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Stability, Growth and Public Services

This year it’s felt a bit as though Autumn Statements are like buses, you wait for ages and then three come along at once. And whilst it has not been quite that bad - the fact that uncosted measures brought in earlier this autumn by the previous Chancellor were swiftly overturned by the current Chancellor meant that this latest Autumn Statement was always going to be viewed with some  measure of concern.

It's not difficult to see why. Amidst growing inflation, which the Office for Budget Responsibility (OBR) says is primarily down to global factors, balancing the books was never going to be easy. Cut too deeply and you risk a prolonged recession. Wield the axe too lightly and you risk an inflationary/cost spiral. In a time in which the International Monetary Fund expect one third of the world’s economies to be in recession this year or next, the Government had to work hand in hand with the OBR and the Bank of England to deliver a balanced plan.

 That led the Chancellor, Jeremy Hunt, to announce a phased strategy based on stability, growth and public services. In the short term as growth slows and unemployment rises, the Government will use fiscal policy to support the economy. Then as growth picks up measures will be brought into play which are designed to reduce Government debt. These plans have been fully costed by the OBR and they forecast that, whilst they consider the UK to be currently in recession, the current approach will lead to a shallower recession, a reduction in inflation, and protection for some 70,000 jobs.

So how does the Autumn Statement seek to deliver on its aims? As with any plan the devil is in the detail and it is that detail that the Beckworth Investment Committee will be studying in depth over the coming days in order to best advise our clients. Measures to boost the NHS, Social Care, and Education have been balanced with a slowdown in the rate of growth in public spending. Nevertheless, several important infrastructure projects are to go ahead with a renewed focus on science, innovation and fast broadband.

 As far as personal finances go it’s not as bad as it might have been but individuals may need to factor the announced changes into their long term financial, investment, and inheritance tax planning. Announcements include:

• The threshold at which a 45% tax rate kicks in will be lowered from £150,000 to £125,140 with effect from the start of the 2023/24 tax year. It is estimated that this will result in some 200,000 additional individuals paying the top tax rate. Other personal allowance thresholds are to be frozen until April 2028.
  
• The dividend allowance which currently stands at £2,000 is to be cut to £1,000 with effect from the start of the next tax year and then to £500 the following year.
  
• The capital gains tax exempt amount is also going to be cut from its current rate of £12,300 to £6,000 for the next tax year and £3,000 the year after.
  
• The current inheritance tax bands were due to remain unchanged until 2026. This has been extended to April 2028.