STA Update: UK Government Autum Budget Statement – Highlights for Businesses

The Government announced their Autumn Budget today (Thursday 17th November 2022).

The full speech can be accessed here. A summary of the statement is below.

Key headlines include:

Office for Budget Responsibility (OBR) predicts economy will shrink by 1.4% next year and the Chancellor has acknowledged the country is in recession. It is then expected to rise by 1.3%, 2.6% and 2.7% over the following three years.
The OBR has predicted that inflation will hit an average rate of 9.1% this year and 7.4% in 2023. Chancellor said today’s announcement will help inflation fall sharply from next year.
Chancellor predicts relatively shallow but lengthy recession expected.
Household energy price guarantee to stay until March 2024, although rate will increase 20% from April 2023. Guarantee of £2,500 for typical households to become £3,000.
It was briefly mentioned that there will be a new targeted approach for energy price relief from next April for businesses.
Energy, infrastructure and innovation were outlined as the three main growth priorities.
Commitment to work with the Scottish Government on the feasibility study for the A75.
UK Government will go ahead with round 2 of the levelling up fund, at least matching the £1.7 billion value of round 1.
NHS and schools in Scotland face equivalent pressures – Chancellor said there would be a £1.5bn Barnett consequential for Scottish Government.
VAT registration threshold to be maintained until March 2026.

Opening comments:

Plan to tackle cost of living crisis and rebuild the economy.
Main priorities are stability, growth and public services
Plan will lead to shallower downturn, higher growth, and lower energy prices.
High inflation is the enemy because it leads to higher prices, higher mortgage rates and businesses failing, and causes industrial unrest and erodes savings. Inflation also hurts the poorest the most.

Economic forecast:

Office for Budget Responsibility (OBR) predicting economy will shrink by 1.4% next year and the Chancellor has acknowledged the country is in recession. It is then expected to rise by 1.3%, 2.6% and 2.7% over the following three years.
The OBR has predicted that inflation will hit an average rate of 9.1% this year and 7.4% in 2023. Chancellor said today’s announcement will help inflation fall sharply from next year.
This year the economy is forecast to grow by 4.2%.
OBR has said high energy prices driven by war in Ukraine is the primary cause of current inflation.
Unlikely economy will start growing again until 2024.
Chancellor said a relatively shallow but lengthy recession was expected.
Bank of England forecasts are that unemployment could reach 6.5% and 1 million people could be out of work.
UK Government plan to tackle debt over five years, rather than three.
Two new fiscal rules announced: debt must fall as a percentage of GDP over a five-year period, and public sector borrowing over must be below 3% of GDP in the same period.

Business taxes:

VAT registration threshold to be maintained until March 2026.
Going ahead with revaluation of business properties from April 2023. Chancellor said almost two thirds of properties will not pay more next year and thousands of pubs, restaurants and small high street shops will benefit. This will include a new government funded Transitional Relief scheme – called for by the CBI, the British Retail Consortium, the Federation of Small Businesses – benefitting around 700,000 businesses.
A windfall tax on the profits of oil and gas firms will rise from 25% to 35%, extended until March 2028.
New temporary 45% tax on companies that generate electricity will be applied from January 2023.

Economic growth:

Cannot borrow your way to growth.
Sound money is the rock upon which long-term prosperity rests, but not enough on own.
High wage, high skill economy leading to long-term prosperity.
Energy, infrastructure and innovation are the three main growth priorities.
Focus to be on energy independence combined with energy efficiency.
Need to go further with major acceleration of homegrown technology, but above all nuclear. Announcement of new nuclear plant Sizewell C.
New ambition announced that by 2030, energy consumption from buildings and industry to be reduced by 15%.
Restated commitment to COP26 Glasgow Climate Pact, including a 68% reduction in our emissions by 2030.
Further details on energy independence plans and new energy efficiency taskforce to be announced.
No plans to cut capital investment over the next two years. Northern Powerhouse rail, HS2 and gigabit broadband rollout to go ahead as planned.
Will work with the Scottish Government on the feasibility study for the A75.
Will go ahead with round 2 of the levelling up fund, at least matching the £1.7 billion value of round 1.
Third growth priority is innovation.

Tax:

Those with more to contribute more.
Commitment to avoiding tax rises that damage growth.
Capital gains tax – the amount you can earn on investment profits without paying tax has been cut from £12,000 to £6,000 from April 2023, and £3,000 by April 2024.
Stamp Duty tax cut will be reversed in 2025.
Higher earners will pay the top rate of tax on earnings above £125,000 from April 2023.
Personal allowance, National Insurance threshold, and inheritance tax thresholds held until April 2028.
Dividend allowance will be cut from £2,000 to £1,000, then £500.
Electric cars will pay excise duty from 2025.

Public spending:

Public spending levels to be maintained until 2025.
NHS budget will increase in each of the next two years by an extra £3.3bn.
Schools will get an extra £2.3bn next year and the following year.
NHS and schools in Scotland face equivalent pressures – Chancellor said there would be a £1.5bn Barnett consequential for Scottish Government.

Household support:

Energy price guarantee to stay until March 2024, although rate will increase 20% from April 2023. Guarantee of £2,500 for typical households to become £3,000.
Households using oil/ Liquefied petroleum gas will have their £100 payment doubled to £200 this winter.
It was briefly mentioned that there will be a new targeted approach for energy price relief from next April for businesses.
Additional cost of living payment of £900 for households on means tested benefits
Additional £300 for state pensioners
Additional £150 for those on disabilities.
UK national living wage for people over 23 to increase from £9.50 to £10.42 an hour from April.