Chancellor Jeremy Hunt presented an Autumn Statement which included £30 billion of spending cuts and around £24 billion in tax rises over the next five years.
The announcements were in stark contrast to Kwasi Kwarteng’s ill-fated plan for £45 billion of tax cuts which sent the markets into a frenzy less than two months ago.
The Office for Budget Responsibility has forecast that the UK economy will shrink by 1.4% next year - but it also expects the UK’s inflation rate to fall to 7.4% next year, from a peak of 9.1% in 2022.
So what’s the initial business reaction been?
Stuart Smith, head of Midlands at JLL, said: “I think the Midlands’ cities will rightly feel nervous about the onset of ‘Austerity 2.0’ in today’s Autumn Statement, given that the scars of the last round have barely been healed by the stop-start nature of the Levelling Up agenda.
“Clearly, given the financial crisis caused by the markets’ fear that the UK had lost its sense of fiscal responsibility, there was a need to restore trust today. But with few initiatives to boost growth and a slower rise in capital spending, the Midlands’ public sector is going to find it much harder to play an active role in local regeneration projects.
“Investment zones may not have delivered what was suggested in the ‘mini-budget’ but they were an idea of some promise and at least worthy of exploration.
“Many will feel disappointed by their scrapping. As we look ahead, we await details for the university-focussed scheme that will replace them and hope it will come to the fore before the next Budget to support local authorities.”
Kevin Stevens, of E5 Care, said the Chancellor’s commitment for adult social care was “an overdue step in the right direction”.
E5 is currently working with Dudley Metropolitan Borough Council on multi-million-pound plans for an extra care housing development in Brierley Hill.
“One of the major factors jamming the NHS and adult social care system is the lack of quality care accommodation for adults who are ready for hospital discharge. That’s because the cost of providing that care is often out of reach of local authorities which are already financially stretched, so this is an overdue step in the right direction.
“The Government needs to consider alternative ways to solve the social care crisis. For example, the E5 Care model in Dudley removes the financial block for local authorities as it requires no capital commitment and can be afforded within existing housing budgets. We need innovative approaches if we are to tackle a problem which will only increase, due to our ageing population.”
Sam Martin, chief executive of Peckwater Brands, said: “Prominent voices from the hospitality space have been calling out for direct relief and support ahead of this and every other financial statement, but time and again no special measures are announced to support hospitality businesses.
“Businesses that have survived the pandemic, lockdowns, staff shortages and supply issues will now have to face the fresh challenges of austerity and downturn. The measures announced today like tax relief and the energy price guarantee will go some way to safeguarding our independent pubs, cafes, restaurants, and bars – though only time will tell if they will be enough.”
Chris Romans, EY’s Head of Tax in the Midlands, said: “The Chancellor may have avoided pulling rabbits from hats, but this Autumn Statement was certainly intended to make instability disappear. This was very much in keeping with a traditional role of an economic statement, setting out the future direction rather than revealing mass changes that take immediate effect. Indeed, the tax rises, outside of energy, increase significantly towards the end of the forecast period, as thresholds are frozen for the next two years.
“While the £50bn ‘black hole’ in annual public finances remains a significant sum, the measures announced today will begin to plug it, but won’t deliver this full amount per year until 2027/28. However, once put into the context of the UK’s total tax receipts exceeding £1 trillion by 2025/6, it is clear why the Chancellor didn’t feel the need to act too swiftly. The extensions to threshold freezes announced today are intended to avoid exacerbating the effects of a recession in the short term but will start to contribute to greater tax receipts for the Exchequer, particularly once inflation causes pay to rise.
“On the business side, there was comparatively little other than on energy, beyond confirmation that the UK would remain committed to the changes to international tax being discussed at the global level. One area of action was in the changes to tax support for Research and Development, where the Chancellor differed from his predecessors and shifted support from small to big business. Those hoping for broader investment support will have to wait until the Chancellor next takes to the dispatch box. The government will be hoping that the stability of the economy is enough to maintain the attractiveness of the UK, despite the rise in corporation tax.
“Much of what we saw today was a seamless extension of the policy framework of Rishi Sunak’s time as Chancellor, with the current Chancellor even referring to the Mais Lecture in which the now-PM set out his economic vision. Businesses will hope that the incentives for investment that were part of that approach will still come to pass, perhaps in the Spring.”
Sarah Garnish, a consultant at Quantum Advisory, said: “The Prime Minister was true to his word and kept vulnerable individuals ‘at the forefront of his mind’. The increase will bring a welcome relief to millions of pensioners, who are heavily reliant on the state pension. At a time when prices are rising and money is tight, this will help to ensure that many pensioners don’t fall into poverty.”
“With the National Living Wage rising, those employers with salary sacrifice arrangements will need to ensure that employees earning the National Living Wage where their salary - after salary sacrifice - goes below this new threshold are opted out of the salary sacrifice arrangement.
“Higher rate tax earners affected by this change may find it more attractive to pay additional pension contributions rather than paying additional tax. This may be even more attractive as the further freeze mooted to the Lifetime Allowance on pension savings has not come into fruition and remains frozen until April 2026 at £1,073,100.”
Johnathan Dudley, from national audit, tax, advisory and risk firm Crowe, said: “It’s clear that the Chancellor intends to continue to use Keynesian economics commercially to drive growth by doubling down on infrastructural investment in the Sizewell Nuclear plant and the various large rail projects, including HS2.
“But this only works if that investment is retained and trickled down right here in the UK economy. In the interest of British manufacturers and the economy there simply has to be robust “post Brexit - buy British” procurement initiatives here and the same should also go for expanded investment in schools and the NHS too, or the invested money will leak abroad.
“The Chancellor has announced that he wants the UK to be the new “Silicone Valley” and support innovation, yet he has announced cuts and ominous sounding changes to R&D, for which we await detail, which those very innovative businesses rely on to develop world-beating products and processes.”
National chair of the Federation of Small Businesses (FSB), Martin McTague, said: "The Budget is high on stealth-creation and low on wealth-creation, piling more pressure on the UK’s 5.5 million small businesses, their employees and customers.
"While tackling inflation is essential, so are measures to create conditions for prosperity, growth and support enterprise. Today is a missed opportunity to avoid further economic slowdown. Small businesses, which account for more than 16 million jobs in the UK, were already facing an acute cost of doing business crisis through soaring costs, falling revenues, shrinking availability of affordable finance, and a rise in invoices being paid late. On top of all that, they now face even higher taxes, cuts to innovation, and a recipe for a longer and deeper recession."
