Chancellor pledges '110 measures' to grow economy

The Chancellor has announced a raft of measures intended to boost business investment and grow the economy, including cutting business taxes and National Insurance.

Delivering his Autumn Statement on Wednesday, Jeremy Hunt - citing the Office for Budget Responsibility - said the UK economy was set to grow by 0.6% this year, by 0.7% in 2024 and by 1.4% in 2025 before eventually reaching annual growth of 2% by 2027.

However, in March, the OBR forecast the economy would decline by 0.2% this year but grow by 1.8% in 2024 and by 2.5% in 2025. The watchdog cut its growth forecasts in response to inflation taking longer to come down.

Hunt told MPs: "After a global pandemic and energy crisis we have taken difficult decision to get our economy back on track.

"Rather than a recession the economy has grown…But the work is not done."

He therefore introduced a raft a measures - 110 in total - which he said would unlock supply side reforms and boost business investment by £20bn a year.

The main measure was the widely-trailed decision to make so-called full expensing permanent. Introduced as a temporary measure in 2021, it allows companies to reduce their tax bill by up to 25p for every £1 they spend on plant and machinery.

The move, which will cost £11bn per year, was the "largest business tax cut in modern British history", said Hunt.

The OBR expects the policy to increase business investment by £3bn a year.

National insurance contributions were also overhauled. The 12% rate was cut to 10%, to be introduced from 6 January 2024, while Class 2 contributions, which are paid by self-employed people, were abolished.

Other measures announced include a shake-up of planning, to ensure faster decisions for infrastructure projects and major business application decisions, and extending the 75% business rates discount for hospitality, retail and leisure business for another year, at a cost of £4.3bn.

Hunt also committed to raise the pension by 8.5% to £221.20 per week, and said benefits would rise in line with inflation in September - 6.7% - rather than October’s rate of 4.6%.

He concluded: "This is an Autumn statement for a country that has turned a corner, an Autumn statement for growth."

However, Rachel Reeves, shadow chancellor, said: "The chancellor has lifted the lid on 13 years of economic failure. The economy is now forecast to be £40bn smaller by 2027 than the chancellor said in March.

"The chancellor claims the economy has turned a corner…yet growth has hit a dead end."

As well as publishing growth forecasts, the OBR predicted that underlying debt would be 91.6% of GDP next year, 92.7% in 2024-45, 93.2% in 2026-27 and 92.8% in 2028-29.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said “the course is clear” for the Monetary Policy Committee to cut interest rates next year. “Fiscal policy remains set to dampen GDP growth in 2024, despite the tax cuts announced by the Chancellor today,” he added.

“The chancellor’s stand-out tax measure today, the reduction in the main rate of employees’ NI contributions, will boost households’ disposable income by just £8.7bn, or 0.5%, in 2024/25.”

Rain Newton-Smith, chief executive of the Confederation of British Industry, said: “With tough decision to be made, the chancellor was right to priorities game-changing interventions that will fire the economy.”

Stephen Phipson, chief executive of trade body Make UK, also welcomed the changes to full expensing. “Manufacturers will applaud this focus on addressing the painful Achilles heel that has troubled the economy for decades. The biggest factor that companies want when planning investment decisions is certainty in policy and this has now been provided.”