Jeremy Hunt Cuts National Insurance And Increases Minimum Wage In Autumn Statement
Jeremy Hunt delivering his Autumn Statement (Alamy)
Jeremy Hunt has cut national insurance and announced an increase to the minimum wage as part of his plans to “make work pay” in the Autumn Statement.
The National Insurance cut was the headline announcement in an Autumn Statement that also included reforms to planning, a freeze in alcohol duty, uprates in benefits and state pensions, and mandatory work placements for long-term jobseekers.
However, the budget watchdog the Office for Budget Responsibility (OBR) has said that the tax burden is still forecast to reach a post-war high.
Addressing the Commons this afternoon, the Chancellor told MPs that he would cut the main rate of Employee National Insurance from 12 per cent to 10 per cent on earnings between £12,570 and £50,270 from as soon as January 2024.
The changes will mean that somebody on the average salary of £35,000 will “save over £450,” Hunt said.
“If we want people to get up early in the morning, if we want them 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 us all,” Hunt told MPs.
The chancellor said that while it would be usual to wait until the new financial year to implement National Insurance changes, he intended to introduce emergency legislation this week in order to make the cut from 6 January 2024.
Hunt also confirmed that he is abolishing the Class 2 National Insurance charge, and reducing Class 4 National insurance for sef-employed workers – paid on earnings between £12,570 and £50,270 - from 9 per cent to 8 per cent.
“Taken together [...] these reforms will save around 2 million self-employed people an average of £350 a year from April,” Hunt told MPs.
His changes to National Insurance came alongside the confirmation that the minimum wage – known as the National Living Wage – will increase to £11.44 per hour, a change Hunt called the “largest ever cash increase” in the scheme.
There was also an increase to benefits of 6.7 per cent confirmed, and an increase in the state pension of 8.5 per cent through the triple lock.
Hunt described the move as “vital support to those on the very lowest incomes from a compassionate Conservative government”. The benefits increase is in line with the September figure for inflation and will see benefits rise by 6.7 per cent. Hunt acknowledged the "speculation" that benefits would have been subjected to the lower inflation figure for October, but said using the September figure will mean "an average increase of £470 for 5.5m households next year".
He also confirmed a freeze on “all alcohol duty” until 1 August next year and an increase in the Local Housing Allowance, in support for “private renters on the lowest incomes”.
Local Housing Allowance rates are used to calculate the amount of housing benefit available for tenants who are renting from private landlords. Hunt told the Commons that he would be increasing the allowance "to the 30th percentile of local market rents," and said the change would provide 1.6million households with more support next year.
At the beginning of his speech this morning, Hunt confirmed that there were “110 growth measures” included in his statement. Among them were promised changes to planning rules that will impact businesses and housebuilding.
Hunt told the Commons that it "takes too long to approve infrastructure projects and business planning applications", so promised to overhaul the system so that local authorities can recover the costs of big business planning applications, in exchange for having to meet deadlines faster.
"If they fail, fees will be refunded automatically with the application being processed free of charge," Hunt announced.
Following the defeat of the government's nutrient neutrality plans earlier this year, Hunt also said that ministers will invest more than £100 million "to deliver high quality nutrient mitigation schemes" which he said would "unlock" 40,000 homes. He also promised new housing quarters in Cambridge, London and Leeds.
Alongside those were plans for people who live close to new energy infrastrure to get up to £10,000 off their electricity bills over a 10 year period.
"Taken together these planning and grid reforms are estimated to accelerate around £90 billion of additional business investment over the next 10 years," Hunt told MPs.
Hunt told MPs that the watchdog the Office for Budget Responsibility “say that the combined impact of these measures will raise business investment, get more people into work, reduce inflation next year and increase GDP”.
Responding to Hunt's speech, shadow chancellor Rachel Reeves said that growth has "hit a dead end" and the government's plans shown the "damage that this government has done".
"As the sun begins to set on this divided, out of touch, weak government the only conclusion the British people will reach is this," she added.
"After 13 years of the Conservatives the economy is simply not working, despite all the promises today, working people are still worse off."
The Liberal Democrats described the statement as "a deception" from Hunt "after years of cruel tax hikes".
The party's Treasury spokesperson Sarah Olney said: "Conservative chaos has sent mortgages and tax bills soaring, today’s announcements won’t even touch the sides."
She added: “Today has been more stale nonsense from a Conservative government out of touch and out of ideas.”
It had been widely expected that Hunt would use the statement to announce tax cuts, with him and Sunak having come under pressure from their own backbenches in recent months over the tax burden.
However, despite the cuts, the OBR said that the overall burden is still forecast to rise in each of the next 5 years to reach almost 38 per cent of GDP overall by 2028/29.
In March, the OBR had predicted that growth would be 1.8% higher next year than it had been this year, although that forecast has now been downgraded to 0.7 per cent.
Last week a senior Conservative figure told PoliticsHome that the Prime Minister “will want to give some read meat” to those who have doubted him given the party’s slump in the polls.
On Monday Sunak had said that the recent drop in inflation had signalled that tax cuts could begin. “Now that inflation is halved and our growth is stronger, meaning revenues are higher, we can begin the next phase and turn our attention to cutting tax,” Sunak said in a speech at a college in Enfield, north London, but was not specific about which taxes these would be.
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