Autumn Statement special
A quick round-up
Hello and welcome to a special edition of Off to Lunch…
Firstly, happy birthday to Jeremy Hunt’s wife. The chancellor opened his Autumn Statement speech today by giving his best wishes to his wife. “Unlike me, she is looking younger every year,” he said. I presume it really is her birthday, although Hunt has got some key facts wrong before, such as saying his wife was Japanese instead of Chinese….
A second thing to note following the Autumn Statement is that financial markets are relatively calm, unlike after the mini-Budget last September.
However, Hunt announced a collection of substantive measures that will make a notable difference for businesses and households. This was, said the chancellor, an “Autumn Statement for growth” and “an Autumn Statement for a country that has turned a corner”. He claimed it included the “biggest business tax cut in modern British history” and the biggest collection of tax cuts overall since the 1980s.
That tax cut for businesses is being able to expense all investment in IT equipment, plant and machinery against profits to pay less in corporation tax, saving up to £11 billion a year overall. The government’s Autumn Statement document shows how much this will cost each year (and save for businesses)…
The tax cut for individuals is even more significant. The rate of National Insurance will be cut from 12 per cent to 10 per cent for all employees from January 6, a move affecting 27 million people. Class 2 national insurance contributions will also be abolished for the self-employed and the Class 4 rate will be cut from 9 per cent to 8 per cent.
This is how much the 2 percentage point cut in National Insurance for employees will cost each year (and save for households). It is worth £450 a year to the average worker earning £35,400.
Overall this Autumn Statement represents a big cost for the government - £21.1 billion a year by 2028-2029, as the official document shows….
The Office for Budget Responsibility, the government’s independent spending watchdog, has published a neat summary explaining how Hunt has been able to afford this. In short, the chancellor had some headroom to offer tax cuts because the economy is in better shape than expected, tax receipts are up, and the government has frozen departmental spending. This is the OBR’s summary…
But it is not all good news for the chancellor- far from it. Despite his comments about it being an Autumn Statement for growth, the OBR has actually cut its growth forecasts for the UK economy over the next five years compared to its previous forecast in March. The new forecasts published today take into account the new policies announced in the Autumn Statement…
And as Paul Johnson at the Institute for Fiscal Studies points out, the tax burden in the UK is still set to rise to a post-war high of 37.7 per cent…
Plus there are concerns that freezing public investment could harm productivity…
However, the chancellor thinks that allowing businesses to expense their spending should spark a big increase in business investment in the UK - around £20 billion a year, or roughly 1 per cent of GDP.
There were other business-friendly moves in the Autumn Statement too. In fact, Hunt said there were 110 measures designed to boost growth. These included:
-A discount on business rates. The small business multiplier has been frozen for another year and the 75 per cent discount for businesses in retail, hospitality and leisure has also been extended
-Alcohol duty has been frozen until next August
-A new concierge service will be introduced for foreign businesses looking to make big investments in the UK. This is one of the headline recommendations from the Harrington Review of Foreign Direct Investment, which the chancellor said the government would accept in full. You can find that review, which was published today, here
-The tax breaks for the investment zones and freeports across the UK, which are designed to attract investment, will be extended by another five years
-The government will look at selling some of its shares in Natwest to retail investors as part of a new “Tell Sid” initiative designed to boost share-ownership in the UK
Here is some reaction to the measures in the Autumn Statement…
You can find all the government’s documents on the Autumn Statement, including the chancellor’s speech, here. You can also find the OBR’s report on the UK economy and its forecasts for the near-future here
Finally, below you can find a summary of all the measures announced by the chancellor today and how much they will cost. You can expand each image by clicking on it…
Other stories that matter…
1. Sam Altman has agreed to return as chief executive of OpenAI under a new board including former Salesforce boss Bret Taylor, former US treasury secretary Larry Summers, and Adam D’Angelo, the chief executive of the online message board Quora. However, The Information, the tech news website that has led much of the reporting on OpenAI, says that Altman has agreed to an internal investigation taking place into the alleged conduct that led to him being forced out. You can read that story here. One last thought on this story today - The New York Times has written a fascinating piece about how the turmoil at OpenAI shows that being a visionary founder and business leader isn’t easy - it can often cause ructions, as it did for Steve Jobs at Apple. “One of the most persistent clichés is that of the visionary founder — the executive who can reach into the future, break off a piece and make it into something that the masses adore,” the piece says. “Do this right and your company will be worth a trillion dollars. Do it wrong and you have an overpriced toaster.” You can read that piece here
2. Sir Brian Souter, the co-founder of Stagecoach, is planning to invest hundreds of millions of pounds into UK businesses after selling the bus and train operator last year. Calum Cusiter, the managing director of Souter Investments, told Bloomberg: “We’re definitely not of the camp that is risk off.” You can read more in a Bloomberg feature here
3. The last oil refinery in Scotland could stop operating by 2025. Petroineos, a joint venture between Ineos and PetroChina, has said it will look to turn the Grangemouth site into a fuels import terminal. Around 400 jobs are at risk. BBC story here
4. We are underestimating the value of a university education for those who complete their course in their early 20s after going straight from school. This is because research on this topic often takes into account those who go to university later in life and graduate after they are 30. These are the findings of new research by the National Bureau of Economic Research in the US and flagged by economist Tyler Cowen. You can find the research here and Cowen’s Marginal Revolution site here
5. Author David Epstein has written a fascinating piece about how businesses need to ensure that they develop “fast risers” and “slow bakers” among their staff in order to maximise the talent available to them. You can read more here
New podcast episode…
As revealed in yesterday’s Off to Lunch, we will be releasing new podcast episodes from tomorrow. Our Business Leader podcast takes a second look at big business stories by speaking to a leading figure at the heart of the story. Business Leader is the new name for the Business Studies podcast. For existing listeners of Business Studies, you can expect more of the same, only better, with episodes now all year round. To listeners of The Business Leader Podcast in the past, hello and welcome. I hope you enjoy the new sound.
The first episode looks at one of the most extraordinary and misunderstood organisations in the UK - The Crown Estate. We speak to Dan Labbad about how he went from the suburbs of Sydney to running the Crown Estate and trying to achieve its eye-opening purpose of “creating lasting and shared prosperity” for the UK. Subscribers to Off to Lunch will be notified when the episode is live and it will also be available across all the usual podcast platforms.
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Best
Graham