Autumn statement: Jeremy Hunt looks to cut UK taxes and ‘turbo-charge growth’
Jeremy Hunt will announce 110 measures to boost Britain’s stagnant economy and bow to demands from anxious Tory MPs for tax cuts when he delivers his second autumn statement on Wednesday.
In one of the last set-piece economic events before the general election, the chancellor will pledge to “turbo charge” growth while taking the first steps to cut personal taxes after recent sharp increases.
Hunt is expected to offer a one-year extension to 100% tax breaks for business investment and cut national insurance contributions. Reductions in income tax are thought more likely in the spring, when low-paid workers will also receive the near-10% increase in the minimum wage announced on Tuesday.
The Low Pay Commission – the body that advises the government on the minimum level for wages – said next April’s increase of just over £1 an hour to £11.44 for the ‘“national living wage”’ meant the Conservatives had met their 2019 manifesto commitment to eradicate low pay by 2024.
Hunt replaced Kwasi Kwarteng as chancellor just over a year ago and is expected to tell MPs that difficult decisions – tax increases and public spending cuts – are paying off.
“After a global pandemic and energy crisis, we have taken difficult decisions to put our economy back on track,” Hunt will say. “We have supported families with rising bills, cut borrowing and halved inflation. The economy has grown. Real incomes have risen. Our plan for the British economy is working.
“But the work is not done … Conservatives know that a dynamic economy depends less on the decisions and diktats of ministers than on the energy and enterprise of the British people.”
After repeatedly saying in recent months that the poor state of the public finances rules out tax cuts this autumn, the chancellor has been given extra leeway by forecasts from the independent Office for Budget Responsibility that are less gloomy than feared.
Sunak and Hunt have both signalled in recent days that cuts to personal taxes could be on the table, with the economy “turning a corner” and pressure mounting from Tory MPs to close the gap with Labour before the election.
Laura Trott, Hunt’s new deputy at the Treasury, suggested on Tuesday that the chancellor is likely to cut tax for individuals as well as businesses.
“The economy is in a very different place to where we were a year ago and we can now focus on going for growth, pushing up the growth rate of the economy and cutting taxes for individuals,” she said.
“That is where the focus is. In broad narrative terms this is a big moment for us, for people at home, because inflation has halved. We know how difficult it has been and it will mean important things for the household budget.”
Government sources have suggested that a cut in national insurance is more likely than a cut in the basic rate of income tax, which could increase inflation.
The chancellor is expected to set out a two-stage plan with a focus on business and workers now and signalling further personal tax cuts to come in the spring.
Tory insiders believe he could recommit to Rishi Sunak’s promise from the spring budget in 2022 that the basic rate of income tax will be cut from 20 pence to 19 pence in the pound by 2024.
One minister said: “I’d expect a decision on income tax to be deferred to spring. We’ll need a big tax offer before the next election.”
Hunt is expected to increase benefits by 6.7% in line with inflation figures from September, after initially considering whether to use the lower October figure of 4.6%, which would have saved the government more than £2bn but hit 9m struggling households.
One senior Tory was scathing about the idea that benefits could go up in line with lower figure. “There is no way they could get that past colleagues, they won’t get MPs to vote for a lower increase one year out from an election, in marginal seats,” the MP said. “Get real!”
The government is also expected to increase the state pension by 8.5% in line with total average earnings, rejecting a plan to use a measure that stripped out bonuses.
Such a move would have breached the Conservative manifesto promise on the pensions triple lock.
Hundreds of thousands of people with mobility or mental health problems will be told to look for work that they can do from home or face having their benefits cut by £4,680 a year, as part of a squeeze on benefits.
Rachel Reeves, the shadow chancellor, speaking before the autumn statement, said: “After 13 years of economic failure under the Conservatives, working people are worse off. Prices are still rising in the shops, energy bills are up and mortgage payments are higher after the Conservatives crashed the economy.
“The 25 Tory tax rises since 2019 are the clearest sign of economic failure, with households paying £4,000 more in tax each year than they did in 2010. The Conservatives have become the party of high tax because they are the party of low growth. Nothing the chancellor says or does in his autumn statement can change their appalling record.”
Hunt is expected to say: “In today’s autumn statement for growth, the Conservatives will reject big government, high spending and high tax because we know that leads to less growth, not more.
“Instead we will back British business with 110 growth measures to remove planning red tape, speed up access to the National Grid, support entrepreneurs raising capital, get behind our fastest growing industries, unlock foreign direct investment, boost productivity, reform welfare, level up opportunity to every corner of the country and cut business taxes.”