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UK chancellor Jeremy Hunt produces a highly political Autumn Statement

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A cut in national insurance contributions and the “largest business tax cut in modern British history” lay at the heart of a highly political Autumn Statement from chancellor Jeremy Hunt in the House of Commons today.

The lowering of NI from 12 per cent to 10 per cent will take effect in January at the start of what is likely to be an election year. The move however falls well short of compensating for the increase in the overall tax burden, which the independent Office for Budget Responsibility said would rise in each of the next five years to a postwar high of 38 per cent of gross domestic product. 

Opposition Labour shadow chancellor Rachel Reeves welcomed the NI cut but said it would not “remotely” make up for the stealth increase in tax caused by fiscal drag, where people are pulled into higher bands as thresholds remain unchanged.

The OBR said that living standards in 2024-25 would still be lower than their pre-pandemic level and revised down its estimates of medium-term UK growth. It also now expects inflation to stay higher for longer, a view shared by Bank of England governor Andrew Bailey.

The most significant move for business was the decision to make “full expensing” — which allows companies to deduct all their spending on IT equipment, plant or machinery from taxable profits — permanent, rather than expiring in 2026 as had been planned. Hunt said the move would increase business investment by about £20bn a year within a decade and was “a decisive step towards closing the productivity gap with other major economies”.

Other announcements in a package of 110 supply-side measures included tax benefits for freeports and investment zones, reforms to planning applications and help for small businesses on rates, late payments and self-employed taxes. They were accompanied by a package of welfare reforms aiming to get people back into the labour market.

Hunt also announced plans for the government to sell its stake in NatWest bank to the public.

Whether today’s measures will help the government claw back some ground in the polls remains to be seen, but Hunt’s eye-catching moves, potentially followed by income tax cuts in the Budget, have persuaded some Tories that a spring general election is on the cards.

Need to know: UK and Europe economy

The European Central Bank in its twice-yearly financial stability review warned of “early signs of stress” in bank balance sheets as the number of loan defaults increases. The ECB also warned that eurozone property companies were experiencing big losses, with debts exceeding those in the period leading up to the 2008 financial crisis.

ECB chief Christine Lagarde said it was too early to “start declaring victory” in the central bank’s push to tame inflation.

Brussels urged Germany, Portugal, Malta, France and Croatia to stop subsidising companies’ and households’ energy costs and avoid breaching EU budget guidelines. The EU suspended its rule that deficits should not exceed 3 per cent of GDP during the pandemic, but wants to reintroduce them in 2024.

The European parliament backed a plan to cut some of the 80mn tonnes of packaging waste produced by businesses in the bloc. “Ultra-light” plastic bags and harmful chemicals in packaging could also be banned.

Germany froze all new spending commitments, including military aid for Ukraine, following a bombshell ruling by the country’s constitutional court which blocked a government move to transfer €60bn originally earmarked for the pandemic to projects to modernise the German economy and fight climate change.

Today’s general election in the Netherlands could see an unexpected comeback for far-right politician Geert Wilders. A poll at the weekend showed Wilders’ Freedom party tied in first place with the liberal VVD party of outgoing Prime Minister Mark Rutte.

Need to know: Global economy

Oil prices fell 5 per cent as the Opec+ cartel postponed its planned weekend meeting, with traders deciding the group was struggling to agree on further production cuts.

Minutes from the US Federal Reserve’s recent policy meeting showed officials were not minded to raise interest rates further, even as they warned that policy must stay “restrictive”.

Wheat prices rose after Russian attacks on food infrastructure in Ukraine raised concerns over supplies from the world’s fifth-largest wheat exporter.

More than 75 per cent of the foreign money invested in Chinese stocks this year has left, despite Beijing’s attempts to restore confidence in the economy.

Chief economics commentator Martin Wolf assesses the threat of fiscal crises now that public debt in richer countries has reached such high levels.

Line chart of General government debt as a % of GDP  showing Sovereign debt is close to historic highs

Need to know: business

Hedge funds bets on a fall in US and European stock markets have racked up $43bn of losses after shares rebounded in recent days.

Stellantis is considering a partnership with China’s CATL to build low-cost electric car batteries in Europe, in a move that would increase the affordability of its electric vehicles but deepen its reliance on Chinese battery technology. 

The UK advertising regulator banned a Toyota advert featuring a large number of pick-up trucks driving off-road because it showed no regard for their environmental impact

Dutch plans to reduce the growth of Schiphol airport on environmental grounds are a proxy for the debate over the future of the airline industry, writes international business editor Peggy Hollinger.

A Big Read ponders whether Disney boss Bob Iger can overcome streaming losses and pressure from investors to revive the company.

The World of Work

A trend is becoming apparent, in Australia at least, of companies linking discretionary elements of pay to attendance in the office. ANZ bank says workers must spend half of their working time there or risk lower bonuses.

The UK Supreme Court ruled that Deliveroo riders cannot form unions or be recognised as employees in a landmark decision for the gig economy.

What’s the best way of working well under pressure? Isabel Berwick talks to a bomb disposal operator and a professor of performance psychology in the Working It podcast.

Some good news

Climate mitigation policies are not just good for the planet: cutting out fossil fuels also brings substantial health benefits and could prevent millions of premature deaths each year, according to The Lancet Pathfinder Commission. Health will be on the agenda at COP28 for the first time next week.

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