is a tax burden more hefty than it's been for decades”.
So, what did we get in Jeremy Hunt’s “Autumn Statement for Growth”?
The Chancellor promised 110 “growth measures”. For the most part, many were primarily attempts to tinker around the edges, call for evidence or launch consultations.
Mr Hunt led the announcements on taxation with something fairly inconsequential but presumably dear to his heart, a freeze on alcohol duty.
There were a couple of genuinely worthwhile measures that will be valued by beneficiaries.
For businesses, in line with leaks, full expensing of investment in plant and machinery is now to become permanent. Ironically, this could be a double-edged sword, since while many might invest more as a result, others may slow down the process given that there is no longer a tight deadline for making big capital investment decisions.
Individuals will welcome reductions in National Insurance Contributions. For employees, the 12% rate is to be reduced to 10% with effect from the unexpectedly early date of 6 January 2024.
The self-employed, Class 2 National Insurance Contributions, currently £3.54 per week, will no longer be compulsory although those with profits below £6,725 may still wish to make voluntary contributions, while the Class 4 rate is to be cut from 9% to 8%. These changes will not take place until 6 April 2024.
Given that there was no mention, it is assumed that the 2% rate on higher levels of earnings, thresholds and employer’s NIC rates will all remain unchanged.
Since AccountingWEB has long called for a belated beefing up of HMRC and in particular its ability to recover unpaid taxes, it was pleasing to hear that the department is to be given additional resources with the expectation that it will raise at least a relatively modest £5.5bn over the next few years.
One measure that will be welcomed by employees, if it is eventually implemented, is the prospect of being able to consolidate pension funds into a single, transferable pot for life.
Business rates have been a burden for many years and the system badly needs wholesale reform. For the moment, the Chancellor has agreed to freeze the small business multiplier and extend the 75% discount for retail, hospitality and leisure businesses for an additional year.
Capital market reforms might also be of interest to both accountants and clients but regrettably, the headline prospect for relaxations was not immediately supported by any specific details.
Similarly, there is to be a simplification of the R&D tax credit regime but the devil here might well be in the detail and there could be as many losers as winners.
One could argue that the most significant tax measure for the vast majority of listeners was one about which the Chancellor remained silent -- the continued freezing of tax and NIC thresholds.
The big question now is what Jeremy Hunt has held back for that final, pre-election Budget in March.
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