Autumn Statement 2023: Background briefing

The Chancellor will present his Autumn Statement to the House of Commons on 22 November. The Office for Budget Responsibility (OBR) will publish revised forecasts for the economy and public finances on the same day as the statement. The OBR is the independent public finances watchdog, which produces the official forecasts for the economy and public finances used by the Chancellor.

Economic situation

The UK economy has been growing very slowly since the beginning of 2022, with GDP growth of 0.6% in the year to the third quarter of 2023. The impact of high inflation and rising interest rates has subdued economic activity, a trend set to continue in 2024.

GDP is forecast by the Bank of England to stagnate in 2024 as the full impact of recent interest rate increases is felt. The Bank raised rates from 0.1% in December 2021, a record low, to 5.25% in August 2023 to subdue inflation. Since then, rates have been kept unchanged.

Economists don’t think further rate increases are likely. The annual inflation rate has fallen from a peak of 11.1% in October 2022 to 4.6% in October 2023. Previous sharp increases in prices seen in 2022, such as in energy bills, have not been repeated in 2023, reducing the annual rate. Further modest declines are expected in inflation in 2024. For more see the Library research briefing Rising cost of living in the UK.

The rise in interest rates has made debt repayments, such as for mortgages, more expensive squeezing household budgets and is expected to result in falling business and housing investment. A strong labour market has shown signs of cooling, with job vacancies falling, although average wage growth has recently risen at a faster annual rate than prices for the first time since late 2021.

Public finances

Government borrowing – the difference between public spending and income raised from taxes and other sources – has fallen from the peacetime record reached in 2020/21 but remains higher than the past 50-year average.

Borrowing was equivalent to 5.0% of GDP in 2022/23. The OBR forecast in March 2023 that borrowing in 2023/24 would be broadly similar to in 2022/23 and would fall in subsequent years.

The Government has borrowed less, in the first six months of 2023/24, than the OBR forecast. This is largely because of the strong performance of government receipts. Lower-than-expected borrowing in the near term is good news. The extent to which it is good news for borrowing in the longer-term depends on whether the OBR expects the underlying improvements to persist.

Government debt (which is largely the stock of past borrowing) is 98% of GDP. The last time it was higher than this, relative to the size of the economy, was in the 1960s. Debt has been higher, though, particularly after periods of war.

Government’s underlying debt (excluding the Bank of England’s net debt) is 89% of GDP. This is the measure of debt used in the Chancellor’s target for government debt. The OBR forecast in March that underlying debt would continue growing each year before falling in 2027/28.

The OBR’s November 2023 forecast

The OBR’s forecasts for the wider economy determine much of what happens in the public finance forecasts. For instance, inflation and the and the size of the economy are important for forecasting tax revenues and some areas of spending, such as welfare and debt interest. The Chancellor’s policy decisions, such as whether to increase working age benefits by inflation, are also important for the forecasts.

The Chancellor will be seeking to meet his targets for government borrowing and debt. Both targets are focused on the fifth year of the forecast (which will be 2028/29) and both were being met in the OBR’s March 2023 forecast.

Press reports suggest that in its initial forecast, the OBR has the debt target being met a little more comfortably than in March 2023. It’s likely that the Chancellor will use this additional ‘headroom’ to introduce policy measures.

The Treasury’s priorities and potential announcements

The Treasury says measures announced in the Autumn Statement will help to get people back into work and boost growth.

It’s likely that the Chancellor will announce changes to the Work Capability Assessment (WCA). The WCA determines entitlement to benefits that help cover day-to-day living costs for people whose capability for work is limited by a disability or health condition. The Government says changes, proposed in a recent consultation, would give those who can work “the right support and opportunities to move off benefits and towards the job market”.

A ‘Back to Work Plan’ was announced on the day this briefing was going to press, which will form part of the 2023 Autumn Statement. The plan comprises a “package of employment-focused support that will help people to stay healthy, to move off benefits and to move into work”.

We will hear more about an ongoing review into improving public sector productivity. More detail might be announced about reforms to unlock pension fund investment.

The Chancellor says that cutting business taxes, to support economic growth, is his priority for taxes currently.

Further information

The Library will publish a summary of the Autumn Statement on the evening of 22 November 2023.

For a quick explainer on the Autumn Statement, see the Library Insight: What is the Autumn Statement?

Ahead of the Autumn Statement, the Library will publish Economic Indicators, our analysis of the latest UK and international economic indicators. The latest data are also available on the Library’s UK economy dashboard.

Find all of the Library’s research on the 2023 Autumn Statement in one place.