What the autumn statement means for Rishi Sunak’s new economic priorities
Rishi Sunak announced five long-term priorities for the economy ahead of the Chancellor’s autumn statement.
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Your support makes all the difference.The autumn statement was the first major announcement after Rishi Sunak revealed a new series of long-term priorities for the economy.
In a speech on Monday, the Prime Minister said the “next phase” of the Government’s plan would see him focus on reducing debt, cutting taxes, building domestic and sustainable energy, “backing British business” and delivering “world-class” education.
On Wednesday, the Chancellor explicitly referenced these five priorities as he set out “an autumn statement for growth”.
Below, the PA news agency looks at how his announcements line up with the Prime Minister’s priorities.
-Reducing debt
The Chancellor was able to say that he was set to meet his fiscal rule that requires debt to be falling as a proportion of GDP by the fifth year of the forecast period covered by the Office for Budget Responsibility.
Underlying debt is still set to rise from 89% of GDP this year to 93.2% in 2026/27, after which the OBR forecasts debt will hold steady and then decline to 92.8% of GDP in 2028/29.
While this may meet Mr Hunt’s fiscal rules, the forecast still involves underlying debt ending up higher towards the end of the decade than it is today.
There are also several risks to meeting even this forecast. The reduction in debt requires no changes to departmental spending limits despite persistent inflation – a cut in real terms – while it is also dependent on assumptions about taxation that may not prove accurate.
Notably, the OBR has assumed that the Government will increase fuel duty in line with inflation rather than freezing it as all chancellors have done since 2011. Continuing the freeze reduces the Chancellor’s headroom considerably and makes cutting debt less likely.
-Cutting taxes
The autumn statement contained two major tax cuts, described by the Chancellor as “the biggest package of tax cuts to be implemented since the 1980s”.
The first cut is the reduction of national insurance by 2 percentage points for employees and 1 point for the self-employed, while the Chancellor also announced that “full expensing” would be made permanent – amounting to “the largest business tax cut in modern British history”.
However, the OBR still forecasts that the overall tax burden will rise to its highest level since the Second World War by 2028/29, reaching 38% of GDP.
Part of this is due to the decision to keep personal allowances frozen which, combined with higher inflation, means more people are dragged into either paying tax or into higher tax bands as their wages rise.
-Building domestic and sustainable energy
The key energy sector announcement was a series of reforms to planning and grid connection regulations that the Chancellor said would cut delays in accessing the national grid by 90%.
He said he would also offer up to £10,000 off energy bills over 10 years for those living near new transmission lines to calm opposition to new pylons.
Several of these reforms are likely to require legislative measures to bring into effect, with limited time remaining before the next election.
-Backing British business
Alongside making full expensing permanent, expected to unlock around £14 billion in investment over the next five years, the Chancellor announced a series of other measures designed to encourage businesses to invest in the UK.
This included £4.5 billion in support for strategic manufacturing sectors such as aerospace, life sciences and the car industry and providing more tax relief for loss-making research and development companies.
The Chancellor expects the combined measures to increase business investment by £20 billion per year over the next decade, amounting to 1% of GDP.
But with business investment averaging 9.5% of GDP over the past 10 years, this would bring total investment up to 10.5% of GDP – still below the average of 11.2% in France, Germany and the US.
-Delivering world-class education
The Chancellor made little mention of education in his speech, other than announcing £50 million to pilot ways of increasing the number of apprentices in engineering and “other key growth sectors”.
The Government has previously announced £600 million to provide teachers in “key shortage academic and technical subjects” with financial incentives for the first five years of their careers.
However, with analysts expecting a further squeeze on departmental spending limits in order to meet the Government’s other aims, it remains to be seen whether education in the UK can be improved without additional investment.