22 November 2023

Businesses will welcome today’s Autumn Statement, but what about the rest of us?


The scale of briefing, leaking and kite flying accompanying today’s Autumn Statement was such that it was almost impossible to be surprised by any of the measures announced. But if we learned anything, it’s that Jeremy Hunt is clearly an avid CapX reader. Many of his announcements, from full expensing to pension reform, have been called for by authors on this site.

Even the Chancellor admitted at the despatch box that going through all the 110 new measures introduced would be an onerous task, so let’s examine the most salient policies.

First on the agenda, and to the joy of business advocates across the land, is the decision to make full expensing permanent. The policy, first introduced in the March Budget as a temporary measure to end in 2026, allows businesses to immediately deduct the full cost of most types of machinery and equipment from their corporate tax bill. For a while, this has vastly improved our corporate tax regime and made Britain a more attractive place to set up shop – or at least partly compensated for the rise in corporation tax.

CapX readers don’t need to be told that our economic growth is sclerotic, and an essential ingredient to changing this is encouraging businesses to invest in Britain. This, as Sam Dumitriu pointed out on these pages only last week, and as our colleagues at the Centre for Policy Studies have said repeatedly, requires businesses being confident that they’ll make a good return on their investment after tax. Not only will permanent full expensing give firms the confidence they need, but it will also enhance our overall international tax competitiveness, which currently languishes near the bottom of the OECD.

Another welcome announcement made by the Chancellor today was reform pension funds to ‘increase the flow of capital going to our most promising growth companies in a way that also improves outcomes for savers’. Currently, as Zachary Spiro has highlighted, UK pensions invest four times less in start-ups than their Australian counterparts, nine times less than America’s and fifteen times less than Canada’s. Correcting this and opening up untapped pension funds will unlock billions of pounds for groundbreaking British start-ups and consequently propel us forward in the global science race. An undoubted policy win.

These boosts to investment alongside the reduction of the main rate of National Insurance from 12% to 10% certainly tease free market instincts. However all is not quite as it seems.

On the surface, the move to raise the national living wage from £10.42 to £11.44 an hour looks like something to celebrate. Surely we should laud the Chancellor’s altruism? Not necessarily. Not only will it increase financial pressure on businesses, but it’s a small win for workers when you consider how many people are paying more tax despite not being better off in real terms due to fiscal drag caused by frozen thresholds.

The real kick in the teeth, however, was Jeremy Hunt’s proud devotion to the triple lock on pensions and, by extension, to Britain’s emerging status as a gerontocracy. If our economy is to grow at anything near the rate we need over the coming years, the government must balance the need to protect pensioners with policies which enable home ownership and increase housebuilding, as well as easing burdens on working families. It is also extremely telling that the government has chosen to raise state pension payments by 8.5%, while only increasing in-work benefits by 6.7% – leaving us under no illusion as to which demographic the Tories hope to appeal to next year.

Fundamentally, while many of today’s announcements were indeed welcome, one can’t help but wonder what position we’d be in today had policymakers heeded the warnings of CapX contributors earlier. Although moves such as permanent full expensing and pension reform signal a much-needed change of tack, they should have been implemented long ago. Sadly, after 13 years, it seems unlikely that today’s ‘Autumn Statement for growth’ will be enough to revive the government’s electoral prospects.

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Joseph Dinnage is Deputy Editor CapX