What the Autumn Statement means for you

I don’t usually post about national issues, but having yesterday listened to the whole Autumn Statement in Parliament (which never gets fully reported by the press), I wanted to mention the key points and what they mean for you. The aftermath of Covid and global inflation have made it a tough couple of years economically, but there is now much better news thanks to good management of the economy.

Pensioners.  Pensions will rise next April by 8.5%, having already risen this April by 10.1%.  These rises are much higher than the current rate of inflation (4.6%) and much higher than next year’s forecast rate of inflation (2.8%). Pensioners have often worked hard all their lives and it is right that they are properly looked after in retirement. This is an extra £900 per year for a pension on the full state pension.

Workers.  The headline rate of employees’ National Insurance is being cut by 2%, and will be effective from the start of January. This form of National Insurance is deducted from wages between around £12,500 and £50,000 of annual earnings, so this tax cut will directly benefit anyone earning over £12,500 per year, effective from 6th January. Wages are also currently rising at around 8% (much higher than inflation, which is currently 4.6%) and so people will see their wages going further.  This is a tax cut for 27 million working people, amounting to £450 per year for an average worker, with the benefit of rising wages on top of that.

Workers on the Minimum Wage. When the last Labour Government left office, the minimum wage was only £5.93 an hour. I have been continuously campaigning to increase it, and the Chancellor announced that from next April it will rise again to £11.44 an hour – a 10% rise year-on-year (much higher than inflation, which is currently 4.6% and falling). The increase will help 2.7 million people on lower wages – they will each be £1,700 a year better off if working full time. Given that the first £12,500 of earnings is now tax free (up from around £6,500 under Labour) the take-home wages of someone on the minimum wage after adjusting for inflation is now 30% higher today than it was under the last Labour Government. I think it is right that work pays and that people on lower wages are properly paid.  This is very good news for them.

The Self Employed.  The top rate of Class 4 National Insurance is being cut from 9% to 8%, and Class 2 National Insurance is being abolished entirely. Millions of self-employed people will save money (someone earning £28,800 will save £350 a year, with the benefit of rising wages on top of that).

Employment.  Payroll employment is at record ever levels. Unemployment is around 4%, about half the level under the last Labour Government. The fact that so many people are now in work and unemployment is so low is very welcome.

Businesses. Full expensing of business investment is now being made permanent (i.e. investment is 100% tax deductible in the year the investment is made).  This is an £11 billion tax cut for businesses, and critically will encourage investment. The OBR forecast that this will increase business investment by £14 billion over the next 5 years – which will create jobs and make the economy more productive.  Our headline rate of corporation tax, while higher than I would like, remains the lowest in the G7. The small business rates multiplier will continue to be frozen and the substantial business rates discount for small shops, pubs, hospitality and leisure will continue – saving high street businesses thousands of pounds per year.

Those receiving Benefits.  Working age and disability benefits will go up next April by 6.7%, having already gone up by 10.1% this April. This is higher than current inflation (4.6%) and higher than next year’s forecast inflation (2.8%) and is worth an extra £470 a year for 5.5 million families. However, conditions will be introduced so that people that are not in work after 18 months of intensive support will be required to do whatever unpaid work they are able to do, in order to continue receiving benefits. Working age benefits cost around £180 billion a year (meaning each household contributes £7,000 per year on average towards paying other people’s benefits) so it is reasonable that there is some conditionality and incentive to get into work.

Public Services.  Funding for the NHS, Education and the Police are at record levels. There are around 30% more NHS staff (including doctors and nurses) now than under the last Labour Government, and there are record ever Police numbers (3,500 more than under the last Labour Government, at 149,566 headcount).  Overall crime, measured by the crime survey, is 54% lower now than in 2010 (although there are specific areas that are receiving further work, like shoplifting and inner-city knife crime). England’s 9–10-year-olds are now the 4th best readers in the world. Public sector wages are rising at an average of around 7% at present, higher than inflation with is currently 4.6% and forecast to fall to 2.8% next year.

Inflation.  Inflation has been high around the western world in recent years (due to the Russia/Ukraine war, the post-Covid demand bounce-back, semi-conductor shortages and supply chain disruptions in China). Thankfully in the UK inflation has now fallen to 4.6% (meeting the PM’s pledge to halve it) and is forecast to fall further to 2.8% next year. I hope this will pave the way for interest rate reductions.

National Debt.  The sum of all the measures announced yesterday and revised forecasts sees national debt lower than forecast last March and falling as a % of GDP by the end of the new forecast period.  UK National Debt as a % of GDP is the 2nd lowest in the G7 – lower than the US, Canada, Japan, France and Italy.

Economic Growth.  UK economic growth was the highest in the G7 in 2021 and 2022.  The economy has grown a little in 2023, but we have avoided the recession (i.e. economy shrinking for two quarters) that was previously forecast and which actually happened in the Eurozone and even happened this year in Germany, traditionally Europe’s strongest economy. Yesterday’s statement also contained 110 individual measures to increase growth. Since 2010 when the last Labour Government left the UK economy in the worst recession for a generation, the UK economy has grown more than France, more than Japan, more than Italy, more than Spain and even grown more than Germany.

Average Impacts.  The average annual impacts of yesterday’s statement on people are as follows (the effect of rising wages is on top of these impacts where marked: *):

  • Pensioner on full state pension – £900 better off
  • Average family with two earners – £900 better off (*)
  • Senior nurse with 5 years’ experience – £600 better off (*)
  • Average Police Officer – £630 better off (*)
  • Average Junior Doctor – £750 better off (*)
  • Typical self-employed plumber – £410 better off (*)
  • Typical teacher – £630 better off (*)
  • Someone receiving universal credit – £470 better off on average (*)
  • Someone full time on the national living (i.e. minimum) wage – £1,700 better off

I want to see continued careful management of the economy delivering lower taxes and higher wages in the future, while also supporting well-funded public services.

I hope this is a useful summary.