In the recent Autumn Statement, the Chancellor, Jeremy Hunt, outlined 110 initiatives aimed at economic expansion. This piece will cover the key points relevant to the UK budget and economic strategy.
The backdrop of the 2023 Autumn Statement
The backdrop of the 2023 Autumn Statement is a receding inflation rate, now anticipated to settle at 4.8% for the last quarter, a downward adjustment from the 2.9% previously forecast. The government’s target of 2% inflation is expected to be achieved in the first half of 2025, marking a year’s delay from earlier projections.
The revised forecast for GDP growth in 2023 is modest at 0.6%, a positive swing from the -0.2% predicted last March. Over the next four years, average growth is projected at 1.6%, approximately 0.5% below past estimates. Consequently, the cumulative real growth for 2023-2027 is revised down by 2.4% from the March forecast.
Real household disposable income
The OBR projects real household disposable income to be 3.5% lower than pre-pandemic levels in 2024/25, reflecting a squeeze on living standards. Combined with fixed tax thresholds, inflation has led to a substantial increase in predicted tax revenues. With departmental spending remaining constant in cash terms, this translates into an effective reduction in real spending of more than £19 billion by 2027/28.
Key tax alterations announced include a reduction in National Insurance rates for employed and self-employed individuals, permanent full expensing of company capital expenditures, extended tax incentives for investment zones and freeports, and a continued discount on business rates for the hospitality, retail, and leisure sectors.
National Living Wage
Additional measures encompass a notable increase in the National Living Wage, a freeze on alcohol duty, a full application of the state pension triple lock, and a rise in Universal Credit and other benefits in line with inflation. Pension reforms were also outlined to foster a more integrated market and offer greater investment flexibility.
Efforts to streamline civil services were stated, with plans to reduce their size. Yet, resources will be allocated to HMRC to close tax gaps, potentially bringing in an additional £5 billion. Planning application processes will be accelerated, with refunds issued for local authority delays.
Investments
Investments in apprenticeship schemes and welfare reforms were also detailed, aiming to enhance employment and benefit systems. Significant funding is earmarked for housing development schemes across various cities, alongside a new initiative to address pollution risks that could facilitate the construction of 40,000 homes.
Full Statement
The full Autumn Statement document is available for review for those seeking a comprehensive understanding of the fiscal and economic policies to navigate the UK’s current economic landscape. link
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