Autumn Statement Cuts NICs and Raises National Wages

JEREMY HUNT, Chancellor of the Exchequer, has delivered his Autumn Statement for 2023.

Key announcements include:

• National Insurance tax cut from 12% to 10% for 27m working people (avg. cut £450pa) from January 2024.
• Abolition of self-employed class of NICs and cut to NICs top rate from 9% to 8% –saving of around £350 for someone earning £28,000 a year.
• Permanent Full Expensing tax cut for businesses investing in IT equipment, plant, and machinery expected to boost investment by £20 billion per year.
• Triple lock maintained for pensioners, benefits to rise in line with inflation and Local Housing Allowance
• National Living Wage rise to £11.44 an hour represents £1,800 avg. increase for full-time workers. No benefits for those refusing to follow Back to Work Plan.
• Alcohol duty frozen for six months to August 2024.
• 95% Mortgage Guarantee Scheme extended until end of June 2025.
• Energy Saving Stamp Duty Incentive for EPC improvements.

Tax

With an election due in the coming year, Jeremy Hunt cut taxes.

• The main rate of Employee National Insurance will be cut by 2 percentage points from 12% to 10%, coming into effect from January 2024 for 27 million workers.
• The combined rate of income tax and National Insurance for employees paying the basic rate of tax will therefore fall from 32% to 30%.
• The rate of Class 4 NICs on all earnings between £12,570 and £50,270 will be cut by 1p, from 9% to 8% from April 2024.
• The weekly Class 2 NICs – the flat rate compulsory charge which is currently £3.45 paid by self-employed people earning more than £12,570 – will effectively be abolished, with no-one required to pay from April 2024. Access to contributory benefits will be maintained and those currently paying voluntarily will still be able to do so at the same rate.
• The cuts to Class 4 and Class 2 together amount to a tax cut of £350 a year for the average self-employed person on £28,200, with around 2 million individuals to benefit.

Business

Measures aimed at removing barriers to investment and to bridge the productivity gap between the UK and its G7 peers.

• Permanent Full Expensing to allow businesses to claim 100% capital allowances on qualifying main rate plant and machinery investments.
• Business rates support package worth £4.3 bn over the next 5 years includes a rollover of 75% Retail, Hospitality and Leisure relief for 230,000 properties and a freeze to the small business multiplier, benefitting around 90% of ratepayers for a fourth consecutive year.
• Pension reforms, including through establishing a new Growth Fund within the British Business Bank, will help unlock an extra £75 bn of financing for high-growth companies by 2030.
• Tougher regulation on late payers to improve prompt payments, the expansion of Made Smarter in Great Britain and continued funding for Help to Grow.
• The existing R&D Expenditure Credit and Small and Medium Enterprise Scheme will be merged from April 2024.
• The rate at which loss-making companies are taxed within the merged scheme will be reduced from 25% to 19%, and the threshold for additional support for R&D intensive loss-making SMEs will be lowered to 30%, benefiting a further 5,000 SMEs.
• Climate Change Agreement Scheme extended for energy intensive businesses giving around £300m tax relief every year until 2033.

Work and welfare reform

Measures aimed at expanding the workforce and get those out of work back into work to deliver growth. The OBR expect they will support 78,000 people into work by 2028-29.

• From 1 April 2024, the National Living Wage will increase by 9.8% to £11.44 an hour for eligible workers including 21-22-year-olds. Increase of £1,800 to annual earnings of a full-time worker benefitting 2.7m workers.
• National Minimum Wage rates for young people and apprentices increase: for 18-20-year-olds by 14.8% to £8.60 an hour, for 16-17 year olds and apprentices by 21.2% to £6.40 an hour.
• Reforms to the Work Capability Assessment. Changes to the activities and descriptors reflect the greater flexibility and reasonable adjustments now available.
• Boosts to NHS Talking Therapies, Individual Placement and Support, Restart and Universal Support – will benefit up to 1.1 million people over the next five years.
• The government is exploring reforms of the fit note process to provide individuals whose health affects their ability to work with specialised work and health support.
• Mandatory work placements for those who have not found a job after 18 months of intensive support. Those who choose not to engage for six months will have their claims closed and benefits stopped.

