Hunt’s opening remarks
Jeremy Hunt says the government has taken difficult decisions to put the economy back on track and halve inflation but “the work is not done”. The chancellor says his priorities are to avoid big government spending and high tax, and instead cut taxes and “reward hard work” with 110 “growth measures” for business.
Aletha Adu, political correspondent: The chancellor opens his second autumn statement with a few attempted jabs at the Labour party, saying the government will not give the unions “unaffordable pay offers”, not ban new gas and oil exploration or increase borrowing by £28bn a year. Labour’s £28bn “green prosperity plan” is the party’s biggest single spending commitment; that has already been watered down.
Before he kicked off with economic forecasts, Hunt hoped to create more distance between the Conservatives and Labour by using the moment to express his horror at the Hamas attack in Israel on 7 October and announcing up to £7m a year over the next few years for organisations such as the Holocaust Educational Trust to tackle antisemitism in schools and universities.
Personal tax
Hunt says he will cut the main 12% rate of employee national insurance contributions by two percentage points to 10%.
This tax cut will be take effect from 6 January 2024, the chancellor says.
He says this will affect 28 million people, saving someone on the average salary £450.
Aletha Adu, political correspondent: While the Tories have achieved their manifesto commitment of eradicating low pay by 2024 with its “national living wage” increase, Tory MPs across all sides of the party will be concerned that they have little to say to their constituents on which measures give them immediate financial relief. Hunt’s widely trailed national insurance cut will take effect from January, but frozen tax thresholds the chancellor announced at his first autumn statement last year means the Conservatives will be able to demonstrate their attempts to help working people, but low-earning workers may not feel the full benefits.
Public spending
Hunt says government spending on public services will take a “responsible approach” and focus on “tackling waste”.
The OBR says the measures will result in a £19bn reduction in spending on public services, after accounting for inflation.
Aletha Adu, political correspondent: Hunt said he wanted to create a “more productive state not a bigger one”, as he announced plans to reform public services. But this has left him open to attack from Labour, the unions and ultimately voters who have said in recent polls the Conservatives have left their public services at the brink thanks to years of underfunding.
Growth
The chancellor says forecasts from the Office for Budget Responsibility (OBR) show the economy will grow by 0.6% this year and 0.7% next.
It is now 1.8% larger than it was before the Covid-19 pandemic, according to the official figures, he says.
GDP will then grow 1.4% in 2025, and 1.9% in 2026 and 2% in 2027 and 1.7% in 2028.
In March, the OBR had forecast the economy would shrink by 0.2% in 2023, before growing by 1.8% in 2024, 2.5 % in 2025, 2.1% in 2026 and 1.9% in 2027.
The wider picture of “slower growth from a higher starting point” means that compared with March, the OBR improved its forecast for GDP growth in 2027 by only 0.6%.
Aletha Adu, political correspondent: In what is meant to be an uplifting statement that could be the last before the next general election, Hunt leaned on the Office for Budget Responsibility forecast claiming the 110 measures announced will raise business investment, get more people into work, reduce inflation next year and increase GDP. The chancellor sought to portray the prime minister as getting the job done, in order to charm voters, suggesting Sunak has already ticked off three of his pledges.
Inflation
Inflation is expected to fall to 2.8% by the end of 2024, according to the spending watchdog, down from 11.1% last year when Hunt and Rishi Sunak took office.
The spending watchdog now expects inflation to stay “higher for longer” and that it will not drop to the Bank of England’s target of 2% until mid-2025. This is a year later than it expected in March.
Higher inflation will keep interest rates elevated, the OBR says. It expects the central bank’s key interest rate to stick at about 4% until 2028, rather than drop to 3%, at it predicted in the spring.
Aletha Adu, political correspondent: The Conservatives have already popped the champagne over the fall in inflation rate last week. In an attempt to shut down recent polls that suggest Sunak is seen as less competent on economic affairs than most recent Conservative prime ministers, the chancellor did not lead with the fall in inflation rate but a sharp personal swipe on the shadow chancellor, Rachel Reeves, who has been viewed positively by voters as a politician who is economically competent and responsible, according to recent surveys. Hunt relies on what will become a popular Tory attack line in the run-up to the next election, calling Reeves a “copy and paste” chancellor. “My conference speech was before hers, so all she had to do was a bit of copy and pasting, which I’ve heard she’s good at,” he says.
