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Autumn Statement 2023: Where is the growth?

Autumn Statement 2023

Jeremy Hunt delivered his Autumn statement to the House of Commons today. The Chancellor announced several economic measures that he believes will help to restore the British economy after a turbulent year.

The statement comes 13 months after Hunt first became the Chancellor following Kwasi Kwarteng’s short stint at 11 Downing Street. This time last year, a recession was predicted for the United Kingdom but the government have narrowly managed to avoid one, something Hunt regards as a sign that his plan is working.

In his statement today, the Chancellor provided an update on the current state of the economy, inflation and forecasts for the future, while also announcing a raft of economic changes that will impact everyone in the country. He called it an “Autumn Statement for a country that has turned a corner. An Autumn Statement for growth.”

State of the economy and borrowing

After consulting the Office for Budget Responsibility (OBR), Hunt announced that headline inflation will drop to 2.8% by the end of 2024. The current rate stands at 4.6%, a figure significantly less than this time last year when the rate was at 11.1%. However, it is still more than double the Bank of England’s inflation target of 2%.

The Chancellor announced in his statement that OBR forecasts suggest that the UK will reach the Bank of England’s 2% target at some point in 2025, which is later than previously anticipated. As a result, the Bank of England aren’t expected to drop interest rates at any point in the near future.

In terms of debt, the OBR’s forecasts suggest that the government will need to borrow more money before things get better. Underlying debt will be 91.6% of GDP next year, 92.7% in 2024-25, and 93.2% in 2026-27. However, by 2028/29, these percentages are expected to start reversing with the forecast showing that debt will be 92.8% of GDP in 2029.

Hunt also announced that the economy will grow by 0.6% this year and then by 0.7% next year. The Chancellor and OBR then anticipate that growth will accelerate from 2025 onwards with GDP forecasted to rise by 1.4% in 2025, 1.9% in 2026 and 2% in 2027.

Although these figures are promising, they are a big cut in previous forecasts for 2024, which were forecast in March to be at 1.8%, and in 2025, 2.5%.

The headline announcements

In total, Hunt made 110 announcements within his Autumn statement. Here are the headline changes that are set to come into play:

  • The main employee National Insurance rate will be cut from 12% to 10% from January 2024. According to the Chancellor, this will mean that someone on £35,000 per year will save over £ 450 a year.
  • Benefits will increase by 6.7% next year to reflect the inflation rate for September.
  • Local Housing Allowance rates will be increased to the 30th percentile of local market rents. According to Hunt, this will give 1.6m households an extra £800 each next year.
  • Confirmation that the government will stand by their commitment to the pensions triple lock.
  • An increase to the full new state pension by 8.5% to £221.20 a week from April 2024.
  • The abolishment of class two National Insurance for self-employed people who earn more than £12,570. This will save the average self-employed person £192 each year.
  • A drop of 1% for self-employed people who pay Class 4 National Insurance on earnings between £12,570 and £50,270.
  • An increase in the National Living Wage from £10.42 to £11.44 per hour from April 2024.
  • An investment of £7m over the next three years to tackle antisemitism in the UK.
  • £500m per year for the next two years to go to artificial intelligence funding.
  • £50m in funding to support apprentices “key growth sectors”.
  • Confirmation that the UK will spend 2% of GDP on defence.
  • Duty on hand-rolling tobacco has been increased by 10% while alcohol duty has been frozen.

Response from the opposition

Following the statement from the Chancellor, Rachel Reeves gave her immediate reaction to the House of Commons as Labour’s Shadow Chancellor. Reeves wasn’t impressed with the statement, stating that the poor growth forecasts “laid bare the full scale of damage done” by the Tories. She added:

“After 13 years of the Conservatives the economy is simply not working, despite all the promises today, working people are still worse off. The cost of living crisis has hit us harder because Tory mismanagement has left us so exposed.

“It is clear today that Labour is the party of economic and fiscal responsibility. Our country cannot afford five more years of the Conservatives. Their time is up.”

Final thought

As we enter a General Election year with Labour well ahead in the polls we are running out of road for Rishi Sunak, his chancellor and perhaps even his new Foreign Secretary to signal what has been achieved after 13 years of Tory Government and what they would do with five more years.

This statement, like the budget before it, is largely dealing with the aftershocks of crises caused or mismanaged by this Government. Brexit, the Pandemic and the Emergency Budget of 2022 all loom over this Government. While the top of Government looks more capable now than in a long time, this Autumn Statement gave us little clue as to where they are going.

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