Chancellor backs business and rewards workers to get Wales growing
Tax cuts for working people and British business headlined Chancellor Jeremy Hunt’s ‘Autumn Statement for Growth’ today, Wednesday 22 November.
Autumn Statement Press Notice
- Plan for stronger economy will reward hard work, with 1.2 million workers in Wales to benefit from £324 back into their pocket thanks to National Insurance tax cut from January.
- Biggest permanent tax cut in modern British history for businesses will help them invest for less and boost investment by £20 billion per year over the next decade.
- Triple lock maintained for pensioners, benefits to rise in line with inflation and Local Housing Allowance increased to continue supporting families with the cost-of-living.
- Government is making work pay. National Living Wage rise to benefit 130,000 in Wales, representing boost of £1,800 to the average annual earnings of a full-time worker, and the Back to Work Plan will help over a million people start, stay, and succeed in work while ensuring tougher consequences for those choosing not to.
- Great British pubs, breweries and distillers 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 British business 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.
Welsh Secretary David TC Davies said:
This is a hugely ambitious Autumn Statement which puts more money in the pockets of over a million working people across Wales with cuts to National Insurance and another increase to the National Living Wage.
As we grow the economy, I’m delighted to see substantial direct UK Government investment in Wales. The two new £160 million Investment Zones in north-east and south-east Wales and an ambitious commitment to floating offshore wind will encourage business and create jobs, while £5 million for transport links in Monmouthshire and £500,000 to support the Hay Festival are important investments in those communities.
There will also be an additional £305 million in Barnett Consequentials for the Welsh Government, on top of its record block grant, to spend on devolved responsibilities like health and education.
This all comes on top of £111 million in levelling up funding announced earlier this week seven Welsh projects which will transform local areas and shows that the UK Government is delivering for people across Wales.
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 Wales 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 £324 average annual tax cut for 1.2 million workers in Wales, almost immediately improving living standards for over a million 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. The Chancellor also reinforced the new £2.5 billion Back to Work Plan for those with long-term health conditions, disabilities and difficulties finding employment, which includes tough new sanctions for those who can work but choose not to.
The Chancellor also announced that the government will honour its commitment to the triple lock in full, with the state pension to increase by 8.5% in April in what is the second biggest ever cash increase. Universal Credit and other working age benefits will be boosted by 6.7% in April, in line with September’s inflation figure as is convention.
Further action to help families includes increasing the Local Housing Allowance rate to cover the lowest 30% of rents from April – benefiting 1.6 million households with an average gain of £800 in 2024/25 - and an alcohol duty freeze to 1st August 2024, following common-sense changes of the duty system made possible by Brexit. Measures 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.
Many of today’s decisions on tax and spending apply in Wales. As a result of decisions that do not apply UK-wide, the Welsh Government will receive £305 million over the next two years.
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 UK government will also work with the Welsh Government to explore the expansion of the Made Smarter Adoption programme - which helps manufacturing SMEs to reduce emissions and drive productivity - in Wales from 2026/27.
- 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.
Work and welfare reform
Mr Hunt set out steps to reward work, help make work pay, and reform welfare in recognition of the need to expand the workforce and get those out of work back into work to deliver growth. The OBR expect that the measures announced at Autumn Statement will support a further 78,000 people into work by 2028-29, on top of the 110,000 resulting from action taken at Spring Budget.
- 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 130,000 low paid workers in Wales.
- 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.
- The government is reforming the Work Capability Assessment, to ensure that people who can work are supported to do so via the welfare system. Changes to the activities and descriptors will better reflect the greater flexibility and reasonable adjustments now available in the world of work, preventing some individuals from being deemed not fit for work and ensuring they will be better supported into employment.
- As part of the Back to Work Plan, the government is extending and expanding the Restart scheme until June 2026 – providing tailored, intensive support such as coaching and CV and interview skills for those who have been on Universal Credit for more than six months rather than nine. An expansion to the flagship Universal Support programme will also help place and support more people with disabilities and from vulnerable groups into existing vacancies. Strengthened sanctions will apply in Wales.
- A new voluntary Occupational Health standard providing guidance on workplace health and disability will be developed, alongside creating a new digital marketplace to support smaller Welsh businesses procure Occupational Health services.
Infrastructure and levelling up
The Chancellor unveiled a raft of supply-side measures and funding packages to benefit businesses and local communities across Wales.
- £4.5 billion of funding for British manufacturers in the high-growth industries of the future, including £960 million earmarked for the Green Industries Growth Accelerator to support clean energy.
- Two new Investment Zones will be established in Cardiff & Newport and Wrexham & Flintshire, to boost economic growth across Wales. The extension of the Investment Zones and Freeport programmes in England will be replicated in Wales, subject to Welsh Government agreement. The governments will also work together to deliver a share of the funding from a flexible £150 million Investment Opportunity Fund, to support the securing of specific business investment opportunities.
- The government has published its full response to the Winser review and Connections Action Plan, which will cut grid access times for larger projects by half, halve the time to build major grid upgrades and offer up to £10,000 off electricity bills over 10 years for those living closest to new transmission infrastructure.
- The government is working with The Crown Estate to bring forward additional floating wind in the Celtic Sea through the 2030s, with the potential to deliver £20 billion of direct investment from deployment in the area.
- 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.
- The government will ensure greater connectivity for Wales, through £1 billion to fund the electrification of the North Wales Main Line.
- £5.2m of funding for transport in Monmouthshire will deliver significant improvements to the local bus network, walkways, cycleways and shared use paths within Chepstow.
- £800,000 of funding for the Space Technology Test Centre in North Wales, providing a flight test range for rocket-powered test vehicles, near-space scientific flights, microgravity research and trials of re-entry vehicles and payload recovery systems.
- The government is also providing £500,000 to support the well-loved Hay Festival in Wales.