24 November 2023
This is an excerpt from our full analysis of the Jeremy Hunt’s Autumn Statement. To learn more about the in-depth content our consultants provide for Cicero clients, get in touch at UKPublicAffairs@h-advisors.global.
After the King’s Speech brought forward questions about the longevity of Rishi Sunak’s premiership, Chancellor Jeremy Hunt had a final chance to set the agenda and take back the initiative this year. From first sights he’s succeeded in surprising with good news for most and was on form, delivering both the puns and the pounds in this year’s Autumn Statement.
No policy stood out more than the Chancellor’s pledge to cut National Insurance Contributions by 2 per centage points from 12 to 10. While a change to National Insurance had been mooted, most presumed either higher thresholds or a modest 1 percentage point cut, but the fiscal headroom provided by better tax receipts allowed Hunt to produce greater changes. It’ll be welcomed by Conservative MPs keen to cut the cost of Government on their constituents who have also seen their disposable incomes squeezed by inflation and interest rate rises to counter it. Eyebrows were raised when the Chancellor announced this measure would be secured and in place by January 2024 through emergency legislation, promoting speculation about a Spring 2024 election.
While the reduction in National Contribution Payments was the rabbit out of the hat, there was a bigger package of cuts which saw 20bn worth of tax giveaways in this Autumn Statement. For Jeremy Hunt, this served two purposes. The first was to stop a faction of his own MPs from upending his Autumn Statement with an “alternative budget” and the other was to galvanise public support for his measures which make it difficult for Labour to attack them. How effectively these positions can be maintained remains to be seen but there is a risk that this giveaway could be overshadowed by the Government’s freeze on tax thresholds while inflation is still more than the Bank of England’s 2 per cent target.
The other striking policy was “making work pay” by cracking down on long-term unemployment. Headline announcements around people losing benefits after 18 months if they don’t find work, and changing assessments to assume those with physical disabilities can work from home are controversial. They draw a stark line between the Conservatives and the Labour Party and is reminiscent of the debate during the austerity years. This won’t be helped by the Government’s spending on day-to-day items only rising by 1 for the next six years as public services are already struggling with demand and recruitment issues. Expect significant challenges from Labour on this as well as moderate Conservative MPs.
It’s worth looking back at previous Conservative governments to understand how different Rishi Sunak’s positions stand in real terms. Under previous Conservative governments there would have been more of a play towards showing increased spending into the NHS, educational issues, the environment, or even defence. Here though, we see perhaps Sunak’s Thatcherite tendencies towards supporting market measures and sound money ahead of spending pledges for departments with popular support. This could point to the Conservative Party keeping their powder dry on these issues until the Spring.
Jeremy Hunt’s biggest issue isn’t how well some of these land but whether the public is listening. No rises in alcohol duty or fuel duty may be welcome to consumers but they’re not the same as a cut, the investment tax changes are felt in productivity and wages in years hence, and speeding up grid connections will still take the best part of a decade to filter through in energy bills. Hunt’s bet is that he’s at the helm as the economy is on the turn and that wage increases in the new fiscal year will shore up the base and win some workers back. Sunak had best hope it comes off.
The day after the Autumn Statement, H/Advisors Cicero hosted a webinar to discuss the financial and political outcomes of the Chancellor’s announcements. We heard from a panel featuring Nick Macpherson, Jim Pickard and Cicero’s Sonia Khan, and chaired by Senior Counsel, Rhoda Macdonald.