The trade tax relief will become permanent
Hunt confirms the tax break for fully settled businesses will be permanent.
Companies will be able to claim back 25p of corporation tax for every pound they invest in IT, machinery and equipment, a move that will cost the Treasury £11bn a year. Hunt said it was the “biggest corporate tax cut in modern British history”.
Hunt confirms £4.5bn for UK manufacturing
Hunt confirms pre-announced £4.5 billion of funding for UK manufacturing to boost investment in eight sectors across the UK, available for five years from 2025.
As the Treasury announced last week, this includes £960m for clean energy, over £2bn for the automotive industry, £975m for aerospace and £520m for life sciences manufacturing.
The entire manufacturing sector accounts for over 43% of all UK exports and employs around 2.6 million people. Finance Secretary Jeremy Hunt said the government was seeking the funding to “support the sectors in which the UK is or could be a world leader”.
“Our £4.5 billion funding will leverage multiples of funding from the private sector and in turn grow our economy by creating more skilled, better-paid jobs in new industries that are built to last,” Hunt said in a statement .
-Elliot Smith
Hunt: Government to invest £500m in AI
Hunt promises an additional £500 million investment in artificial intelligence.
“When it comes to technology, we know that AI will be at the heart of any future growth. “I want to make sure our universities, scientists and startups can access the computing power they need,” he says.
“Building on the success of the supercomputing centers in Edinburgh and Bristol, I will invest £500 million over the next two years to fund additional innovation centers to help us become an AI powerhouse.”
The UK economy is expected to grow by 0.6% this year and 0.7% next year
The OBR forecasts the UK economy will grow by 0.6% this year and 0.7% next year, Hunt reveals.
GDP is then expected to grow by 1.4% in 2025, 1.9% in 2026 and 2% in 2027.
This represents a significant downward revision for 2024 and 2025, for which the OBR’s spring forecasts had forecast growth of 1.8% and 2.5% respectively.
Alcohol tax frozen, tobacco tax increased
Alcohol duty will be frozen until August 1, 2024, Hunt confirms, while duty on hand-rolled tobacco will be increased by a further 10%.
Britain needs a “more productive state, not a bigger state”: Hunt
Hunt says the UK needs a “more productive state, not a bigger state”, setting a new public sector productivity growth target of 0.5% a year.
This follows an existing plan to reduce the size of the public service to pre-pandemic levels, as part of measures to ensure public sector spending growth is “always lower than economic growth”, says Hunt.
The British government’s policy to reduce inflation is not enough: City of London Corporation
Chris Hayward, political chairman of the City of London Corporation, weighs in on the inflation risk of the UK government’s new fiscal policies, how to restore “broken trust” with the EU and why he sees Labor as a “pro-business party.”
The government will cover 2% of GDP defense spending, says Hunt
Hunt says the UK will meet its NATO commitment to spend 2% of GDP on defense, which he says is “critical at a time of global threats to the international order, particularly from Putin’s nasty war in Ukraine”. .
Hunt: Public sector borrowing is expected to fall from 4.5% this year to 1.1% in 2028/9
According to the OBR, borrowing is lower this year and next, averaging £0.7 billion a year across the forecast compared to the spring forecast, says Hunt.
Public debt falls from 4.5% of GDP in 2023/4 to 3% next year, 2.7% in 2025/6, 2.3% in 2026/7, 1.6% in 2027/ 8 and 1.1% in 2028/9.
“It also means we meet our second fiscal rule that public sector borrowing must be below 3% of GDP not just last year but in almost every year of the forecast,” says Hunt.
“Part of this improvement is due to higher tax revenues from a stronger economy, but we are also taking a disciplined approach to public spending.”
Hunt: Debt to GDP decline
According to the OBR, underlying debt is now forecast at 91.6% next year, 92.7% in 2024/5 and 93.2% in 2026/7, before rising in the final two years of the forecast 92.8% in 2028/9.
