Autumn statement live: Jeremy Hunt cuts employee national insurance from 12% to 10%; OBR downgrades UK growth forecast | Politics
Hunt announces 2 percentage point cut to national insurance, coming into effect from January, worth £450 for average worker
Hunt turns to tax cuts.
He says he promised to only cut taxes when that was affordable, and possible without putting up inflation.
Today the OBR says that is possible, he says.
High taxes disencourage work, he adds, and taking into account national insurance, people pay a 32% marginal tax rate.
National insurance will be cut, he announces.
He is going to cut the main rate for employee national insurance from 12% to 10%. He says 27 million people will benefit.
He says that is worth £450 for someone on average earnings.
Hunt says normally this could come in at the start of the tax year, in April. But instead he will introduce emergency legislation to bring this in from 6 January.
He says the OBR says this will lead to the workforce going up by 94,000.
The Treasury says:
From January employee national insurance contributions will drop from 12% to 10%.
That’s a £450 tax cut for the average worker earning £35,400.
Helping people keep more of the money they earn & making work pay.
Part of our plan to grow the economy.
Key events
Disappointing economic news: the OBR has revised down its estimate of the medium-term potential growth rate of the economy to 1.6%, from 1.8% at the March budget.
The revision is largely driven by a weaker forecast for the average hours an employee will work, which is now forecast to fall rather than remain static.
The OBR says:
This largely reflects our reassessment of the effect of demographic shifts in the composition of the working population toward younger and older age groups who work shorter hours on average.
The TUC say it’s a ‘damning judgement’ on the autumn statement:
OBR’s damning judgement on Chancellor’s “budget for growth”:
“we have revised DOWN our estimate of the medium-term potential GROWTH rate of the economy to 1.6 per cent, from 1.8 per cent in March”. (our emphasis)
— TUC Economics and Social Affairs (@TUCeconomics) November 22, 2023
Small print alert: UK house prices to fall in 2024
UK house prices are forecast to fall by 4.7% next year, the the Office for Budget Responsibility’s new economic and fiscal outlook shows.
That follows an estimated 0.9% rise this year, with the OBR lifting its forecast for mortgage rates over the next few years.
The OBR says:
This would be consistent with the price of the average UK home reaching a low of around £266,000 at its trough in the final quarter of 2024.
All in all, from their high in the fourth quarter of 2022 to their low in the final quarter of 2024, nominal house prices are expected to decline by 7.6%.
As this chart shows, that’s a smaller fall than forecast in March.
The OBR then expects a slow recovery in house prices, but it will take until the second half of 2027 for them to reach their 2022 peak, they estimate.
Reeves says things might look fine to Sunak 10,000 feet up in his helicopter. But on the ground people know the reality is different, she says.
She says 1.6 million families will have to remortage this year.
People are having to pay on average more than £200 a year, she says.
And in Hunt’s constituency the average increase will be £420 a month, she says.
Working people do not have that sort of money hanging around, she says.
Tory economic recklessness is not a thing of the past, she says. People are still paying the price.
She says the Tories voted against an amendment to the king’s speech last week which would have prevented a repeat of the mini-budget horrorshow (by banning fiscal announcments like that without an OBR assessment). They have not learned their lessons, he says.
At the election, the question will be simple. Do people feel better off? Do service work better? Does anything work better? Working people are worse off under the Tories.
Taxes are up, debt is up – and their time is up too, she says.
Sir Nicholas Macpherson, the former top civil servant at the Treasury, has posted that chancellor Hunt is funding his national insurance cut by raising more money through income tax – in a reversal of decades of fiscal policy.
Credit to Mr Hunt though for funding national insurance cut by raising income tax. Turns practice of last 40 years on its head. Benefits workers and young at expense of rentiers, capitalists and pensioners. https://t.co/i2fP2yihOF
— Nick Macpherson (@nickmacpherson2) November 22, 2023
UK tax burden still heading to post-war high
For all the talk of tax-cutting from Jeremy Hunt, the UK’s tax burden is still forecast to increase to a post-war high!
