GovWire

Tax cuts for working people and British business headlined Chancellor Jeremy Hunts Autumn Statement for Growth today, Wednesday 22 November.

Aimed at building a stronger and more resilient economy, the Chancellor set out a plan to unlock growth and productivity by boosting business investment by 20 billion a year, getting more people into work, and cutting tax for 29 million workers across the UK the biggest tax cut on work since the 1980s.

Welsh Secretary David TC Davies said:

This is a hugely ambitious Autumn Statement which puts more money in the pockets of over a million working people across Wales with cuts to National Insurance and another increase to the National Living Wage.

As we grow the economy, Im delighted to see substantial direct UK Government investment in Wales. The two new 160 million Investment Zones in north-east and south-east Wales and an ambitious commitment to floating offshore wind will encourage business and create jobs, while 5 million for transport links in Monmouthshire and 500,000 to support the Hay Festival are important investments in those communities.

There will also be an additional 305 million in Barnett Consequentials for the Welsh Government, on top of its record block grant, to spend on devolved responsibilities like health and education.

This all comes on top of 111 million in levelling up funding announced earlier this week seven Welsh projects which will transform local areas and shows that the UK Government is delivering for people across Wales.

With higher revenues resulting from stronger growth than previously projected and the pledge to halve inflation having been met, the government has stabilised the economy through taking sound decisions. As set out by the Prime Minister this week, the stronger outlook means taxes can now be cut in a serious, responsible way.

To that end, Mr Hunt announced that a 2 percentage cut to Employee National Insurance from 12% to 10% will come into effect from January 2024.

Taxes for the self-employed in Wales will also be cut and reformed. From April 2024, Class 4 NICs for the self-employed will be reduced from 9% to 8% and no self-employed person will have to pay Class 2 NICs.

Taken together, this is the largest ever cut to employee and self-employed National Insurance a UK-wide tax cut of 9 billion per year that amounts to a 324 average annual tax cut for 1.2 million workers in Wales, almost immediately improving living standards for over a million people and rewarding hard-work as the government builds an economy for the future.

Businesses will also benefit from the biggest business tax cut in modern British history. As signalled at Spring Budget, the Chancellor announced permanent Full Expensing: Invest for Less for those investing in IT equipment, plant, and machinery.

Full Expensing: Invest for Less is an effective permanent tax cut of 11 billion a year, boosting business investment by 14 billion across the forecast period and helping to grow the economy. With the tax cut now permanent, the UK will continue to have both the lowest headline corporation tax rate in the G7 and the most generous capital allowances in the OECD group of major advanced economies, such as the United States, Japan, South Korea and Germany. Since the introduction of the super deduction the predecessor to full expensing in 2021, investment in the UK has grown the fastest in the G7.

To further ensure that work pays, Mr Hunt confirmed that the National Living Wage will increase by nearly 10% to 11.44 an hour from April 2024, the largest ever cash increase. The Chancellor also reinforced the new 2.5 billionBack to Work Planfor those with long-term health conditions, disabilities and difficulties finding employment, which includes tough new sanctions for those who can work but choose not to.

The Chancellor also announced that the government will honour its commitment to the triple lock in full, with the state pension to increase by 8.5% in April in what is the second biggest ever cash increase. Universal Credit and other working age benefits will be boosted by 6.7% in April, in line with Septembers inflation figure as is convention.

Further action to help families includes increasing the Local Housing Allowance rate to cover the lowest 30% of rents from April benefiting 1.6 million households with an average gain of 800 in 2024/25 - and an alcohol duty freeze to 1stAugust 2024, following common-sense changes of the duty system made possible by Brexit. Measures today take the governments total support for the cost-of-living between 2022-25 beyond the 100 billion mark, to an average of 3,700 per household.

Many of todays decisions on tax and spending apply in Wales. As a result of decisions that do not apply UK-wide, the Welsh Government will receive 305 million over the next two years.

Accompanying forecasts by the OBR confirm that todays measures will make the economy permanently bigger, with growth every year of the forecast period. Borrowing and debt as a share of the economy are lower than in Spring this year and next year, with borrowing also lower on average across the forecast by comparison. They also confirm that inflation is expected to return to target in line with the Prime Ministers economic priorities.

Tax

With inflation halved and debt forecast to fall, Mr Hunt delivered on the governments commitment to cut taxes rewarding and incentivising work as part of its long-term plan to grow the economy.

• The main rate of Employee National Insurance will be cut by 2 percentage points from 12% to 10%, coming into effect from January 2024 - delivering the benefit of a tax cut quickly for 27 million workers.
• The combined rate of income tax and National Insurance for employees paying the basic rate of tax will therefore fall from 32% to 30% - the lowest combined basic rate since the 1980s.
• The rate of Class 4 NICs on all earnings between 12,570 and 50,270 will be cut by 1p, from 9% to 8% from April 2024.
• The weekly Class 2 NICs the flat rate compulsory charge which is currently 3.45 paid by self-employed people earning more than 12,570 - will effectively be abolished, with no-one required to pay from April 2024. Access to contributory benefits will be maintained and those currently paying voluntarily will still be able to do so at the same rate.
• The cuts to Class 4 and Class 2 together amount to a tax cut of 350 a year for the average self-employed person on 28,200, with around 2 million individuals to benefit.

Business

Measures to back British businesses big and small will remove barriers to investment and help to bridge the productivity gap between the UK and its G7 peers unlocking 20 billion extra business investment per year over the next decade.

• Permanent Full Expensing will create the certainty that businesses need to confidently invest for less. A company can now permanently claim 100% capital allowances on qualifying main rate plant and machinery investments, meaning that for every pound invested its taxes are cut by up to 25p.
• Pension reforms, including through establishing a new Growth Fund within the British Business Bank, will help unlock an extra 75 billion of financing for high-growth companies by 2030 while providing an extra 1,000 a year in retirement for the average earner saving from 18.
• SMEs will be supported with tougher regulation on late payers to improve prompt payments and continued funding for Help to Grow. The UK government will also work with the Welsh Government to explore the expansion of the Made Smarter Adoption programme - which helps manufacturing SMEs to reduce emissions and drive productivity - in Wales from 2026/27.
• The existing R&D Expenditure Credit and Small and Medium Enterprise Scheme will be merged from April 2024, simplifying the system and boosting innovation in the UK.?
• The rate at which loss-making companies are taxed within the merged scheme will be reduced from 25% to 19%, and the threshold
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