- Despite things going in the right direction, the Chancellor acknowledged the challenge that is still being presented by high inflation, forecasting that the UK will not meet its 2% target until 2025.
- Economic growth is predicted to be modest over the coming years, gradually increasing from 0.6% in 2023 to 2% by 2027.
- Headline debt is predicted to be lower than first feared – at 94% of GDP – by the end of the current five-year forecast period.
- A new target also aims to increase public sector productivity by at least 0.5% annually.
Tax & National Insurance:
- Perhaps the day’s headline-grabbing announcement was the cut in National Insurance rates for both employed and self-employed people. Firstly, the NI rate paid on earnings of between £12,570 and £50,270 will fall from 12% to 10%. In practice, that means someone earning £35,000 a year will save around £450 annually; it’s a change that the government says will ‘benefit tens of millions of people’ when it comes into force in January next year.
- Furthermore, self-employed individuals will see a reduction in ‘Class 4’ National Insurance contributions – paid on profits between £12,570 and £50,270, dropping from 9% to 8%. That’s on top of the total abolition of Class 2 NICs. Cumulatively, it’s projected that these cuts will save the average self-employed person around £350 annually.
Growth & Investment:
- The Chancellor paid particular attention business investment in today’s speech. Businesses investing in IT, machinery, and equipment can claim a 25% corporation tax credit. And, instead of having to offset the cost against corporation tax over a longer period, eligible firms can now do this all-in-one go. The move serves to stimulate substantial capital investments and is particularly beneficial for manufacturers. It will cost the taxpayer £11bn a year.
- In a move to further incentivise growth, the small business multiplier will remain frozen for another year, complemented by an extended business rates’ discount of 75% for retail, hospitality, and leisure sectors, up to £110,000.
- Strategic manufacturing will receive £4.5 billion of support between 2025 and 2030. This includes £975m for aerospace firms, £520m for life sciences, and £960m for new green industry firms.
- Full expensing is to be made permanent, allowing businesses to write off the full cost of qualifying plant and machinery investments.
- The chancellor said he will also extend financial incentives for Investment Zones and tax reliefs for Freeports from five to ten years, setting up a new £150m Investment Opportunity Fund for the programme.
- And a notable £500 million boost will be afforded to UK artificial intelligence, underlining a commitment to the country’s technological innovation.
Planning & Energy:
- In a bid to streamline business operations, reforms to the planning system will allow for the acceleration of major business applications, further enhanced by faster access to the grid for clean energy businesses. These reforms aim to reduce bureaucracy and enable quicker project rollouts.
- The Chancellor will allow local authorities to recover the full costs of major business planning applications, in return for being required to meet guaranteed faster timelines. If they fail, these fees will be refunded automatically with the application being processed free of charge.
Skills & Employment:
- Earlier in the day, Mr Hunt confirmed the increase in the National Living Wage, which rise to £11.44 per hour, from £10.42 currently. And, for the first time, it will also be extended to 21 and 22-year-olds, marking a significant step towards addressing the issue of lower pay.
- The Work Capability Assessment is to be reformed to reflect the availability of home working after Covid pandemic.
- The government is also setting its sights on employment and skills enhancement, with a £50 million investment aimed at increasing apprenticeships in engineering and other important growth sectors.
- Funding of £1.3 billion is to be made available over the next five years to help people with certain health conditions find jobs.
- There’s also an approach to bolster employment amongst the longer-term unemployed – and clamp down on those who are deemed to be ‘refusing to seek work’. That means, those failing to engage in the job search process for 18 months will be required to participate in mandatory skill-enhancing work placements. Failure to engage with the work process for six months will result in the complete cessation of their case and the benefits they receive.
- Meanwhile, though, Universal Credit and other working-age benefits will rise by 6.7% from April, in line with September’s inflation rate.
- The Chancellor’s pension reforms include the announcement of a consultation on creating a ‘one pot for life’ system, as well as giving legal rights for employees to direct pension contributions to existing schemes. Mr Hunt suggested these reforms would help unlock an additional ‘£1,000 a year in retirement for an average earner saving from the age of 18’.
- Elsewhere, the UK pensions lifeboat fund will become a consolidator of small corporate pension schemes. Under the plans, by 2030 the majority of workplace pension savers would be in funds of £30bn or larger (£200bn by 2040), signalling a major market shift.
- State pension payments are to increase by 8.5%, to £221.20 a week, from April, keeping them in line with average earnings and the triple lock commitment. The triple lock commits the government to raise the state pension by average earnings growth, CPI inflation or 2.5 per cent – whichever is highest.
- Local Housing Allowance rates – which determine the level of housing benefit and Universal Credit people receive to pay rent – will be unfrozen and increased to 30% of local rents.
- Households living close to new pylons and transmission infrastructure will get up to £1,000 a year off their energy bills for a decade.
- The government will also consult on new rules to allow any house to be converted into two flats, provided the exterior remains unchanged.
- The UK will meet its NATO commitment to spend 2% of GDP on defence.
- The rules surrounding ISAs will be overhauled to enable savers to pay into multiple accounts of the same type for the first-time next April. The current £20,000 tax-free allowance will remain unchanged.
- There will be exploration over a potential retail sale of shares in NatWest, of which the government currently owns a 39% stake.
- Duty on hand-rolled tobacco will see an additional 10% increase, although alcohol duty will remain frozen.
Sam Wright is Danbro’s Marketing Manager. He produces regular content and feature articles on our digital and non-digital channels – and social platforms – for the Danbro Group and its subsidiaries, as well as having responsibility for the Company’s internal and external communications.
His background is in Journalism and Creative Writing, having previously contributed to publications such as The Daily Post, The Lancashire Evening Post, and The Blackpool Gazette.
He is a keen swimmer and avid Manchester United fan (but don’t hold that against him), and he lives in Lancashire with his wife, Sarah.