Infrastructure and levelling up

The Chancellor unveiled measures and funding for businesses and local communities.

• £4.5 billion of funding for British manufacturers in the high-growth industries of the future, including £960 million earmarked for the Green Industries Growth Accelerator for clean energy.
• The government has published its full response to the Winser review and Connections Action Plan, which will cut grid access times for larger projects by half, halve the time to build major grid upgrades and offer up to £10,000 off electricity bills over 10 years for those living closest to new transmission infrastructure.
• Three advanced manufacturing Investment Zones will be established in Greater Manchester, East Midlands, and West Midlands – aimed at generating £3.4 billion of private investment and creating 65,000 jobs over 10 years.
• The Investment Zones programme and freeport tax reliefs will be extended from 5 years to 10 years, and a new £150 million Investment Opportunity Fund will support Investment Zones and Freeports to secure specific business investment opportunities.
• Four new devolution deals across England have been agreed. Mayoral deals with Greater Lincolnshire and Hull and East Yorkshire, and non-mayoral deals with Lancashire and Cornwall.
• £500 million over the next two years will help establish two more Compute innovation centres for development of artificial intelligence.
• £20 million to speed up the development of new dementia treatments coming as part of the government’s response to the O’Shaughnessy Review of UK commercial clinical trials.
• For those who want to invest in the UK, the government has accepted in principle the headline recommendations of Lord Harrington’s review into increasing foreign direct investment. Additional resource for the Office for Investment to extend its concierge offer to strategically important investors.

INDUSTRY COMMENT

Failed to go Far Enough

James Talman, CEO NFRC

James Talman, NFRC CEO, said: “The Chancellor has failed to go far enough on measures that support SME construction businesses, including roofing and cladding firms. Whilst the intention to take late payment seriously in the public sector is a welcome step, the government also needs to adopt this attitude to cash retentions, which leave construction SMEs in an impossible position with regards to cashflow.

“Whilst additional funding for supporting greater numbers of people into apprenticeships is a welcome move, it is not yet clear whether this will exclusively support careers in engineering. We would ask the Chancellor for clarity as to whether the broader construction sector will benefit, in the midst of a severe skills shortage.

“Finally, we would have hoped to see widespread and meaningful improvement to the Structures and Buildings Allowance, which the Chancellor has still only enhanced within special tax zones in investment zones and freeports.”

Brian Berry, Chief Executive of the Federation of Master Builders

Some Surprising Outcomes

Brian Berry, Chief Executive of the FMB said: “The Autumn Statement will be welcomed by small builders, with the Government finally taking steps to support micro and SME businesses in a sector which has faced significant difficulty in recent years. However, this must only be the start if the Government is serious about tackling the challenges we continue to face.

“Measures to reform the way local authorities process planning applications is good news, as are plans to help fund local authorities tackle nutrient neutrality mitigation. However, substantial increases in funding for local authority planning departments are needed if we are to see real progress.”

“There were some surprising outcomes, like the changes to permitted development rights, which will bring work for house builders and the repair, maintenance, and improvement sector. Buried in the details is additional support for housing associations to deliver energy efficiency improvements. This support should also be rolled out to the owner occupier sector to help improve the UK’s leaky housing stock”.

“Financial support for SMEs represents another positive step, along with other announcements to boost SME growth, such as adopting digital technology. It is good to see that skills training has received a boost, with additional funding announced to increase the number of apprenticeships undertaken.”

Construction Crying Out for Clarity and Consistency

Dr David Crosthwaite, BCIS Chief Economist

BCIS Chief Economist, Dr David Crosthwaite, said: “In light of the OBR’s central forecast being downgraded, the Autumn Statement was really quite underwhelming for the construction industry, which has been crying out for some clarity, commitment and consistency in policies.

