Chancellor Jeremy Hunt has recently revealed a significant economic plan before the 2024 general election. The core of this autumn statement is a substantial cut in national insurance rates for workers and substantial tax reductions for businesses, touted as the largest in modern British history. While Hunt emphasizes these fiscal changes as a means to boost investment and economic growth, he also addresses the challenges of slow growth and spending cuts.
Here’s a breakdown of the major announcements:
National Insurance Cut:
Reduction of the national insurance rate from 12% to 10%.
Described as the largest tax cut in modern British history.
The average worker is expected to save £450 a year.
Tax Cuts for Self-Employed:
National insurance contributions for the self-employed slashed, Class 2 will be abolished, while the Class 4 rate will be reduced from 9 per cent to 8 per cent from April, benefiting almost 2 million people.
The cut for self-employed individuals is estimated to be worth £350 a year.
Overall Tax Levels:
Despite the announced cuts, overall tax levels are expected to continue rising.
Freeze on the levels at which people start paying tax, leading to more individuals entering the tax system due to inflation (fiscal drag).
Spending on day-to-day items to rise by only 1% a year for the next six years.
Investment to be frozen in cash terms.
Benefits and State Pension:
Confirmation of a rise in benefits and the state pension.
Crackdown on long-term unemployed individuals, with changes to the work capability assessment and potential loss of benefits for those claiming universal credit for 18 months without a good reason.
Measures to Unlock Investment:
Announcement of 110 measures to “unlock investment” in Britain.
Expected support for business spending in the economy by £20bn a year.
Measures include steps to expedite planning approvals, subsidies for manufacturing, and new investment zones.
Confirmation of a permanent extension to “full expensing,” allowing companies to claim tax relief on investments, worth more than £10bn a year.
Updated forecasts from the Office for Budget Responsibility (OBR).
Government aims to get the economy back on track after the challenges posed by the Covid pandemic and energy crisis.
Avoidance of a recession in the current year, with a revised growth forecast of 0.60%.
As the autumn statement concludes, Chancellor Jeremy Hunt’s tax cuts and business incentives paint a picture of economic revival, emphasising the value of hard work. However, the conservative economic outlook, predicting modest growth and constrained spending, raises questions about the sustainability of these fiscal measures. This delicate balance between reducing taxes, encouraging investment, and addressing challenges sets the stage for next year’s general election, where voters will assess promises against fiscal realities.