“In every year this is lower than the forecasts from spring. We are therefore meeting our fiscal rule for underlying debt to fall as a share of GDP in the final year of the forecast, with double the headroom compared to the OBR’s March forecast, and we will continue to have the second lowest government debt in the G7 said Hunt.
Hunt: State pension to rise by 8.5%
Hunt said the full new state pension will rise by 8.5% to £221.20 a week, worth up to £900 a year for pensioners.
Including today’s measures, this government’s “total commitment to reducing cost of living pressures” stands at £104 billion, he adds.
Hunt: Universal Credit and other benefits are set to rise by 6.7%
Hunt said universal credit and other benefits will rise by 6.7%, in line with September’s annual inflation figure and an average increase of £470 for 5.5 million households next year. Universal Credit is a means-tested social security payment to low-income or unemployed households.
Local housing benefit will be increased to the 30th percentile of local market rents, meaning 1.6 million households will receive an average of £800 in support next year.
OBR: Inflation is expected to fall to 2.8% next year
The independent Office for Budget Responsibility forecasts inflation will fall to 2.8% by the end of 2024 and fall back to the Bank of England’s 2% target in 2025, Hunt says.
Resolution Foundation: Restructuring instead of tax cuts
The Resolution Foundation, a think tank focused on improving living standards for low- and middle-income households, says the chancellor’s measures will amount to a “major tax restructuring”, with tax cuts on top of already planned tax rises.
Resolution Foundation economists Torsten Bell, Adam Corlett and Lalitha Try said the most likely personal tax cut would be the basic income tax, with 36 million people benefiting an average of £200 a year from a basic rate cut of £0.01. The foundation estimates this measure would cost the Treasury £7 billion a year.
Still, overall income taxes were found to be rising due to Hunt’s previously announced tax freezes, which are currently underway.
“We’re rearranging taxes instead of cutting them – most people see taxes going up. Why? Because major, already announced tax increases are underway,” the Resolution Foundation said.
“In particular, when we think about the impact of these changes next April, freezing the income tax and national insurance thresholds (rather than increasing them by 6.7 per cent in line with inflation) will raise £8 billion and cost all property tax workers.” 270 ( and pensioners £170).”
-Elliot Smith
TUC boss: Sunak ‘increases his credibility’ by claiming falling inflation
Paul Nowak, general secretary of the Trades Union Congress, told CNBC on Wednesday that Prime Minister Rishi Sunak is “showing his credibility” by trying to claim credit for halving inflation.
The headline consumer price index rose 4.6% year-on-year in October, compared with more than 10% in January, as falling energy prices and Bank of England interest rate hikes slowed inflation.
In January, the prime minister cited halving inflation as one of his top priorities and quickly declared victory following the release of the consumer price index last week. However, the country’s economic institutions had unanimously forecast that inflation would fall below 5% by the end of the year, regardless of government policy.
“A year ago the Prime Minister told us that inflation wasn’t the government’s fault – it was global energy prices – and now he reckons he’s brought inflation down so you can’t have your cake and eat it.” Nowak told CNBC’s Silvia Amaro.
“Of course, any easing of inflationary pressures is good, but these price increases are entrenched, and at a time when the wages of ordinary working people have not increased, the price of a supermarket store has not decreased, the price of the need, the car Filling the tank hasn’t gone down, rent and mortgages certainly haven’t gone down, and so I fear the Prime Minister is overstating his credibility a bit by claiming to have brought down inflation and lowered the cost of living during the crisis. “
–Elliot Smith
UK Liberal Democrat Leader: To stimulate the economy, the health crisis must be tackled
Ed Davey, leader of the Liberal Democrats, says the government must address long-standing problems with the National Health Service to realize its ambitions for economic growth.
A survey conducted by the party found that one in three working adults in the UK miss work while waiting for an NHS appointment or treatment, while one in five are unable to go to work while waiting Waiting to see your family doctor.