Wages and benefits
Hunt says he is making the biggest set of welfare reforms in a decade and will get a further 200,000 people into work.
People claiming benefits will face mandatory work experience if they do not find a job within 18 months.
As pre-announced, the “national living wage” will increase by more than a pound an hour from April to £11.44. It will also be extended to 21-year-olds.
Benefits will be increased by 6.7%, and there will be tougher requirements for those who claim them to look for work.
The state pension will be increased by 8.5%.
Hunt says he will raise the local housing allowance, which has been frozen since 2020, in a measure worth £800 for some households next year.
Aletha Adu, political correspondent: The rise in benefits and unfreezing of housing benefits may bring sweet relief to many moderate Tories who were concerned the chancellor’s statement would struggle to shatter claims that the Conservatives are completely out of touch with the struggles of vulnerable people. But the uncertainty placed on these benefits, and the pressure placed on struggling households as a result, is a feeling many Tory MPs fear their constituents will not be able to forget at the ballot box.
Creating more political traps for Labour, Hunt confirmed benefit sanctions that will certainly appease rightwing Tory MPs but concern many who already believe 13 years of Conservative governments have failed to invest in healthcare and public services, increasing the rise in long-term sickness and also destroying the barely there safety net for the most vulnerable.
Borrowing
Hunt says headline debt is to be worth 94% of GDP by the end of the forecast period, lower than forecast by the OBR in March.
In cash terms, the OBR estimates the budget deficit – the gap between spending and income – is 4.5% of GDP in 2023-24.
In its previous forecasts in March, the OBR had estimated borrowing would be 5.1% of GDP or £132bn in cash terms, in 2023-24.
Overall, the OBR says that the course for borrowing in the next five years is “little changed” from March, as any improvement has been wiped out by the chancellor’s new measures.
Aletha Adu, political correspondent: The chancellor said the government had “supported families with rising bills, cut borrowing and halved inflation”. But it has been noted that Hunt may fail to meet his overall target of reducing debt, while persuading voters that the Tories are making long-term decisions for a brighter future, over the next five years if fuel duty is kept frozen.
Business tax
Hunt will make so-called full expensing permanent. This allows businesses to offset investment in items such as new IT equipment and factory machinery against tax.
The chancellor adds that the total package of measures will help increase business investment by about 1% of GDP.
Hunt says he wants to reform taxes paid by self-employed people, and will abolish their “class 2” national insurance contributions, which count towards their state pension entitlements. This will cut taxes for 2 million people, he says. “Class 4” contributions will be cut by one percentage point. Together these will be worth £350 a year.
There will be a business rates discount for hospitality, retail and leisure worth £4.3bn.
Aletha Adu, political correspondent: These tax cuts will be celebrated by Tory MPs in the “red wall” who had urged Hunt to focus on growth and help small businesses that have been forced to pay more tax upfront in a faster pace than expected. The cuts have also allowed the Tories to open another dividing line from Labour as Hunt billed the “full expensing” scheme for businesses introduced in March will become permanent, the chancellor confirmed, calling it the “largest business tax cut in modern British history”.
Economy
The chancellor will invest an extra £4.5bn between 2025 and 2030 in manufacturing.
About £1m will go to aerospace companies and businesses working on green technologies.
Hunt says he will accept recommendations from a review of foreign direct investment into the UK, carried out by the former business minister Lord Harrington.
He says there will be a new “investment zone” in Wrexham, Wales, in an attempt to increase employment in the area. There will be three others in England: in Greater Manchester, and the West and east Midlands.
The chancellor says he will explore options for the sale of some of the government’s stake in NatWest. This will be done through a “retail share offer”.
Aletha Adu, political correspondent: The chancellor’s attempt to bill this statement as one filled with growth measures may struggle to fly very far as Reeves and other opposition parties have continued to highlight the economic failures of previous Conservative governments. A number of Conservative MPs have already noted their fears that the economy’s long-term growth prospects still have a way to go.
