Autumn statement 2023: The good and the bad

by Jonathan Eida, researcher

 

The autumn statement was a mixed bag for taxpayers. Here we set out the good and bad bits from the budget.

 


Five good things:

 

Full expensing tax break for businesses

The Chancellor announced that businesses will be able to deduct the full cost of new machinery and equipment from their profits for tax purposes, whereas previously they had to write it down over a number of years. This will encourage firms to invest and grow in Britain. The OBR predicts this measure will boost investment by £14 billion over their forecast period.

 

National Insurance cut

Workers across the country will celebrate the cuts to national insurance. There were three parts to the national insurance cuts: the main rate of national insurance will be cut from 12 per cent to 10 per cent, class 2 national insurance - paid by self-employed people earning more than £12,570 will be abolished and profits between £12,570 and £50,270 for self employed people will be cut from 9 per cent to 8 per cent. As well as simplifying national insurance, it’s a genuine cut which will leave millions better off.

 

Lower business rate freeze

We’ve written extensively about the problems of business rates and the options for reform. While no reforms were forthcoming, the small business rates multiplier (essentially the rate) was frozen at its current rate.

 

Alcohol duty frozen

The announcement of an alcohol duty freeze is a reason for punters to raise their glasses. The freeze means that the price of alcohol will not rise directly due government action, at least until August. This policy will go some way in ensuring that a drink remains affordable.

 

TME coming down

To bring down the record tax burden sustainably over the long term, the chancellor needs to get serious about spending. Fortunately, there are signs that Hunt may be doing that. Total managed expenditure is expected to fall from 45.1 per cent to 42.7 per cent. The proof, of course, will be in the pudding as to whether the government, or any future government, is actually able to achieve this.

 


Five bad things:

 

Tobacco taxes going up

As if banning smoking for future adults wasn’t enough, the Chancellor couldn’t resist hiking taxes on tobacco yet again. Tobacco duty is already guaranteed to increase by 2 per cent above inflation, but the duty on hand-rolling tobacco will increase by an additional 10 per cent. No one denies the logic of tobacco taxes, in order to mitigate against the serious impact of smoking. But we are well beyond this point - smokers are easily net contributors to the Exchequer. This instead feels far more like a punishment.

 

Nothing on frozen thresholds

While the cut to national insurance is hugely positive, the grim reality is that most taxpayers will still be worse off than if tax thresholds were never frozen. According to the Institute for Fiscal Studies, for those earning full time minimum wage (£20,800 per year), the national insurance cut will put £165 back into their pockets. But this is more than offset by the additional £413 going to the Treasury due to frozen thresholds.

 

Tax burden still heading for a record high

And as a result of these frozen thresholds and a number of other tax rises, the UK is still heading towards yet another record tax burden. By the end of this decade, taxes will reach 37.7 per cent. All measures, however positive, have to be viewed in this light.
Disappointing growth forecasts As Julian Jessop has pointed out, the OBR forecasts for growth aren’t quite as dire as some are presenting. The key reason for the downward revision in growth is that the overall UK economy, and therefore the baseline, has been revised upwards since the March forecast. The economy is actually expected to be slightly bigger by 2028 under the November forecast compared to the March forecast. Despite this, the rates of growth expected are still dismally low, only reaching 2 per cent once in the next five years.

 

Disappointing growth forecasts 

As Julian Jessop has pointed out, the OBR forecasts for growth aren’t quite as dire as some are presenting. The key reason for the downward revision in growth is that the overall UK economy, and therefore the baseline, has been revised upwards since the March forecast. The economy is actually expected to be slightly bigger by 2028 under the November forecast compared to the March forecast. Despite this, the rates of growth expected are still dismally low, only reaching 2 per cent once in the next five years.

 

Hay festival

The Chancellor announced that the Hay Festival will receive £500,000 of extra funding. Is this really a priority…?

 

This website uses cookies to ensure you get the best experience.  More info. Okay