The Office for Budget Responsibility says that the tax changes in this Autumn Statement reduce the tax burden by 0.7% of GDP.
However, that burden rises in every year to a post-war high of 37.7% of GDP by 2028-29.
When is a tax cut not a tax cut?
This chart from OBR shows tax as a per cent of GDP still peaks at same level as projected in March – a record 37.7% of GDP.
OBR: “the tax burden is forecast to reach a post-war high of 37.7 per cent of GDP in 2028-29” pic.twitter.com/zj9aabobYO
— Paul Johnson (@PJTheEconomist) November 22, 2023
The OBR says that income tax increases explain most of the increase in this forecast, rising from 10.2% of GDP this year, to 11.3% in 2028-29.
That is driven by the freezing of income tax thresholds – which means fiscal drag will put more people into higher bands as their nominal wages increase.
The OBR says:
By 2028-29, frozen thresholds result in nearly 4 million additional workers paying income tax, 3 million more moved to the higher rate, and 400,000 more paying the additional rate.
VAT and corporation tax also rise from 6.4% and 3.4% of GDP this year to 6.5% and 3.6% per cent of GDP in 2028-29.
The OBR says this is becaause “consumption shifts back towards standard VAT-rated goods and companies face the full-year effects of the rise in the main corporation tax rate”.
Reeves welcomes the extra money for tackling antisemitism.
She says Hunt calls this an autumn statement for growth. But Labour has led the way on this, she says. She says Hunt’s plan is just a “cover version” of hers.
She says Labour would go further on pension fund reform.
And she says Hunt is copying plans already announced by Labour on planning reform.
She also says Labour said full expensing should be made permanent.
Reeves says some NHS trusts are still using fax machines. The Tories have failed to invest in the health service, she says.
Reeves says, to grow the economy, more people need to be in work.
She says Labour believes that, if people can work, they should work.
It has called for reform of the work capability assessment, she says.
Too many people are out of work because of long-term health isssues, she says.
OBR: Chancellor has spent almost all his windfall
As Jeremy Hunt sits down, the Office for Budget Responsibility releases its assessment of the autumn statement.
And the topline is that chancellor Hunt has received a windfall of £27bn – and spent almost all of it.
That windfall comes because borrowing so far this financial year has been lower than expected, partly because high inflation has lifted tax receipts. But departmental spending budgets are not inflation-linked, so did not automatically rise in response.
The OBR says:
The economy has proved more resilient to the shocks of the pandemic and energy crisis than we anticipated. But inflation has also been more persistent and interest rates higher than in March.
Higher inflation boosts tax revenues but also welfare benefits while higher interest rates push up debt servicing. But because departmental spending is left largely unchanged, this delivers a net fiscal windfall of £27 billion.
The Chancellor spends virtually all of this on a 2p cut in NICs, permanent tax relief for business investment, and further welfare reforms, leaving debt falling by a narrow margin in five years.
Reeves says 177 economies are expected to grow more quickly than the UK over the next few years.
And next year the UK is forecast to have the slowest growth in the G7.
The UK is more world-following than world-beating.
Under Labour, the economy grew by 2% on average every year, she says. Under the Tories growth has been 1.5%, she says.
Labour’s Rachel Reeves says NI cut will ‘not remotely’ compensate for tax increases already imposed by Tories
Rachel Reeves, the shadow chancellor, is speaking now.
She says the government’s plans are not working and people are “still worse off”.
She says she can remember when Rishi Sunak was arguing for an increase in national insurance. Labour opposed that plan then. Now Sunak is implementing a cut – which means he is arguing with himself, she says.
She says the public knows that today’s announcements are about a party wanting to hold on to power.
Ahead of today, the government had implemented tax increases equivalent to a 10% increase in national insurance.
So today’s 2% cut will “not remotely” compensate for those, she says.
Hunt says his decision to lower the main national insurance rate from 12% to 10% will save a worker on the average salary of £35,000 over £450 per year.
