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UK chancellor Jeremy Hunt has announced that he will cut national insurance by 2 percentage points and make business investment tax relief permanent, as he put a £20bn tax giveaway at the heart of his Autumn Statement.
Outlining measures to boost growth and improve the government’s political fortunes ahead of an election year, Hunt said he would cut the main rate of national insurance by 2 points to 10 per cent, a bigger reduction than expected, effective from January 6.
He also announced plans to sell shares in NatWest, the high street bank, to the public over the coming year.
But Rachel Reeves, shadow chancellor, accused the government of presiding over record tax rises, because of the impact of its decision to freeze thresholds at a time of high inflation.
In what he called “the largest business tax cut in modern British history”, Hunt confirmed the government would make permanent the “full expensing” regime for private sector investment.
The scheme, which was due to expire in 2026, allows a company to immediately deduct all of its spending on IT equipment, plant or machinery from taxable profits. Extending it was a priority for business groups.
The chancellor said that the measures would increase business investment in the economy by around £20bn a year within a decade and was “a decisive step towards closing the productivity gap with other major economies”.
Arguing that the economy was “back on track” but that “the work is not done”, Hunt said the Office for Budget Responsibility considered that Wednesday’s measures would raise gross domestic product and push down inflation.
He added that the OBR expected the economy to grow 0.6 per cent this year and 0.7 per cent next year. This compares with the OBR’s previous forecasts of a 0.2 per cent contraction this year and 1.8 per cent growth in 2024. The Bank of England expects growth to remain flat next year.
Referring to the government’s 38.6 per cent stake in NatWest, a legacy of the financial crisis, Hunt said he would “explore options for a NatWest retail share offer in the next 12 months”.
He said this was part of a broader push to “make sure the UK remains one of the most attractive places to start, grow and list a company”. The UK is seeking to stem the flow of British businesses listing in New York, lured by perceived higher valuations and a deeper pool of capital.
He said he would set a new target to keep public spending growth below overall economic growth “while always protecting services”.
The chancellor confirmed that the state pension would rise by 8.5 per cent in April, in what he termed “one of the largest ever cash increases” — and that universal credit and other benefits would increase by 6.7 per cent in line with September inflation, rather than the lower October level.
Hunt also promised measures “to unlock the building of more homes” in the UK, which has consistently fallen short on government house building targets.
These include a plan to refund planning fees if local authorities take too long to handle applications and £32mn to “bust the planning backlog”.
Hunt also said that he would freeze duty on alcohol, a move applauded by the industry.
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