News 1/12/2023
Autumn Statement Briefing – 22 November 2023
Summary
This document provides
in the UK Government’s Autumn Statement announced by the Chancellor of the Exchequer, Jeremy Hunt MP.
The Statement was set up in four key chapters, ‘Economic and Fiscal Outlook,’ ‘Reducing Debt,’ Cutting Taxes and Rewarding Work’ and ‘Backing British Business’ and had the distinct feeling of setting up an election campaign due to its strong focus on policy: something unusual for a Chancellors speech.
Economic Outlook
Consumer Prices Index (CPI) inflation has now more than halved from a peak of over 11% in autumn 2022 to 4.6% in October 2023, meaning the Government has met its inflation reduction pledge. The OBR estimates that government decisions at the 2023 Autumn Statement will boost business investment by £14 billion and bring a further 78,000 people into employment by the end of the forecast period.
Underlying debt is expected to fall from 2027-28 and then to 92.8% of GDP in the target year (2028-29). Autumn Statement policies are forecast to increase the economy’s potential output in the medium term by 0.3%. This is in addition to a 0.2% increase to potential GDP resulting from announcements at Spring Budget 2023.
Planning Reform
The Chancellor announced targeted planning reforms and reaffirmed commitments made during his 2022 Autumn Statement. While announcements were not revolutionary, they did move the Government.
back to a strategic vision of planning that was present at the start of 2019 and were likely pushed by the Labour party’s strong national infrastructure focus during their 2023 Party Conference.
Housing
Housing starts and completions are expected to drop considerably in 2024 and the Government appears to be trying to stem that flow by supporting affordable housing programmes and some specific streamlined planning reforms.
Transport
The government is continuing to progress its commitment to deliver East West Rail, with a statutory consultation, due 2024. As part of Network North, £2.5 billion has been committed for a West Yorkshire mass transit system. The business case for a rapid transit bus network in Thamesmead, as part of its vision for a new Docklands 2.0, is to be explored.
With HS2 cancelled, £36 billion of savings will be reallocated to Network North for an ambitious pipeline of alternative transport projects.
An extra £8.3 billion has been made available for road resurfacing across England.
Energy
National Networks and Energy National Policy Statements are expected in the coming months, alongside and extension of the critical national priority designation for nationally significant low-carbon energy projects.
The commission of an Electricity System Operator to produce a Strategic Spatial Energy Plan is welcomed news, alongside reforms to grid connectivity in order to speed up connections, alongside this, new proposals for community benefits with up to £10,000 off electricity bills if infrastructure is installed nearby.
Starting in 2025, a six-year Climate Change Agreement scheme has been reaffirmed and offers
£300 million a year in tax relief in exchange for meeting energy efficiency targets. There will also be a VAT relief expansion available on the installation of energy-saving materials in residential buildings or those used solely for a relevant charitable purpose.
The Government expects to unlock a further 20-30GW of new offshore wind seabed rights by 2030, which will offer great levels of off and onshore civil works.
Taxation
The Chancellor announced some major taxation measures, aimed at backing British business.
Business taxes
Jeremy Hunt announced the permanency of full expensing. Worth over £10bn a year, this tax break will allow businesses to offset investment of qualifying plant machinery, IT, and equipment against corporation tax. The Government has said this will improve capital stock, productivity and drive sustainable growth. For NASC members, this tax break may open opportunities to reinvest in their businesses and could significantly alleviate tax burdens.
The Government is also extending business rate relief for small businesses in a business rates support package worth £4.3bn which includes freezing the small business rates multiplier for the fourth year.
Personal taxation and NICs
The main rate of employee National Insurance Contributions (NICs) will be cut from 12% to 10% from 6 January 2024. This equates to a 2p cut meaning the average worker on £35,400 will receive a tax cut of over £450 next year.
The Chancellor also announced two tax cuts specifically for the self-employed, to be implemented from 6 April 2024. The Government has committed to reducing the main rate of Class 4 self-employed NICs from 9% to 8%, equating to a 1% cut and benefiting around 2 million individuals.
The Government has said it will reform the tax system by abolishing the Class 2 self-employed NICs liability. This means from 6 April 2024 self employed individuals with profits above £12,570 will no longer be required to pay Class 2 NICs, but will continue to receive access to contributory benefits, including the State Pension. Those with profits between £6,725 and £12,570 will continue to get access to these benefits through a National Insurance credit without paying NICs as they do currently.
For employees within NASC member businesses, the reduction in the main rate of employee NICs will translate into an increase in take-home pay. For self-employed NASC members, the changes to two NIC specific to them should allow for more financial freedom within their businesses.
