Chancellor backs business and rewards workers to get Northern Ireland growing
Tax cuts for working people and UK businesses headlined Chancellor Jeremy Hunt’s Autumn Statement.
- Plan for stronger economy will reward hard work, with 800,000 workers in Northern Ireland to benefit from £311 back into their pocket thanks to National Insurance tax cut from January.
- Biggest permanent tax cut in modern UK history for businesses will help them invest for less and boost investment by £20 billion per year over the next decade.
- Government is making work pay with National Living Wage rise to benefit 140,000 in Northern Ireland, representing boost of £1,800 to the average annual earnings of a full-time worker.
- Pubs, breweries and distillers in Northern Ireland backed by freezing alcohol duty for six months to August 2024.
- Public finances in a better position than in March thanks to government action, with borrowing and debt as a share of the economy down on average across the next five years.
- Autumn Statement gets the economy growing, debt falling and helps return inflation to its 2% target – long-term decisions to build a brighter future.
Tax cuts for working people and UK businesses headlined Chancellor Jeremy Hunt’s ‘Autumn Statement for Growth’ today, Wednesday 22 November.
Aimed at building a stronger and more resilient economy, the Chancellor set out a plan to unlock growth and productivity by boosting business investment by £20 billion a year, getting more people into work, and cutting tax for 29 million workers across the UK – the biggest tax cut on work since the 1980s.
Secretary of State for Northern Ireland, Chris Heaton-Harris, said:
“Today’s Autumn Statement provides welcome support for Northern Ireland people on the cost of living, measures for businesses to promote growth, and exciting plans to foster further innovation.
“The National Insurance cut combined with the increase in the National Living Wage will mean a pay boost for nearly one million people in Northern Ireland, while tax measures such as full expensing will benefit local businesses.
“There’s also exciting news that the Belfast region has secured £3.8 million wireless innovation funding to become one of the UK’s 10 5G Innovation Regions.
“Since the 2021 Spending Review, the UK Government has provided an average of £15 billion per year for Northern Ireland public services.
“We will work with the Northern Ireland Executive once power sharing is restored to determine how the UK government can continue supporting Northern Ireland going forward.”
With higher revenues resulting from stronger growth than previously projected and the pledge to halve inflation having been met, the government has stabilised the economy through taking sound decisions. As set out by the Prime Minister this week, the stronger outlook means taxes can now be cut in a serious, responsible way.
To that end, Mr Hunt announced that a 2 percentage cut to Employee National Insurance from 12% to 10% will come into effect from January 2024.
Taxes for the self-employed in Northern Ireland will also be cut and reformed. From April 2024, Class 4 NICs for the self-employed will be reduced from 9% to 8% and no self-employed person will have to pay Class 2 NICs.
Taken together, this is the largest ever cut to employee and self-employed National Insurance – a UK-wide tax cut of £9 billion per year that amounts to a £311 average annual tax cut for 800,000 workers in Northern Ireland, almost immediately improving living standards for hundreds of thousands of people and rewarding hard-work as the government builds an economy for the future.
Businesses will also benefit from the biggest business tax cut in modern British history. As signalled at Spring Budget, the Chancellor announced permanent Full Expensing: Invest for Less for those investing in IT equipment, plant, and machinery.
Full Expensing: Invest for Less is an effective permanent tax cut of £11 billion a year, boosting business investment by £14 billion across the forecast period and helping to grow the economy. With the tax cut now permanent, the UK will continue to have both the lowest headline corporation tax rate in the G7 and the most generous capital allowances in the OECD group of major advanced economies, such as the United States, Japan, South Korea and Germany. Since the introduction of the super deduction – the predecessor to full expensing – in 2021, investment in the UK has grown the fastest in the G7.
To further ensure that work pays, Mr Hunt confirmed that the National Living Wage will increase by nearly 10% to £11.44 an hour from April 2024, the largest ever cash increase.
Measures to help families and businesses include an alcohol duty freeze to 1st August 2024, benefitting pub-goers and industry following common-sense changes of the duty system. Actions today take the government’s total support for the cost-of-living between 2022-25 beyond the £100 billion mark, to an average of £3,700 per household.
As a result of decisions taken today that do not apply UK-wide, the Barnett Formula will provide £185 million to the Northern Ireland Executive over the next two years. Recognising the unique challenges Northern Ireland faces, the UK Government has provided around £7 billion in additional funding to Northern Ireland since 2014, on top of the Barnett-based block grant. The Northern Ireland Budget per person remains around 20% higher than equivalent UK Government spending in other parts of the UK.
Decisions on how the £185 million will be allocated with regard to repaying Reserve claims will be set out in due course, as is routine.