The average nurse will save £520, the chancellor says, while a typical police officer would save £630.
Hunt’s final measure a personal tax cut. Employee National Insurance cut by 2% to 10%, affecting 27m people from January. Says it will save a nurse £500 a year. (Barely 18 months since Rishi Sunak increased NI to 13.25% to fund the NHS)
— Paul Kelso (@pkelso) November 22, 2023
Hunt announces 2 percentage point cut to national insurance, coming into effect from January, worth £450 for average worker
Hunt turns to tax cuts.
He says he promised to only cut taxes when that was affordable, and possible without putting up inflation.
Today the OBR says that is possible, he says.
High taxes disencourage work, he adds, and taking into account national insurance, people pay a 32% marginal tax rate.
National insurance will be cut, he announces.
He is going to cut the main rate for employee national insurance from 12% to 10%. He says 27 million people will benefit.
He says that is worth £450 for someone on average earnings.
Hunt says normally this could come in at the start of the tax year, in April. But instead he will introduce emergency legislation to bring this in from 6 January.
He says the OBR says this will lead to the workforce going up by 94,000.
The Treasury says:
From January employee national insurance contributions will drop from 12% to 10%.
That’s a £450 tax cut for the average worker earning £35,400.
Helping people keep more of the money they earn & making work pay.
Part of our plan to grow the economy.
Hunt confirms the increases to the national living wage announced yesterday.
Hunt claims Labour wanted to address poverty by tinkering with tax credits. But his party believes in getting people into work, he says.
Hunt says new welfare support and sanction measures will get 200,000 more people into workforce
Hunt says the government needs to back workers as well as businesses.
He says he wants to increase incentives to work.
He praises Mel Stride, the work and pensions secretary. He says Stride’s reforms build on universal credit. Those measures were opposed by Labour, he says.
He says 30 hours of free childcare for one- and two-year-olds was announced in the spring budget.
Today he is announcing measure for the long-term unemployed, and people who do not work due to sickness or disability.
Under the back-to-work plan, the sick note system will be changed, to assume that people can work. The work capability assessment will be changed. And more support will be offered of people going into work.
The government will ask for something in return, he says. If after 18 months of help, there will be mandatory work experience. And if people do not participate, the government will close the case and stop their benefits.
He says the OBR thinks this will get another 200,000 people into the workforce.
Labour wants to expand the workforce by immigration, he claims. He says his party wants to use workers from Britain.
Hunt says these measure will increase business investment by £20bn a year – almost 1% of GDP.
Hunt announces £11bn ‘full expensing’ tax cut for businesses
Hunt is now on full expensing. (See 10.36am.)
This will cost £11bn a year, he says.
But today it is affordable. Full expensing will be made permanent. It is “the largest business tax cut in modern British history”.
The Treasury says:
NEWS: Due to the success of full expensing we are making it permanent. This means that companies that invest in the UK will reduce their tax by up to 25p for every £1 they spend on plant and machinery.
Shares in NatWest have dropped, after Hunt said he would explore options to sell some of the government’s stake in the bank through a “retail share offer”.
The government is currently the largest shareholder in NatWest, holding 39.39% of its shares.
That stake dates back to the bailout of Royal Bank of Scotland (which rebranded as NatWest) after the 2008 financial crisis.
NatWest’s shares are down 1% at 205p, as City traders anticipate some of the government’s stake hitting the market.
Hunt joked that it was “time to get Sid investing again”, a reference to the 1980s campaign to persuade the public to take part in the privatisation of British Gas, as the Thatcher government flogged off much of the UK’s “family silver”.
Hunt announces tax cuts for self-employed worth £350 per year
Hunt says he is abolishing class 2 national insurance, which is paid by the self-employed. This will save them £192 per year.
Nearly 2 million self-employed people will benefit, he says.
And he says the self-employed also pay class 4 national insurance at 9%. That will go down to 8%.
Taken together, these measures will save self-employed workers £350.