Stamp Duty Land Tax
Extending the Growth Market Exemption, a relief from Stamp Duty (SD) and Stamp Duty Reserve Tax (SDRT), to include smaller, innovative growth markets. It will also increase the threshold for the market capitalisation condition that is used within the exemption from £170 million to £450 million.
Landfill Remediation Pathfinder
The government is launching a £78 million competitive pilot fund to alleviate the cost of landfill tax where it is acting as a barrier to the remediation and redevelopment of contaminated land.
Pensions, Benefits and National Living Wage (NLW)
The State Pension will increase by 8.5% next year, in line with average earnings. It will reach £221 a week from April 2024. The Government has said it is launching a call for evidence on a lifetime provider model which would allow individuals to have contributions paid into their existing pension scheme when they change employer.
The Chancellor announced that working age benefits will rise by 6.7% next year, in line with the inflation rate for September, however for some the rules will be tightened. The government will strengthen the Universal Credit regime to incentivise unemployed claimants to find work. Welfare recipients will be made to undertake a mandatory work placement if they are still looking for a job after 18 months.
From 1 April 2024, the National Living Wage (NLW) will increase by 9.8% to £11.44 with the age threshold lowered from 23 to 21 years old. Young people and apprentices on the National Minimum Wage (NMW) will also see a boost to their wages.
Late Payments
Alongside the publication of the Payment & Cash Flow Review Report and action taken through the Procurement Act, the Government has said it will introduce more stringent payment time requirements for firms budding for large government contracts. From April 2024, firms bidding for government contracts over £5 million will have to demonstrate they pay their own invoices within an average of 55 days, tightening to 45 days in April 2025, and to 30 days in the coming years.
Public Services Spending
In the Autumn Statement, the Chancellor reaffirms the commitments made at the Autumn Statement in 2022, to make available up to £14.1bn for the NHS and adult social care and provide an additional £2bn for schools in both 2023-24 and 2024-25.
The Government has said it will continue to drive forward their Public Sector Productivity Programme. Departmental spending plans for 2022/23 to 2024/25 were first set in the 2021 Spending Review.
Although resource (day to day) spending plans have been repeatedly increased since, they have changed very little between the 2023 Spring Budget and the Autumn Statement.
At the time of the Spring Budget in March 2023, resource spending was forecast to increase across the entire Spending Review period by an average of 3.8% per year. However, following this Autumn Statement, spending will now increase by an average of 2.7% per year.
In his speech, the Chancellor confirmed that the intended path for public spending in the years following the current Spending Review Period had not changed. These plans initially set out in the 2022 Autumn Statement, involve resource spending increasing by 1% per year in real terms and capital spending remaining frozen in cash terms from 2025/26.
This would represent an average increase in resource spending of about £4.1bn per year (in 2023/24 prices) between 2024/25 – 2027/28, and an average decrease in capital spending of £2.4bn per year over the same period.
Education
A down payment of over £600 million over the next two years will give teachers in key shortage academic and technical subjects – who are in the first five years of their career – a payment of up to
£6,000 per year tax free.
Beyond 16-19 education, the Government will invest in employer-based training in England so that adults of all ages can access high quality apprenticeships. £50 million has also been announced to deliver a two-year apprenticeships pilot.
Innovation and Investment Zones
The government is announcing the next set of Investment Zones and has announced that the Greater Manchester Investment Zone will focus on advanced manufacturing and materials, with local partners expect it to help to leverage £1.1 billion in private investment and help to create 32,000 jobs in the region over the next 10 years.
The West Midlands Investment Zone will focus on advanced manufacturing and local partners expect it to help to leverage £2 billion in private investment and help to create 30,000 jobs in the region over the next 10 years.
The East Midlands Investment Zone, with a focus on green industries and advanced manufacturing, is expected by local partners to help to leverage £383 million in private investment and help to create 4,200 jobs in the region over the next 10 years.
Devolution
A Memorandum of Understanding outlining the approach to the single funding settlements which will be implemented at the next Spending Review for the West Midlands and Greater Manchester Combined Authorities. The government is also publishing a new ‘Level 4’ of the devolution framework.
Devolved institutions with a directly elected leader that meet eligibility requirements will be able to draw down from this framework, which delivers deeper powers alongside new scrutiny expectations. The
powers include new levers over local transport, reflecting the substantial progress made towards the National Infrastructure
£80 million has been announced for the expansion of the Levelling Up Partnerships programme to Scotland, for Na h-Eileanan an Iar, Argyll and Bute, Dundee, and the Scottish Borders, and will consider how to extend the programme further.
Over £50 million will support regeneration in places across the UK: Bolsover, the Isles of Scilly, Warrington, North Norfolk, Eden, and Monmouthshire. A reallocation of £20 million from within the Inverness & Highland City Region Deal will fund essential landside infrastructure improvements for the Corran Ferry, subject to agreement through the appropriate Deal governance structures.
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