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UK Autumn Statement: Running off a cliff with no road to stand on?



When I was young, I loved watching slapstick cartoons: Tom and Jerry, Pink Panther, Looney Tunes, and Wile E. Coyote and Road Runner. Nine times out of ten, you'd have Wile E. Coyote chasing Road Runner when the road suddenly stops. Coyote shoots off the cliff's edge and tries to run in thin air, before falling a thousand feet.


Yesterday, Jeremy Hunt delivered his Autumn Statement. And while there is lots to be celebrated within the Statement, I cannot help but feel Hunt is doing a Coyote and trying to run in thin air.


Before we get to that, let's focus on the positives.


We finally have a chancellor who has realised that charging businesses £2.10 a year in corporation tax simply won't keep the coffers full enough. Raising corporation tax from 19% to 25% creates a river of gold from Elon Musk's pocket, which can revitalise the NHS, our schools and our public services. What's more, the fact this increase only applies to businesses with profits exceeding £250,000 means startups don't get their legs chopped off by the taxman before they've even opened their doors to customers.


In fact, it's doubly good news for businesses because investment will be deducted from taxable profits. Therefore, we'll get better products without significant price increases. Just in time for Christmas. Nobody really knows what Santa Claus looks like, but I have a sneaking suspicion he may be Chancellor and the MP for South West Surrey.

 

Finances are looking up for you as an individual, too, with tax cuts galore and a remarkable fall in inflation to 2.9% by the end of the year – from 10.7% in 2022. The non-taxable pension allowance has increased from £40,000 to £60,000. This is good news for everyone who works and everyone who hasn't been born yet, considering they'll probably be working from the moment they exit the womb until they're 100 years old.


The 5p cut to fuel duty has been extended for another year; household energy bills are to remain frozen at the current caps; and 4 million households using pre-payment meters for energy will have their prices brought down to parity with everyone else – saving the least well-off more money.


Hunt also announced £200m to help councils repair potholes. This is good news for everybody because you'll no longer be fearing for your life every time you sit behind the wheel of your car. Perhaps it is a sign that almost a decade of bumpy political road could finally end.


So there are a considerable number of positives if you're a motorist, worker or newborn – and if you're a business owner, this is your dream.


However, like Looney Tunes star, Jeremy Hunt runs in thin air. Suddenly, we have a whole host of tax cuts and extra financial help for people – with little hope that we have the revenue to fund it all.


Increasing corporation tax is a big plus for the government's books. But is it enough to account for the big reduction in personal tax revenue? The figures suggest not since our underlying debt is due to rise to 93.7% of GDP in 2024.


If you're not an economist and want to know what this means, imagine you have just spent £100 on Christmas presents – but £93.70 was borrowed from your mum. Will you look like a millionaire, splashing the cash on your family and friends this year? Yes. But are you financially stable? No.


Now, this is the case for all developed economies. The Covid-19 pandemic rinsed everybody of their money, and we had to borrow to make sure people didn't die of starvation. But half the point of Rishi Sunak's existence was to bring down inflation and debt. He has indeed brought down inflation and perhaps debt with it, but he is now burning the money he's saved to make British people a bit happier.


Of course, we know he's doing this because a general election is forthcoming – and you won't win a general election if the people you're trying to win votes from are living off stale bread and water because you've made their taxes too high. A Prime Minister would be silly not to try and get a pre-election bounce. Don't get me wrong, I'm a Rishi fan. But this Autumn Statement has veered away from the Sensible Sunak we've seen previously towards an excitable child wanting to win a competition by giving his classmates free cake.


So Jeremy Hunt could find himself running on a financial road that suddenly stops because there isn't the revenue to back his spending.


But there are some other crucial concerns from this Autumn Statement. We've looked at what's there, so what isn't there?


Where was education? We're told our schools are falling down and that we're getting a new Advanced British Standard to keep up with the Chinese – but where was the funding for that?


Where was housing? We're told a rat-infested matchbox-sized apartment in London costs £10m, yet the Lifetime ISA only lets you buy a house worth £450,000 or less. We're told Britain's houses are damp, mouldy colanders, so poorly insulated they couldn't keep an alcoholic in a pub. But where was housing?


These are just two gaping holes in Jeremy Hunt's Autumn Statement. 


Overall, we're on track. The Autumn Statement was not a nightmare. We've got help for the poor and ordinary workers, which – in part – is coming from the billionaire's pocket. But the question remains: have we burnt our savings just to make people happy in the build-up to an election? We will have to wait and see whether Jeremy Hunt as Chancellor proves to be an intelligent Road Runner or a desperate Coyote who will eventually run out of road.


Image: Institute for Fiscal Studies


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