Davey told CNBC’s Silvia Amaro on Wednesday that a massive shortage of primary care physicians and a failure to strengthen the care system are causing hospitals to become overwhelmed and forcing people to stay away from work longer than necessary, “undermining the economy.” .
“If we want our economy to grow we really need to tackle these sorts of problems and the Conservatives promised to do that at the last election and they failed absolutely miserably – they wasted a lot of money on politics, for example PPE contracts during the pandemic that have wasted billions of pounds – so we need better spending on health, but we need to address people’s problems,” he said.
“The Conservatives have really misunderstood the problems in our healthcare system and their impact on the economy, and that has really worried me [Prime Minister] Earlier this week, he actually excluded health from his top priorities. He is completely out of touch and doesn’t understand what companies are saying and what people are suffering about.”
-Elliot Smith
Head of London’s financial center: Labor is now a “business-friendly party”
LIVERPOOL, UK – October 11, 2023: Keir Starmer, leader of Britain’s main opposition Labor Party, applauds a speaker on the final day of the Labor Party’s annual conference in Liverpool, northwest England, on October 11, 2023.
Paul Ellis | Afp | Getty Images
Chris Hayward, policy chairman of the City of London Corporation, which represents the interests of London’s financial district, told CNBC on Wednesday that a Labor government would not “frighten” businesses.
Polls suggest the UK’s main opposition Labor Party could be on track to take power with a clear majority at the next general election, which must be held before the end of January 2025.
“We are cross-party at the City Corporation – we work with politicians from all sectors and with the government we are given – but I think Labor has changed dramatically since the last general election,” he said.
Labor lost the 2019 election in a landslide under its far-left former leader Jeremy Corbyn, but current leader Keir Starmer has sought to rebuild the party as a centrist, moderate alternative to a ruling Conservative Party that has been widely seen as leaning rightward in recent years.
“They are now a pro-business party and that is fundamental for us in the city. “We need a government that understands that encouraging business growth actually generates tax revenue, which in turn will boost spending on public services,” Hayward said.
“I think this would be a government that wouldn’t scare businesses in the city.”
-Elliot Smith
Conservative colleague Harrington: Don’t expect “anything dramatic” with tax cuts for individuals
Conservative peer Richard Harrington told CNBC on Wednesday that Finance Minister Jeremy Hunt has listened to businesses and will take steps to make the corporate tax regime more accommodative.
“I’m sure that given the financial constraints that the chancellor is facing, the regime will move towards the kind of investment breaks and the like that the economy is looking for,” Harrington, who sits in the House of Lords, said outside CNBC Parliament’s Silvia Amaro.
However, he noted that measures to put more money in people’s pockets at the end of the month were likely to be muted.
“I’m sure the pre-announcements on social security and the like will help, but of course everyone knows that the country’s public finances were in an absolutely dismal state,” he said.
“The things that Rishi Sunak and Jeremy Hunt have done will help improve that, but it won’t happen immediately and so I don’t expect a dramatic impact on the retail tax cut.”
-Elliot Smith
Finance Minister confirms upcoming tax cuts for private individuals
Laura Trott, Hunt’s Treasury secretary, told BBC News on Tuesday that the Chancellor would announce cuts to personal taxes on Wednesday because the economic outlook had “completely changed”.
“The economy is in a completely different state than it was a year ago. We can now focus on pursuing growth, increasing the rate of growth of the economy and reducing taxes for individuals.”
Prime Minister Rishi Sunak’s government will be keen to deliver some positive news to voters who have suffered from high inflation and sluggish growth in recent years ahead of the likely general election in 2024, according to polls.
-Elliot Smith
The national living wage has been increased to £11.44 an hour
Hunt will announce an increase in the national living wage by more than £1,800 ($2,253.78) a year for a full-time worker, extending the threshold to 21-year-olds for the first time.
