In an attempt to regain UK fiscal credibility, Jeremy Hunt has dismantled much of his predecessor Kwasi Kwarteng’s September mini-budget. On November 17th, Chancellor of the Exchequer Jeremy Hunt delivered the highly anticipated Autumn Statement and unveiled his plans to reverse the unfunded tax cuts which the “Trussonomics” had promised only two months ago, amongst other policy retractions. With the existing state of recession and high levels of inflation - the Autumn Budget 2022 is likely to bring more pain to already struggling households. Nevertheless, UK investors and small businesses can breathe a sigh of relief as SEIS/EIS extensions remain unchanged with no mention of these schemes amidst this U-turn in fiscal policy. Key features of the announcement include:

• A range of tax threshold freezes, including both income and inheritance tax for an additional two years on top of the existing four-year freeze.
  
  
• The threshold for the 45% additional tax rate will be cut from £150,000 to £125,140.
  
  
• Windfall taxes will raise £14 billion with an increase in the Energy Profits Levy from 25% to 35% and a temporary 45% levy placed on electricity generators. 
  
  
• The generosity of the Dividend Allowance and the Capital Gains Tax Annual Exempt Amount was reduced – with the Dividend Allowance reduced to £1,000 for 23/24 FY and then further reduced to £500 in 24/25 FY, and the CGT threshold slashed from £12,300 to £6000 next year and again to £3k by 2024.
  
  
• As previously confirmed, the planned increase in the Corporation Tax rate to 25% for companies with over £250,000 in profits will go ahead. 
  
  
• Tax as a percentage of GDP will increase by no more than 1% over the next five years.

Borrowing is more than halved by the announced policies according to the Chancellor who asserts that “you cannot borrow your way to growth”. UK borrowing this fiscal year is forecast to be 7.1% of GDP or £177 billion; next year, this is to fall to 5.5% of GDP and then again to 2.4% of GDP by 2027-28. The Chancellor claims that today’s statement delivers a consolidation of £55 billion, meaning inflation and interest rates end up significantly lower. Just under half of this consolidation is coming from taxes - with the threshold freezes mentioned above and double-digit inflation raising billions of pounds.

With regard to the ongoing cost of living crisis, measures have been taken to target the lowest-earning households. The energy price guarantee caps energy bills at £2,500 for the average household - this will rise to £3,000 in April and remain there for 12 months. The £400 support package that was offered this year is not to be repeated, but a cost of living support payment will be made to households on means-tested benefits, pensioners and those with disabilities. Hunt seeks to resolve the energy crisis by setting the goal of a 15% reduction in UK energy consumption by 2030 and striving for energy independence by proceeding with a £700m investment into the nuclear power project at Sizewell C. 

What about EIS / SEIS?

The Office for Budget Responsibility forecasts the economy to grow by 4.2% this year - with a vital element to growth being a commitment to supporting innovation.  Hunt seeks to protect the UK’s entire research budget and will increase public funding for R&D to £20 billion by 2024-25 - keeping the UK within reach of the target to invest 2.4% of GDP in R&D, 

as set in 2017. Further support for SMEs is evidenced by the government reducing business rates; providing £13.6 billion of support for businesses over the next five years. This includes freezing the multipliers and increasing relief for retail, hospitality and leisure to 75%. We can assume that given the Autumn Statement did not mention EIS/SEIS schemes, the current Chancellor of the Exchequer will continue to support these schemes as per his predecessor's mini-budget, one of the few areas that was not scrapped.

Hunt’s plans for public spending saw adult social care secure additional grant funding of £1bn next year and £1.7bn the year after. The NHS budget will be increased by £3.3bn in each of the next two years, and schools will receive an extra investment of £2.3bn per year. The Barnett consequentials of the autumn statement mean an extra £1.5 billion for the Scottish government, £1.2 billion for the Welsh government, and £650 million for the Northern Ireland Executive.

While the September mini-budget announcement unleashed turmoil, sending the pound slumping to an all-time low against the US dollar and forcing the prime minister’s premature resignation from office, we can only hope that Hunt’s proposed reforms are more successful in stabilising public finances and helping to return confidence to the UK economy.