The UK economy has outperformed expectations this year:
• Inflation is less than half its peak. Responsible decisions taken by the government to limit borrowing have supported the Bank of England in their action to bring inflation down from over 11% last autumn to 4.6% in October. Meeting the PM’s pledge.
• Debt is forecast to fall as a proportion of GDP over the medium term with headroom to debt falling in the target year doubling since Spring.
• Borrowing is lower this year, next year and on average across the forecast period compared to Spring.
• The economy is expected to grow in every year of the forecast period after recovering more strongly from the pandemic than previously thought.
In today’s Autumn Statement I announced measures that will reduce the tax burden by 0.7% of GDP by 2028/29. The key measures I announced include:
Cutting Tax and Rewarding Hard Work
• The largest ever cut to Employees’ National Insurance: a tax cut for 27 million employees, with the average worker on £35,400 receiving an annual tax cut of over £450 per year. The Class 1 main rate of National Insurance contributions for employees will be cut by 2ppts from 12% to 10% from 6 January 2024, ensuring workers keep more of their earnings with the OBR forecasting that 28,000 more people will be in work by 2028/29 as a result.
• A tax cut for over 2 million self-employed individuals: cutting the main rate of Class 4 self-employed National Insurance contributions from 9% to 8%, and abolishing compulsory Class 2 National Insurance contributions for the self-employed with effect from April 2024. These changes mean that the average self-employed person on £28,200 will save £350 per year
• A 9.8% increase in the National Living Wage from 1 April 2024, rising to £11.44 with the age threshold lowered from 23 to 21 years old. This represents an increase of over £1,800 to the annual earnings of a full-time worker on the National Living Wage and is expected to benefit over 2.7 million low paid workers.
• Protecting pensioners and those who can’t work for legitimate reasons by protecting the Triple Lock – increasing the basic state pension, new state pension and pension credit standard minimum guarantee from April 2024 by 8.5% - and uprating working-age benefits by 6.7% in 2024-25 in line with September CPI.
In addition, the government is reforming the welfare system to better support people into work, focusing on the long-term sick and disabled, and long-term unemployed. This includes, via the Back to Work Plan, supported by over £2.5 billion in funding:
• Steps to reform the fit note process and the expansion of the Universal Support programme that matches those with health conditions and disabilities into vacancies, to 100,000 starts.
• Expanding the NHS Talking Therapies programme to reach an additional 384,000 people over the next five years and Individual Placement and Support to help people with mental health conditions to reach an additional 100,000 people over the same time period.
• Implementing stricter sanctions for people not looking for work – by closing the claims of individuals on open-ended sanctions for over six months and solely eligible for the Universal Credit standard allowance, ending their access to additional benefits such as free prescriptions and legal aid; and by rooting out fraud and error.
• Extending the Restart scheme in England and Wales for 2 years – expanding tailored support to people who have been on Universal Credit for 6 months rather than 9 months and helping them tackle barriers to entering employment.
I also announced that the government is:
• Reforming the Work Capability Assessment so that more individuals receive the right support, at the right time, to find work where they can, rather than being automatically deemed unable to work or look for work.
• Increasing the Local Housing Allowance rates to the 30th percentile of local market rents in April 2024, meaning that 1.6 million low-income households will be better off by an average of £800 in 2024-25.
The OBR expect the measures announced at Autumn Statement will support a further 78,000 people into work by 2028-29. This means that the combined impacts of the Spring and Autumn policy measures will increase the number of people in work by around 200,000 by the end of the forecast.
In addition to supporting workers, I delivered an Autumn Statement for Growth through: Backing British Business.
• The biggest business tax cut in modern British history: The UK already has one of the most competitive business tax regimes of any major economy, with the lowest headline rate of corporation tax in the G7. At the Autumn Statement the government is taking this further, introducing permanent Full Expensing. Worth over £10 billion a year, full expensing is the biggest business tax cut in modern British history. The OBR expect this will unlock an additional £14 billion of investment over the forecast period.
• Supporting SMEs with a business rates package worth £4.3 billion: The small business multiplier will be frozen for a fourth consecutive year, and Retail, Hospitality and Leisure (RHL) relief will be extended, ensuring the most vulnerable businesses continue to be supported. This will save the average independent pub nearly £13,000 next year.
• Removing barriers to investment in critical infrastructure by reforming the planning system to speed up approvals and setting out a plan to reduce the time it takes for new projects to connect to the grid. Together these reforms will unlock new commercial developments that will enhance our energy security and help drive the transition to net zero.
• Introducing a new £4.5 billion manufacturing fund – with £2 billion for the automotive industry and £960 million to support clean energy manufacturing, supporting the UK to compete globally, develop strengths in fields where it has a competitive advantage, and drive our transition to Net Zero.
• Levelling Up across the UK – including by extending the Investment Zones programme from five to ten years, announcing the next set of Investment Zones in Greater Manchester, the West Midlands, and the East Midlands, confirming that there will be two Investment Zones in Wales, doubling the flexible funding envelope for each investment zone in England from £80 million to £160 million and by establishing a £150 million Investment Opportunity Fund.
The OBR expects that the measures in the Autumn Statement will deliver an even larger permanent boost to potential GDP than Spring Budget did – making this the policy package the largest that the OBR have ever scored in a medium-term forecast as a result of government policy, boosting potential output by 0.5% by the end of the forecast period.
Full details of this package can be found in the Autumn Statement 2023 document and other associated documents (https://www.gov.uk/government/publications/autumn-statement-2023).