This briefing covers rising prices including food and energy inflation, Government support, and how the cost of living affects households.
The Chancellor of the Exchequer, Jeremy Hunt, presented his 2023 Autumn Statement to Parliament on 22 November and published supporting documents. Once the Chancellor had finished his statement, the Office for Budget Responsibility (OBR) published updated forecasts for the UK’s economic and fiscal outlook.
As the Library briefing Autumn Statement 2023: Background briefing explains, UK economic growth has been weak since early 2022. High inflation and rising interest rates have constricted household budgets and consumer and business spending.
The OBR forecasts that the economy will grow more slowly than it had forecast in March 2023. Inflation is now forecast to be more persistent and domestically driven. Higher domestically driven inflation improves the outlook for the public finances, boosting tax revenues by more than it raises public spending.
The Chancellor used much of the improvement in the public finances to fund cuts to business taxes and personal taxes.
MPs gave their immediate reaction in the debate that followed the Chancellor’s statement to the House of Commons.
You can find all of the Library’s research on the 2023 Autumn Statement in one place.
How have think-tanks responded to the Autumn Statement?
Institute for Fiscal Studies
In its response to the Autumn Statement, the Institute for Fiscal Studies (IFS) director Paul Johnson stated that whilst “public finances haven’t meaningfully improved” and “inflation is expected to stay higher for longer”, higher levels of inflation will push up tax receipts “by more than it pushes up spending on debt interest or social security benefits.”
Johnson went on to say that the Chancellor has opted to use these increased tax receipts to “cut other taxes”, such as cuts for business investment and National Insurance contributions, though these cuts will not prevent this from “being the biggest tax-raising parliament in modern times” or “stop tax revenues rising to their highest ever levels.”
Johnson argued the Chancellor has “picked a pretty sensible set of taxes to cut” and that cuts to National Insurance rates may help increase employment, however, he noted “immediate tax cuts… [do] not feel like a recipe for good management of the public finances.”
During introductory remarks made to an IFS event (PDF) held on the morning of 23 November 2023, Johnson stated these tax cuts “are paid for by planned real cuts in public service spending” and that the Chancellor has “taken a modest improvement in the public finance forecasts and spent most of it.”
Institute for Government
The Institute for Government’s (IfG) response to the Autumn Statement noted the OBR’s “relatively optimistic” new economic forecast in comparison to other forecasters, it is also “objectively grim” and “much less optimistic” than the OBR’s March forecast.
The IfG went on to say that the Chancellor’s attempts to stimulate private sector growth through “well designed” tax cuts is at the expense of public sector growth. It added the lack of new funding for public services meant that “despite higher inflation eroding the real value of existing spending plans” it would “make it much harder for services to return to pre-pandemic performance levels.”
The Resolution Foundation published ‘A pre-election statement’ (PDF), which described the Autumn Statement as containing “pre-election giveaway”” such as “well-targeted” tax cuts, though these were “juxtaposed with far less well-designed big picture fiscal choices” and a “growth-sapping hit to public investment.” The Resolution Foundation argued the “bigger-than-expected tax-cutting package” leaves the Chancellor with “very low levels of headroom against future shocks.” This analysis goes on to argue that despite tax cuts, the “outlook for living standards remains bleak.”
National Institute of Economic and Social Research
The National Institute of Economic and Social Research’s (NIESR) response argued that despite OBR predictions that the Chancellor will meet his fiscal targets, “fiscal policy ought not to be guided by arbitrary fiscal rules” but instead should be “set to bring to the forefront distributional concerns, productivity, well-being, ecological sustainability, and consistency across the devolved nations and English regions.”
The NIESR response welcomed the increase in the National Living Wage, arguing it will “boost the living standards of working families in the bottom two income deciles”, though “sustained real growth” will be necessary to help those “hit hard by the cost-of-living crisis.” The NIESR also welcomed additional support for strategic manufacturing sectors, though argues “more could have been done” emphasising “the need to increase public investment to at least 3 per cent of GDP per year, which would help unlock business investment.”
