Autumn Statement 2023 won’t contain big tax cuts, chancellor signals

Chancellor Jeremy Hunt has headed off large pre-election tax cuts, reportedly saying Autumn Statement 2023 won’t contain them if it makes reducing inflation trickier.

In a Financial Times interview, Mr Hunt said he would use his fiscal statement to “double down” on inflation, not “pump billions of pounds of additional demand” into the economy.

He also said he and prime minister Rishi Sunak were at one, as “down to the last drop of DNA,” they believe “long term sustainable growth” is not “possible with high inflation.”

'Cycle of tax cuts while delivering tax rises'

Hunt shunning tax cuts follows the Resolution Foundation saying Britain must “move away from its simplistic and pernicious cycle of promising tax cuts, while delivering tax rises.”

The think tank calculates that the UK’s tax take has risen from 33 per cent of GDP in 2009/10, to a projected and on track 38% in tax year 2027/28.

Online last week, a cloud-based payroll software provider to temp staffing and intermediary firms, Octopaye, observed that the rise equates to a tax hike of £4,200 per household.

'Impact of fiscal drag'

The provider was commenting just as new figures from HMRC showed that the number of additional rate taxpayers will this year increase by 55% to 862,000.

Published on Thursday, the HMRC figures show a projected 5.6m higher-rate taxpayers in 2023/24, which represents a 40.7% increase on 2020/21 (or a 6% increase on 2022/23).

Ed Paul, employment tax manager at Colt Technology decoded: “The data appears to confirm the impacts of fiscal drag within the tax system.”

'We're all paying more and getting less'

But aware such terms are absent from the official dataset and HMRC’s accompanying breakdown of the figures, is WTT Consulting tax director Graham Webber

“‘Fiscal drag,’ ‘stealth taxes’ -- all semantics,” he reflected. “We are all paying more and getting less.”

In November 2022, Mr Hunt extended a freeze on income tax thresholds from 2026 to 2028, in his then-Autumn Statement which he also used to both add 1.25% points to limited company dividends and cut the dividend tax-free allowance to £1,000 (and cut it again to £500 from April 6th 2024).

'Electoral jeopardy'

Taking to LinkedIn last week, limited company support group Forgotten Ltd reminded: “[It’s] not long until the next election.

“With over three million people left behind and forgotten by Rishi Sunak -- deliberately -- that electoral jeopardy ignored by The Conservative Party will soon be upon them unless they change tack and decide to actually support the ambitious, entrepreneurial job-creators they took for granted for so long.”

The chancellor’s interview at the weekend may suggest further anti-company measures at Autumn Statement 2023, but potentially not just for small operators.

'Margin-rebuild'

Mr Hunt reportedly said there were times it was “legitimate” for companies to “margin-rebuild,” but also times they should hold down prices because “you need to think about the impact on your own customers.”  

Set to disappoint MPs and others already banging the drum for tax cuts in the autumn to boost the economy, the chancellor added: “If we were to pump billions of pounds of additional demand into the economy when inflation is already too high, that would mean fiscal policy working against monetary policy.”