Jeremy Hunts Autumn statement: ‘We’ll reduce debt, cut tax and reward hard work’
In a much-needed pre-Christmas giveaway, the Chancellor slashed National Insurance and business taxes while increasing benefits and the minimum wage to help struggling families.
Mr Hunt used his crunch Autumn Statement to give 27 million workers a major helping hand by cutting NI from 12% to 10%, starting in January.
It will save a worker on a salary of £35,000 more than £450 a year, £520 for the average nurse and £630 for the typical police officer.
NI is also being slashed for the self-employed with Class 2 contributions abolished and Class 4 reduced – together helping two million workers to £350 each.
Duties on beer, wine and spirits, and pubs and bars are being frozen with boozers having their 75% business rates holiday extended.
Mr Hunt said the decision to axe VAT-free shopping for tourists visiting the UK could be reviewed.
The Local Housing Allowance was also unfrozen, giving 1.6 million households an average of £800 extra support with rent next year.
The changes announced in the Autumn Statement, which reduce the tax burden by 0.7 per cent, were made possible by bigger-than-anticipated tax revenues and easing inflation.
Delivering his statement to a packed Commons chamber Mr Hunt vowed to “reduce debt, cut taxes and reward work”, measures he said would get Britain
“back on track”.
He added: “We have delivered the largest ever cut to employee and self-employed National Insurance and the biggest package of tax cuts to be implemented since the 1980s.
“If we want people to get up early in the morning, if we want people to work nights, if we want an economy where people go the extra mile and work hard then we need to recognise that their hard work benefits all of us.”
The tax cuts follow long-standing pressure from the Tory backbenches to reduce the burden on both the public and business, which has been at a 70-year high.
But it also comes as a general election looms, with the Conservatives still lagging far behind Labour in the polls.
Mr Hunt insisted the Government’s economic plan is working, with a recession avoided and GDP continuing to grow.
The Office for Budget Responsibility has upgraded its growth forecast for this year to 0.6%.
In 2024, growth is forecast to be 0.7% and expected to rise to 1.4% the following year.
Sarah Coles, of Hargreaves Lansdown, said: “The National Insurance cut will bring real relief.”
She said it will take £149 off the tax bill of someone earning £20,000, £349 for someone making £30,000, £549 for someone on £40,000, £749 for someone raking in £50,000 and £754 for anyone earning over the higher rate tax threshold.
But the welcome cuts came as the Chancellor froze thresholds for income tax, meaning that as people’s earnings have increased they have either been brought into tax for the first time or moved into higher bands.
The continuing freeze in income tax and national insurance thresholds, rather than uprating them to account for rising inflation, will result in almost £45billion of extra revenue for the Exchequer by 2028-29.
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And the overall tax burden remains on course to reach its highest since the Second World War.
The burden is forecast to rise from the equivalent of 36.3% of GDP (gross domestic product, or the total value of the economy) in 2023/24 to 37.7% by 2028/29, according to the OBR.
The tax changes announced by Mr Hunt in his statement are estimated to have reduced the tax burden by 0.7% of GDP.
Since March 2021, the income tax personal allowance has been frozen at £12,750 while the higher rate threshold has been kept at £50,270.
The stagnation has meant that over time, as wages have increased, people have either been brought into the tax system for the first time or moved to higher rates – a trend known as “fiscal drag”.
Analysis published by the IFS suggests that for an employee with average full-time earnings (£35,000 per year), the cut in national insurance contributions will offset the impact on incomes of the tax threshold freezes until 2024/25.
Beyond that point, the freezes “are likely to continue to eat further into their incomes each year up to and including 2027/28, at which point they will be paying £249 a year more indirect tax overall as a result of all the changes since 2021”.
A peak in the overall tax burden of 37.7% of GDP in 2028/29 would be 4.5 percentage points above the level before the pandemic.The figure reached its lowest level in 1960/61, when it stood at 27.9% of GDP.
Shadow Chancellor Rachel Reeves said: “We were told to expect an Autumn Statement for growth.
“But growth has been revised down next year, the year after, and the year after that.
“What has been laid bare today is the full scale of the damage that this Conservative government has done to our economy over
13 years. And nothing that has been announced will remotely compensate.”
Darwin Friend, head of research at the TaxPayers’ Alliance, said: “Cutting national insurance will be a huge relief for families
around Britain.”
“Working people grappling with the cost-of-living crisis have been crying out for a cut to personal taxation.
“To make sure that hard work continues to pay off, the Chancellor must unfreeze personal tax thresholds at the next Budget.”
Conservative MP Andrea Leadsom hailed the move to slash NI as “brilliant” as she welcomed many of the measures unveiled by Mr Hunt in Parliament yesterday.
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