“Crucially, the already delayed National Infrastructure and Construction Pipeline is still nowhere to be seen, with the government saying it will publish a National Infrastructure Strategy next year.

“Investment in infrastructure, and removing barriers to private sector investment, is hugely important to driving economic growth. With the Autumn Statement, construction firms operating in an uncertain market have simply had that uncertainty prolonged yet again.

“Other measures, which will be welcomed by the industry, include a slice of a £50 million investment pot for engineering apprenticeships, but this doesn’t address a much wider skills gap we have across construction. The abolition of class 2 NI contributions for the self-employed, a growing demographic in our industry, is a saving of just £3.45 a week, and so a drop in the ocean considering the considerable costs construction trades have faced and continue to face.”

Some Positive Developments

Brendan Sharkey, Head of Construction and Real Estate at MHA MacIntyre Hudson.

Brendan Sharkey, Construction and Real Estate Specialist at MHA, says: “Housebuilding and help for young people and first-time buyers was absent from the statement. It’s a shame the Chancellor didn’t announce cuts to stamp duty. This would have created demand and at the same time provided more affordable properties.

“There were some very positive developments though. The unfreezing of the local housing allowance, fixed since 2020, provides an element of relief.

“Permitted development will now extend to enable one property to be converted into two flats, thereby increasing the supply of new homes, though building controls will need to be upheld during this process. Finally the planning application reforms should speed up the process of new projects and recoverable costs will ease concerns if project deadlines are not met. However, will the Local Authorities have enough resource or will those that pay the piper get priority and the application from smaller SMSs get overlooked?”

New Homes Should Set the Standard

CPRE Chief Executive Roger Mortlock said on the extension to the mortgage guarantee scheme: “People are crying out for genuinely affordable and social rented homes, both of which are in desperately short supply in all parts of the country. This morning, the government announced an extension to the mortgage guarantee scheme but nothing about investing in the kinds of housing that will help to fix our hidden rural housing crisis.

“The government must act now to ensure there is a supply of the homes people need. If it doesn’t, the future of our countryside communities will be at stake.”

On stamp duty rebates for people who makes their homes more energy efficient, he added: “We agree with the government that people’s homes need to be more energy efficient, for the sake of both the planet and people’s pockets. But why is there still no requirement for new houses and other buildings to include solar panels? The proposed stamp duty rebates are a drop in the ocean when what we need is a rooftop solar revolution. Only by making huge changes to the way we generate our electricity will we meet our zero obligations and protect the countryside for generations to come.

“New homes should set the standard for energy efficiency. To turn this into a reality, the government must be bold and make rooftop solar panels compulsory in all new developments, not fiddle around with things like stamp duty.”

Positive Nutrient Mitigation Schemes

David Hannah, Group Chairman of Cornerstone Tax comments, “The Chancellor needed to use this opportunity to provide liquidity support to the construction industry to enable them to build speculatively and increase the housing stock more rapidly in this country. The decision to commit an additional £110m to deliver nutrient mitigation schemes to unlock 40,000 new homes in cities including London, Leeds and Cambridge is positive news. Earmarking £32m to address the planning backlog and beginning a consultation to allow any house to be converted into two flats marks an important step in freeing up the rental sector’s supply problem, potentially easing the strain felt by both landlords and tenants.

Systemic Reform Needed for Dysfunctional Planning System

Muyiwa Oki, RIBA President

RIBA President Muyiwa Oki said: “In terms of addressing the housing and climate crises, our expectations have not been met. While steps to deliver more local authority homes and speed up the planning system are welcome, funding levels for public sector housing continue to fall short. Fees for an improved planning service to businesses are welcome, but we also need systemic reform of our dysfunctional planning system. It’s also disappointing to see no long-term plan to retrofit our existing housing stock – a critical step to decarbonise our built environment, create jobs and level up the country.”

>> Read the CPA’s reaction to the 2023 Autumn Statement here