The almost 10% increase will take hourly wages to £11.44 per hour, while national minimum wage rates will also rise for younger workers, with 18-20 year olds receiving an hourly rise of £1.11 to bring the minimum wage to £1 to increase 8.60 per hour.
The Ministry of Economy and Trade estimates that 2.7 million workers will directly benefit from the increase in the national living wage.
-Elliot Smith
Cuts in social security and trade tax as well as tougher social benefit sanctions are expected
As several British news outlets reported on Tuesday, Hunt will announce a cut in social security contributions for millions of workers on Wednesday, as well as a cut in corporate tax and stricter treatment of benefit recipients.
The BBC reported that Hunt will announce measures to increase business investment by 20 billion pounds ($25.04 billion) a year to “grow Britain.”
The government has also announced plans to remove support for benefit claimants who cannot find work after 18 months unless they complete a traineeship.
-Elliot Smith
Berenberg: “Too many problems, too little time”
Due to stubborn global inflation and domestic supply-side challenges, the government is unlikely to move away from its cautious approach of last year, says Kallum Pickering, senior economist at Berenberg. Hunt is faced with “too many problems, too little time”.
Despite the tax cuts announced Wednesday, Pickering said Hunt would have difficulty announcing measures that “could materially improve the near-term economic outlook” and he would likely focus on reducing the deficit and debt as a percentage of GDP.
“Any large and immediate debt-financed tax cuts or spending increases would likely fuel new inflation concerns and a fresh rise in government borrowing costs, rather than boosting growth hopes,” Pickering said in an email on Tuesday.
“Looking further ahead, Hunt could lay out plans to cut taxes more quickly from 2026 once inflation risks have subsided further.”
However, he noted that such delayed tax plans would only be implemented after the country’s next general election, which is due before the end of January 2025 but is expected to be scheduled at the end of next year.
With the main opposition Labor Party holding a commanding lead in the polls, the landmark tax changes announced on Wednesday may never be implemented.
-Elliot Smith
IFS director: “Dozens” of better options than cutting inheritance tax
There has been a lot of speculation in the British press in recent days that Hunt might announce a cut in the UK’s inheritance tax.
Inheritance tax is a 40% levy on the value of a deceased person’s estate, including their property, money and possessions, in excess of the minimum threshold of £325,000. The tax is only levied on the amount above the threshold and only around 4% of estates in the UK are subject to it.
“There are dozens of tax cuts that would be both fairer and better designed to promote economic efficiency and growth,” said Paul Johnson, director of the Institute for Fiscal Studies.
“We are in the midst of a record increase in the tax burden on income and earnings. Effective tax rates on wealth have been falling for decades. A reduction in taxes on inherited assets seems particularly unfavorable.”
The IFS estimates the alleged cuts would raise a “relatively paltry” £7bn a year, and around half of the total will be paid by the 1% of estates worth more than £2m.
“As expected, the probability that the beneficiaries of legacies large enough to pay inheritance tax are large enough to have high income and wealth themselves is much higher than average: those from wealthier backgrounds, earns more and even accumulates more wealth before benefiting from an inheritance,” Johnson explained.
-Elliot Smith
Hunt confirms £4.5bn for UK manufacturing
Hunt confirms pre-announced £4.5 billion of funding for UK manufacturing to boost investment in eight sectors across the UK, available for five years from 2025.
As the Treasury announced last week, this includes £960m for clean energy, over £2bn for the automotive industry, £975m for aerospace and £520m for life sciences manufacturing.
The entire manufacturing sector accounts for over 43% of all UK exports and employs around 2.6 million people. Finance Secretary Jeremy Hunt said the government was seeking the funding to “support the sectors in which the UK is or could be a world leader”.
“Our £4.5 billion funding will leverage multiples of funding from the private sector and in turn grow our economy by creating more skilled, better-paid jobs in new industries that are built to last,” Hunt said in a statement .
-Elliot Smith