Institute for Public Policy Research
In its analysis of the tax measures in the Autumn Statement, the Institute for Public Policy Research (IPPR) claimed cuts to National Insurance contributions will “largely benefit the best-off households” and National Insurance reductions will be will be of most benefit to those living in London and the South East of England, with IPPR principal economist Henry Parkes describing this as “the opposite of levelling up.”
In a separate response, IPPR executive director Carys Roberts described the Autumn Statement as making “some welcome policy choices”, including raising local housing allowance and the planned uprating of benefits, though argues the UK economy needed “bolder steps to help people with the cost of living and to turn the UK’s faltering economy around.” IPPR North Director Zoë Billingham welcomed new devolution deals and new measures for investment zones, though described the “overall offer for our regions” in the Autumn Statement as “lacklustre.”
Fraser of Allander Institute
The Fraser of Allander Institute argued that the overall UK’s overall “tax burden” remains “on track to rise to a post-war high“, despite some tax cuts. The response also states that cuts to National Insurance rates “is likely to come as welcomed news” for “many earners in Scotland.”
The Taxpayers’ Alliance described the Autumn Statement as “a mixed bag for taxpayers”, praising cut to National Insurance rates, making full expensing permanent and the freeze on alcohol duty, while criticising increased taxes on tobacco and other tax rises, arguing they will result in the UK “heading towards yet another record tax burden.”
Institute for Economic Affairs
Similarly, Mark Littlewood, Director General of the Institute for Economic Affairs (IEA) called the Autumn Statement “a step in the right direction towards lower taxes and economic growth, but not a leap”, arguing that despite some tax cuts, the Government is “presiding over one of the heaviest tax burdens in the past seven decades.” The IEA’s response also argued the Autumn Statement contained “shockingly little about reducing government spending” and that increases to the minimum wage risks “businesses cutting jobs and hours of some of the most vulnerable workers.”
Centre for Policy Studies
By contrast, the Centre for Policy Studies response described the Autumn Statement as “a sensible and measured response to the fiscal challenges facing the country.” However, it did argue “Britain is still on course to have a deeply uncompetitive business tax and investment regime in the years ahead.”
Adam Smith Institute
Maxwell Marlow, Director of Research at the Adam Smith Institute, said there was “much to be positive about” in the Autumn Statement, including “pro-business measures” and moves to encourage more inward FDI (foreign direct investment) into the UK “by accepting recommendations from the Harrington Review.”
How have business groups responded?
Shevaun Haviland, Director General British Chamber of Commerce praised the Autumn Statement, saying it “provided some welcome remedies” for business, coming at a time when businesses “need certainty and security from the Government in the difficult months ahead.” Haviland welcomed planning reforms, plans to support people back into work and making the ‘full expensing’ (100%) capital allowance scheme permanent, stating this will “be a boost to companies wanting to invest.”
Rain Newton-Smith, the Chief Executive of the Confederation of British Industry (CBI) also praised the Autumn Statement, saying the Chancellor was “right to prioritise ‘game-changing’ interventions that will fire the economy” such as making full expensing permanent, saying this would help firms to “unleash pent-up investment [which] is critical to getting momentum into the economy.”
A separate summary of the Autumn Statement published by the CBI praised the new, simplified system of corporation tax reliefs for research and development, though argued the UK’s “R&D [reseach and development] system risks falling behind other jurisdictions like France and Ireland because it continues to exclude capital spending.”
Tina McKenzie, Policy Chair at the Federation of Small Businesses (FSB) praised the Chancellor for “driving pro-small business change”, highlighting action on late payments, small businesses’ rates, and self-employed taxation.
How have other organisations responded to the Autumn Statement?
Dr Mary-Ann Stephenson, Director of the Women’s Budget Group criticised the Chancellor’s choice to conduct a “a pre-election tax giveaway that will benefit men more than women”, rather than “tackle the challenges in our crumbling public services” in its response to the Autumn Statement. Dr Stephenson also criticised “increased conditionality and sanctions in the benefit system”, arguing “sanctions are not only punitive but have been proven to be ineffective at supporting people into work.”
