The Chancellor’s Plan; Key takeaways from the Autumn Budget 2023

As the dust settles from the Autumn Budget, Chancellor Hunt’s economic roadmap emerges. Here at AccNet, we are ready to simplify the complexities, providing clarity on the fiscal path ahead.

Chancellor Jeremy Hunt unveiled 110 policies in the Autumn Statement, aiming to foster entrepreneurship, enhance productivity, and ensure fair compensation for labour. This article will take you through the nuances of Hunt’s fiscal blueprint, dissecting promises, tax maneuvers, and economic forecasts.

Hunt’s Opening Gambit
In his opening remarks, Hunt emphasized the government’s commitment to steering the economy back on track and halving inflation. He positions the budget as a testament to difficult decisions, prioritizing tax cuts and fostering a pro-business environment. Amidst political jabs at the Labour party, Hunt outlined “growth measures” designed to reward hard work.

Personal Tax
A headline move in personal tax involves the reduction of the main employee national insurance contribution rate from 12% to 10%, effective from January 6, 2024. This move is expected to impact 28 million people, saving the average salary earner £450. However, concerns linger over frozen tax thresholds, potentially diluting the immediate financial relief for low-earning workers.

Public Spending
Hunt promises a “responsible approach” to government spending on public services, focusing on “tackling waste.” However, critics argue this might leave public services strained, echoing sentiments that the Conservatives have underfunded these vital sectors for years.

Optimism and Forecasts
Building on the Office for Budget Responsibility’s (OBR) forecasts, Hunt paints an optimistic picture of the UK economy. The OBR predicts a 0.6% growth in 2023, with subsequent increases reaching 1.4% in 2025 and 2% in 2027. However, skeptics point out that these forecasts come on the heels of a higher starting point, emphasizing the need for sustained growth.

Inflation… The Rise and Fall
Inflation, a significant concern in recent times, is expected to fall to 2.8% by the end of 2024, a welcome decline from the 11.1% recorded when Hunt and Rishi Sunak assumed office. However, the OBR warns that inflation will linger, influencing interest rates, which are projected to stick around 4% until 2028. This triggers a political skirmish, with the Conservatives celebrating the fall in inflation while deflecting attention from recent polls.

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.

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.

Hunt highlights a lower-than-expected headline debt of 94% of GDP by the end of the forecast period. Despite a lower deficit in cash terms, concerns linger over meeting the overall target of reducing debt, especially if fuel duty remains frozen.

A boost for Entrepreneurs
In a move aimed at bolstering businesses, Hunt makes full expensing permanent, allowing businesses to offset investments against tax. The total package of measures is anticipated to increase business investment by about 1% of GDP. Additionally, reforms in taxes for self-employed individuals, including the abolition of “class 2” national insurance contributions, garner support.

Investing in Growth
The chancellor commits an extra £4.5 billion between 2025 and 2030 in manufacturing, with a focus on aerospace and 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 also said 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. He will also explore options for the sale of some of the government’s stake in NatWest. This will be done through a “retail share offer”.

Pension Reform
Chancellor Hunt reiterated the government’s commitment to the Mansion House Compact, introducing a strategy for consolidating and scaling pension funds. This approach, directing up to 5% of pension capital into unquoted and unlisted companies, hints at a transformative shift for the pension industry. The focus on Alternative Investment Market (AIM) companies as potential beneficiaries emphasizes the potential impact on smaller growth enterprises. As the financial landscape readies itself for this orchestrated consolidation, the dynamics of the pension sector could undergo significant changes, presenting challenges and opportunities for investors.

Now let’s talk notable omissions. What was left unsaid?

Amidst the array of economic policies, the Autumn Budget 2023 left certain anticipated announcements off the table, such as

  • Income tax cuts
  • A British-ISA – an ISA to promote investment in UK-listed stocks
  • Reducing or abolishing Inheritance Tax

These unfulfilled expectations create a backdrop of curiosity, prompting questions about the strategic considerations in the budget drafting process.

Setting the Stage for elections ahead…
With a general election on the horizon, political parties are positioning themselves. Hunt’s attempts to cast the budget in a positive light face scrutiny from the opposition, setting the stage for a fierce battle in the political stage.

In conclusion, the Autumn Budget 2023 carries the weight of economic recovery and political positioning. As the nation navigates through uncertain times, only time will reveal whether Hunt’s promises translate into tangible improvements and whether the budget becomes a pivotal factor in the upcoming election.

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