A Look Ahead - Autumn Statement 2023
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State borrowing billions over predictions
The Chancellor’s warning came after recent news that there has been a ‘sharp worsening’ of the public finances over the past six months.
Mr Hunt said state borrowing was on course to be ￡20 billion to ￡30 billion higher than predicted in the March Budget.
The Chancellor said: ‘The fiscal position has worsened since the spring, and I will have to take difficult decisions in the Autumn Statement
‘The main reason things are more challenging is because interest rate projections for all economies have gone up. The UK is not immune to those changes. We are likely to see an increase in debt interest payments of ￡20 billion to ￡30 billion and that’s a huge challenge.’
At the time of the March Budget, the?Office for Budget Responsibility?(OBR) said the chancellor had only a ￡6.5 billion buffer to meet his fiscal rule of having debt as a share of national income falling at the end of five years. Higher borrowing in response to the Covid-19 pandemic has pushed the national debt above ￡2 trillion.
No short cuts
The government is now expecting the OBR to cut its future growth forecasts for the UK economy, which would pile additional pressure on the public finances.
However, Mr Hunt says he is not prepared to borrow more to finance the tax cuts being demanded by some Conservative MPs. Instead he says he will make savings to pave the way for a more generous Budget next spring as the next general election draws closer.
The Chancellor said: ‘I will do everything I can to prevent tax rises
‘All western economies have found themselves in a low-growth trap
General Election ahead
The Autumn Statement comes with the UK still battling inflation and looking at an uncertain economic forecast. It also comes as the run up to the next General Election is firmly underway.
The Chancellor would no doubt like to go into that election with inflation falling, the economy growing and the ability to make voters feel good with some tax cuts. He also faces pressure from within his own party to cut taxes.
The former PM Liz Truss is planning to release what her allies call a ‘Growth Budget’ ahead of his Autumn Statement.
Meanwhile, a long campaign by some Conservative MPs to cut inheritance tax is under serious consideration in Downing Street, according to newspaper reports.
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Among the proposals under consideration is to reduce the 40% rate paving the way to abolish it in future years. However, this appears more likely to happen in next March’s Budget rather than this autumn.
Unleash green markets
Meanwhile, the UK’s business groups are also making their pitches for the Autumn Statement.
The Confederation of British Industry (CBI) has urged Chancellor Jeremy Hunt to ‘unleash green markets’ to drive long-term prosperity
One of the CBI’s key proposals is for the government to realise the UK’s net zero growth opportunity. It has urged the Chancellor to decrease waiting times to build electricity transmission infrastructure and speed up the process for becoming connected to the grid.
The business group also advocates introducing a targeted ‘green’ super-deduction for incorporated and unincorporated businesses, with a first-year allowance of at least 120%.
Making full expensing permanent to unlock investment
The CBI is also urging the Chancellor to make full expensing permanent to ‘unlock business investment across the economy
Five key changes
In addition, the Institute of Directors (IoD) has?written to the Chancellor Jeremy Hunt with five key policy recommendations for the Autumn Statement.
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Whatever the Chancellor’s Autumn Statement brings we will be on hand to help. If you need advice on any related matter, please contact us.