Porter Novelli

Analysing the Autumn Statement: Looking beyond the inheritance tax cut



Chancellor Jeremy Hunt delivered his second Autumn Statement in a predictably buoyant mood.

Last week’s timely fall in the rate of inflation, paved the way for some form of tax cut, which Hunt duly delivered with a bigger than expected reduction in national insurance. The cut has dominated front pages in the 48 hours since, providing room for optimism for Rishi Sunak’s premiership ahead of next year’s election, which may come as soon as May.

Hunt was clear in his intention to help working people specifically, eschewing an income and/or inheritance tax cut in favour of the national insurance reduction.

However, the reality remains challenging for consumers and businesses. Economic growth will remain sluggish and many will still end up paying more tax as their wages increase with inflation. Getting business back on side remains a work in progress – with the majority still reeling with the Government’s previous measures to shore up public finances, namely the hike in corporation to tax to 25%.

Here is PN’s summary and analysis of the day’s key announcements.

Say: “Three of the Prime Minister’s pledges were to halve inflation, grow the economy and reduce debt. We are delivering on all three.”

 

Do: Whilst the UK is set to avoid recession in 2023, subsequent growth forecasts were downgraded.

Say: “Largest business tax cut in modern British history”

 

Do: Hunt announced welcome short-term relief but inheritance tax cuts were absent and businesses are still contending from March’s bruising corporation tax hike.

Say: “The best way to improve living standards in the long-term is to get more people into higher paid jobs.”

 

Do: The government was pointed in its stance on how it wants to alleviate cost-of-living pressures, but pledged renewed support for the most vulnerable.

Say: “Pension fund reforms that support our most promising growth sectors and improve outcomes for savers.”

 

Do: A shake-up of the pensions system is set to give workers greater control over where they build their nest egg.

Say: “If we are to incentivise work, we must also tackle low pay”

 

Do: Hunt announced the largest ever cash increase in the Living Wage.

Say: “Targeted investments will ensure the UK remains competitive in sectors where we are already leaders and innovative in areas where we are not.”

 

Do: New initiatives to expand R&D funding and simplify the R&D tax credit system were broadly welcomed by UK businesses, including those in the tech sector who said it would help to accelerate innovation.

Say: “Investors say the biggest thing we can do is to announce a longer-term strategy for their industries”

 

Do: Some expected Hunt to take a similar approach to the EU and the US and introduce funding for the UK’s clean tech sectors. However, there were relatively few measures announced and experts noted that significantly more funding will be needed to help the UK reach its net-zero targets.

Say: “The government is delivering on levelling up and announcing further measures

to support growth and investment across the UK”

 

Do: The Conservatives have long made levelling up one of their flagship policies, however Hunt allocated relatively little new funding to these initiatives.     

Our verdict

 

The Statement – and the prominence of ‘cuts for working people’ – was made with an unsubtle eye on next year’s general election, and Hunt and Sunak will hope to have strengthened core support in the Red Wall and Home Counties. Whilst progress is being made in repairing the damage of their predecessors, they will be under no illusions that the electorate will need more convincing to prevent their party being ousted from Downing St