Earlier this year, the UK government agreed the Windsor Framework delivering the smooth flow of trade and protecting Northern Ireland’s place in the Union, providing a good basis for the return of a restored Executive.
The UK government remains attentive to the needs of the people of Northern Ireland in the absence of the Executive, with the Chief Secretary to the Treasury recently granting a request to make available £15 million of reallocated funding to support communities hit by flooding. It was also confirmed today that £3 million of funding will be delivered for the Tackling Paramilitarism Programme, as was announced at Spring Budget.
Accompanying forecasts by the OBR confirm that today’s measures will make the economy permanently bigger, with growth every year of the forecast period. Borrowing and debt as a share of the economy are lower than in Spring this year and next year, with borrowing also lower on average across the forecast by comparison. They also confirm that inflation is expected to return to target in line with the Prime Minister’s economic priorities.
Tax
With inflation halved and debt forecast to fall, Mr Hunt delivered on the government’s commitment to cut taxes – rewarding and incentivising work as part of its long-term plan to grow the economy.
- The main rate of Employee National Insurance will be cut by 2 percentage points from 12% to 10%, coming into effect from January 2024 - delivering the benefit of a tax cut quickly for 27 million workers.
- The combined rate of income tax and National Insurance for employees paying the basic rate of tax will therefore fall from 32% to 30% - the lowest combined basic rate since the 1980s.
- The rate of Class 4 NICs on all earnings between £12,570 and £50,270 will be cut by 1p, from 9% to 8% from April 2024.
- The weekly Class 2 NICs – the flat rate compulsory charge which is currently £3.45 paid by self-employed people earning more than £12,570 - will effectively be abolished, with no-one required to pay from April 2024. Access to contributory benefits will be maintained and those currently paying voluntarily will still be able to do so at the same rate.
- The cuts to Class 4 and Class 2 together amount to a tax cut of £350 a year for the average self-employed person on £28,200, with around 2 million individuals to benefit.
Business
Measures to back British businesses big and small will remove barriers to investment and help to bridge the productivity gap between the UK and its G7 peers – unlocking £20 billion extra business investment per year over the next decade.
- Permanent Full Expensing will create the certainty that businesses need to confidently invest for less. A company can now permanently claim 100% capital allowances on qualifying main rate plant and machinery investments, meaning that for every pound invested its taxes are cut by up to 25p.
- Pension reforms, including through establishing a new Growth Fund within the British Business Bank, will help unlock an extra £75 billion of financing for high-growth companies by 2030 while providing an extra £1,000 a year in retirement for the average earner saving from 18.
- SMEs will be supported with tougher regulation on late payers to improve prompt payments and continued funding for Help to Grow.
- The existing R&D Expenditure Credit and Small and Medium Enterprise Scheme will be merged from April 2024, simplifying the system and boosting innovation in the UK.
- The rate at which loss-making companies are taxed within the merged scheme will be reduced from 25% to 19%, and the threshold for additional support for R&D intensive loss-making SMEs will be lowered to 30%, benefiting a further 5,000 SMEs.
- The Climate Change Agreement Scheme will be extended, giving energy intensive businesses like steel, ceramics and breweries around £300 million of tax relief every year until 2033 to encourage investment in energy efficiency and support the Net Zero transition.
Pay
Mr Hunt set out steps to reward work and help make work pay in recognition of the need to expand the workforce and get those out of work back into work to deliver growth.
- From 1 April 2024, the National Living Wage will increase by 9.8% to £11.44 an hour for eligible workers. For the first time this will include 21- and 22-year-olds. This represents an increase of over £1,800 to the annual earnings of a full-time worker on the NLW and is expected to benefit 140,000 low paid workers in Northern Ireland.
- The government will also substantially increase the National Minimum Wage rates for young people and apprentices: for people aged 18-20 by 14.8% to £8.60 an hour, for 16-17 year olds and apprentices by 21.2% to £6.40 an hour.
Infrastructure and levelling up
The Chancellor unveiled supply-side measures and funding packages to benefit businesses and local communities across Northern Ireland.
- £4.5 billion of funding for UK manufacturers in the high-growth industries of the future, including £960 million earmarked for the Green Industries Growth Accelerator to support clean energy.
- £3.8 million wireless innovation funding confirmed for Belfast region to become one of the UK’s 5G Innovation Regions.
- To prioritise those who want to invest in the UK’s future, the government has accepted in principle the headline recommendations of Lord Harrington’s review into increasing foreign direct investment. This includes additional resource for the Office for Investment, allowing it to deepen its world-class concierge offer to strategically important investors.
- The life sciences will also be supported as one of the Chancellor’s key-growth sectors, with £20 million to speed up the development of new dementia treatments coming as part of the government’s full response to the O’Shaughnessy Review of commercial clinical trials in the UK.