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During Wednesday’s autumn statement, Andrew Bailey may have felt frustrated as Jeremy Hunt took credit multiple times for the efforts of the Bank of England governor and his team.
The MPC has raised interest rates 14 times in a row, bringing them to 5.25 per cent. This decision received a lot of criticism. However, with inflation now decreased by more than 50% (measured at 4.6%), the Chancellor and Rishi Sunak are taking credit for the success at every chance they get.
It is true that Mr. Hunt ignored increasing demands for tax reductions from his fellow colleagues, which ensured that financial policies were in line with monetary policies. However, this was a minor task compared to the efforts of the MPC. And at present, that opposition has weakened and resulted in a significant concession.
He made sure to mention that the Office for Budgetary Responsibility (OBR), known for having a generally positive outlook on government policies, informed him that his plans were acceptable and not particularly inflationary.
The majority of workers will receive a slight reduction in national insurance, but it may not be as beneficial as it appears. According to PricewaterhouseCoopers, tax thresholds have not been raised, resulting in the ongoing impact of fiscal drag and partially offsetting the savings. As wages increase, more individuals will fall into higher tax brackets due to the unchanged thresholds. This could be seen as a hidden tax.
However, the Resolution Foundation states that this remains “the largest tax decrease plan since 1988,” as the chancellor has utilized almost all of the £90 billion in positive fiscal developments provided by the OBR.
The primary emphasis was on business, as Mr. Hunt mentioned “110 measures for promoting growth” which included numerous “supply-side reforms” that Liz Truss frequently advocated for. Mr. Hunt may not appreciate me mentioning her name in relation to his efforts.
Some of these were appreciated, especially from a business standpoint. For instance, the chancellor chose to permanently permit businesses to fully expense their investments, giving them a significant tax benefit for specific investments. This is intended to address Britain’s historically low performance in this area.
The main focus of the day was on growth, even though it is currently scarce. The OBR has lowered their growth prediction for 2024 from 1.8% to 0.7%, and for 2025 from 2.5% to 1.4%. The prediction for this year has increased to 0.6%, compared to the previous forecast of a 0.2% decline in March.
The OBR predicts that business investment relief will bring a slight but positive impact on the economy. Unfortunately, public sector investment will not be able to match it.
Small businesses were among the top beneficiaries of the autumn statement. According to Tina McKenzie, policy chair at the Federation of Small Businesses (FSB), Jeremy Hunt’s actions on late payments, small business rates, and self-employed taxation were much appreciated. McKenzie believes that small businesses, as well as the 16 million employees they support, are key drivers of future economic growth and will contribute to improving the standard of living nationwide.
However, limiting the business rates for smaller establishments and spaces will not benefit the larger ones. There are no plans for overall reform of this despised tax, which is applied to businesses regardless of their profitability. As a result, the British Retail Consortium strongly criticized the chancellor’s statement, stating that it does not adequately support retailers, customers, and an industry that employs over 3 million individuals, as well as many others in its supply chains.
Although the autumn statement was largely favorable for businesses, there were still missed opportunities and Britain’s economy remains unstable. It is expected that the upcoming spring Budget will focus on benefiting voters rather than businesses.
Source: independent.co.uk
