On 22 November, Chancellor Jeremy Hunt will deliver the Autumn Statement. The Autumn Statement will outline the Government’s policies on taxation, spending, borrowing and debt. The Autumn Statement also provides an update on the latest forecasts from the Office for Budget Responsibility (OBR), which is an independent body that monitors public finances.[1]
The Autumn Statement forms an important part of No.10’s relaunch. In recent weeks we have seen the Prime Minister announce policy changes in an attempt to revive his and his party’s poll ratings. The King’s Speech setting out the Government’s legislative programme for the next session of Parliament will take place on 7 November and this is expected to be preceded by a reshuffle. Taken together, these set-piece events are key to the PM’s relaunch and will likely have a very electoral bent to set up the next year of campaigning before the General Election.
Policies that could be announced at the Autumn Statement include:
Tax Cuts
The Chancellor may consider tax cuts if inflation is halved by the end of the year, as promised by the Prime Minister.[2] Jeremy Hunt has been urged by some Tory MPs to cut taxes, despite the Chancellor’s reluctance due to high national debt and economic instability.[3] Cabinet Minister Robert Jenrick suggested tax cuts could happen if inflation halves by year-end, from 10.1% to around 5%.[4] However, worsening public finances leave little room for tax cuts in the Autumn Statement. Reports this week suggest the Chancellor will resist calls for extending the £10 billion tax cut aimed at bolstering corporate investment in the UK. Concerns over the economy have led to a cautious fiscal approach, despite pressure from industry leaders and Conservative MPs for tax reductions. The Government’s emphasis on balancing economic stimulus with fiscal constraints signals a measured approach in the upcoming statement.[5]
First-time buyers
The Government may extend the mortgage guarantee scheme for another year. This scheme permits individuals to secure mortgages on properties valued up to £600,000 with a 5% deposit. Originally slated to terminate in December, it will likely be prolonged for an additional year.[6]
ISAs
The Chancellor is reportedly contemplating a new system that enables individuals to hold both stocks and cash within a single ISA account[7] to simplify and streamline the current ISA account system is under to facilitate easier investment for customers. The Treasury is also purportedly considering making this ISA product the default option for new customers, according to The Telegraph’s report from last month. [8]
Fuel Duty
The Telegraph reports that the Chancellor faces pressure to increase fuel duty, a tax embedded in the cost of petrol, diesel, and other vehicle or heating fuels. Initially slashed by 5p in March 2022, the Treasury has allegedly informed Hunt of the necessity to raise it by at least 2p to recover the annual £5bn loss incurred since the reduction. [9] This adjustment would bring the duty to 55p per litre for petrol and diesel, with VAT exacerbating the impact of any tax increment. Notably, the last fuel duty increase took place in 2011, with Hunt previously linking any decision on maintaining the freeze to the state of public finances.[10]
Stamp Duty and Inheritance Tax
The Government may reduce stamp duty or abolish inheritance tax, as part of a wider tax reform.[11] The Government may reverse the stamp duty cuts that were introduced in September 2022, but not until 31 March 2025. This means that the residential nil-rate threshold will remain at £250,000 until then, instead of going back to £125,000. This could benefit buyers who are planning to purchase a property before that date. Contrary to the Government’s reiterated stance against tax cuts, The Sunday Times revealed discussions among senior ministers regarding potential alterations to inheritance tax (IHT). Currently, IHT stands at 40% for assets exceeding the tax-free threshold of £325,000. One proposal under consideration involves reducing the 40% rate and ultimately eliminating the tax. When questioned about these deliberations, cabinet minister Grant Shapps told Sky News, ‘I think it’s a question, for many people, of aspiration, and people know that there’s something deeply unfair about being taxed all their lives and then being taxed in death as well.’
Pensions
The Treasury is reportedly considering adjustments to the ‘triple lock’ safeguard. This protection, established in 2010, ensures that pensions increase by the higher of September’s inflation, earnings growth (from May to July), or 2.5%. Current projections suggest an 8.5% increase by April 2024. However, the Government might exclude bonuses from the calculation, resulting in a lower wage growth figure of 7.8% and potentially saving £1 billion, according to the Guardian. Modifying the triple lock rule would be contentious, given the Conservative Party’s commitment in their last election manifesto not to interfere with the formula. According to a Sky News report, one way the Government could finance their triple lock commitment is by discontinuing the annual winter fuel allowance for all but the most financially vulnerable pensioners. [12]
Benefits
During his Tory Party conference speech on 2 October, Hunt pledged stricter penalties for benefits claimants who refuse to seek employment actively. He highlighted that approximately 100,000 individuals opt out of the workforce annually for a life dependent on benefits, stating that those unwilling to seek work should not receive the same benefits as those actively pursuing employment. Sky News suggests that specific proposals will be disclosed in the Autumn Statement To create space in the Budget for changes like tax reductions, the Chancellor might consider implementing real-terms reductions to benefits. Typically, benefits increase every April based on the previous September’s inflation rate, which would result in a roughly 7% increase. However, Bloomberg’s report anticipates lower inflation next spring, prompting Hunt to potentially advocate for a reduced raise. Although the Government hasn’t refuted the speculation, as reported by The Guardian, it remains plausible that the Autumn Statement could introduce this measure as a cost-saving strategy.
Overall, the statement is likely to reflect a cautious fiscal approach with the hope that more ‘giveaways’ will be possible in the Spring. While pressure persists for tax cuts and modifications in various areas, the Chancellor seems inclined to exercise prudence in his decision-making process. Potential proposals are likely to be adjustments such as changing the ‘triple lock’ safeguard for pensions to stricter penalties for benefits claimants. Any new announcements must be considered in light of a coming election such as a potential reduction in inheritance tax and the extension of the mortgage guarantee scheme for first-time buyers.
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[1] Gov.uk, ‘Autumn Statement’, November 2022, Link
[2] Which?, ‘Autumn Statement 2023: when is it and what will Jeremy Hunt unveil?’, October 2023, Link
[3] The FT, ‘Jeremy Hunt to defy rightwing Tory MPs by rejecting calls for Budget tax cuts’, January 2023, Link
[4] The BBC, ‘Tax cuts will be considered if inflation falls, cabinet minister says’, October 2023 Link
[5] The Guardian, ‘Hunt to reject calls to make corporate investment tax cut permanent’ October 2023, Link
[6] Which?, ‘Autumn Statement 2023: when is it and what will Jeremy Hunt unveil?’, October 2023, Link
[7] The Telegraph, ‘Savers could get bigger Isa allowance to invest in Britain’, September 2023, Link
[8] The Telegraph, ‘Savers could get bigger Isa allowance to invest in Britain’, September 2023, Link
[9] The Telegraph, ‘Treasury pushes Jeremy Hunt for first fuel duty hike in a decade’ October 2023, Link
[10] Which?, ‘Autumn Statement 2023: when is it and what will Jeremy Hunt unveil?’, October 2023, Link
[11] Mortgage Solutions, ‘Govt considers mortgage guarantee extension and stamp duty cuts – reports’, October 2023, Link
[12] Which?, ‘Autumn Statement 2023: when is it and what will Jeremy Hunt unveil?’, October 2023, Link
