Business groups are asking for action and Conservative MPs want to see tax cuts in the upcoming Autumn Statement due to take place on Wednesday 22 November in the House of Commons.
Chancellor Jeremy Hunt has warned that there will be some difficult decisions being made in the upcoming statement due to a sharp decline in public finances over the past six months.
Mr Hunt has said that borrowing is on course to be at least £20 billion to £30 billion higher than was predicted in the March Budget.
The Chancellor said:
The fiscal position has worsened since the spring, and I will have to take difficult decisions in the Autumn Statement.
The main reason things are more challenging is because interest rate projections for all economies have gone up. The UK is not immune to those changes. We are likely to see an increase in debt interest payments of £20 billion to £30 billion and that’s a huge challenge.
At the time of the March Budget, the Office for Budget Responsibility (OBR) said the chancellor had only a £6.5 billion buffer to meet his fiscal rule of having debt as a share of national income falling at the end of five years. Higher borrowing in response to the Covid-19 pandemic has pushed the national debt above £2 trillion.
No short cuts
The government is now expecting the OBR to cut its future growth forecasts for the UK economy, which would pile additional pressure on the public finances.
However, Mr Hunt says he is not prepared to borrow more to finance the tax cuts being demanded by some Conservative MPs. Instead he says he will make savings to pave the way for a more generous Budget next spring as the next general election draws closer.
The Chancellor said:
I will do everything I can to prevent tax rises and also show how I can reduce the tax burden over time. But I have to be honest – there are no short cuts. Borrowing to finance tax cuts is no tax cut at all. It just passes on the cost to a future generation.
All western economies have found themselves in a low-growth trap. The Autumn Statement will show how we can get out of it.
General Election ahead
The UK is still fighting inflation and faces an uncertain economic future as it releases its Autumn Statement. Furthermore, it occurs as the next general election is rapidly approaching.
The Chancellor would no doubt like to go into that election with inflation falling, the economy growing and the ability to make voters feel good with some tax cuts. He also faces pressure from within his own party to cut taxes.
Liz Truss, the former prime minister, intends to present her allies’ “Growth Budget” prior to the Autumn Statement.
Meanwhile, newspaper reports claim that Downing Street is seriously considering a lengthy campaign by certain Conservative MPs to lower inheritance tax.
One of the ideas being discussed is lowering the 40% rate, which would pave the way for its eventual elimination. But rather than this autumn, it seems more likely to happen in the budget for March of next year.
Unleash green markets
Business associations in the UK are also presenting their cases for the Autumn Statement.
To promote long-term prosperity and sustainable growth, the Confederation of British Industry (CBI) has encouraged Chancellor Jeremy Hunt to ‘unleash green markets’.
One of the CBI’s key proposals is for the government to realise the UK’s net zero growth opportunity. It has urged the Chancellor to decrease waiting times to build electricity transmission infrastructure and speed up the process for becoming connected to the grid.
The business group also supports the introduction of a targeted “green” super-deduction, with a minimum first-year allowed of 120%, for both incorporated and unincorporated enterprises.
Making full expensing permanent to unlock investment
Additionally, the CBI is pleading with the Chancellor to “unlock business investment across the economy” by making full expensing permanent. According to CBI analysis, permanent full expensing might contribute to a 21% rise in investment and a 2% increase in GDP by 2030–31.
Five key changes
Furthermore, in a letter to Chancellor Jeremy Hunt, the Institute of Directors (IoD) proposed the following five major policy proposals for the Autumn Statement:
We will keep you informed of all significant announcements concerning the upcoming Autumn Statement.
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