In the Local Government Association’s (LGA) response, Shaun Davies, Chair of the LGA said it was “hugely disappointing” the Autumn Statement failed to provide funding to ease the “financial strain on councils”, such as the cost of adult social care and housing. Davies goes on to praise the new devolution deals announced in the Autumn Statement, with the caveat that this “needs to signal a genuine ‘local first’ approach to policy making across Whitehall, to ensure as many communities as possible benefit from devolution.”
Paul Kissack, Chief Executive of the Joseph Rowntree Foundation, also drew attention to strain on Local Housing Allowance, stating “by finally ending the freeze on LHA so that it covers the bottom 30% of local rents the Chancellor has recognised how far behind actual market rents housing benefit has fallen”, though “refreezing after a year” will mean renters will start to face the same issue again from April 2025.”
A joint response signed by Barnardo’s, the Children’s Society, Joseph Rowntree Foundation, the Independent Food Aid Network, End Furniture Poverty, North-East Child Poverty Commission, Lloyds Bank Foundation and Turn2Us said it was disappointing that the Chancellor “decided not to extend the Household Support Fund in the Autumn Statement”, saying this was “a missed opportunity to provide certainty to local authorities with a long-term decision on the future of local crisis support.”
Trades Union Congress (TUC) General Secretary Paul Nowak described the Autumn Statement as “a plan for levelling the country down” and that cuts to National Insurance rates would not make up for “13 continued years of economic failure on living standards and growth.”
The Scottish Parliament Information Centre has summarised the implications of the Autumn Statement for Scotland and the Scottish Budget. It says the Scottish budget will receive additional funding this year and next, through the Barnett formula.
What’s the response been from political parties?
In her response to the Chancellor’s speech, Shadow Chancellor Rachel Reeves claimed economic growth had “hit a dead end” and that the Autumn Statement did not contain any measures that would “remotely compensate” for “the full scale of the damage that this Government have done to our economy over 13 years.”
Writing in the Daily Mirror, Reeves criticised the lack of any plans in the Autumn Statement to to “cut hospital waiting lists… recruit more teachers… [or] to cut energy bills”, stating her priorities as Chancellor would include “tackling the cost of living, growing the economy, bringing down bills and making working people in all parts of the country better off.”
Sarah Olney, Liberal Democrat Treasury and Business Spokesperson described the Autumn Statement as “a deception from the Chancellor after years of unfair tax hikes.” Speaking to BBC Breakfast, Olney described cuts to National Insurance rates as “a drop in the ocean compared to what people are paying in extra tax.”
Scottish National Party
Scottish Deputy First Minister and Cabinet Secretary for Finance said the Autumn Statement “delivered the ‘worst case scenario’ for Scotland’s finance”” and also “failed to live up to the challenges posed by the cost of living and climate crises.” Robison argued cuts to National Insurance showed the “UK Government has the wrong priorities at the wrong time, depriving public services of vital funding.”
Speaking to ITV News, Plaid Cymru Treasury spokesperson Ben Lake said the Chancellor “needed to go further” in addressing the cost-of-living crisis stating Plaid Cymru had argued for “targeted support to help families with energy costs this winter, and a Social Energy Tariff to help make the system fairer in the long term.”
Sinn Féin’s economy spokesperson Conor Murphy said the British Government “must do more to fully support public sector workers and services”, while calling for the restoration of devolved institutions, saying “we urgently need a properly funded Executive restored now and parties working together to negotiate new financial arrangements for the north.”
DUP Treasury spokesman Sammy Wilson described the Autumn Statement as one of “missed opportunities to demonstrate that work pays”, as despite cuts to National Insurance rates, “working families are still subject to amongst the highest levels of taxation.” Wilson also argued the “vicious circle of overspending” on public services in Northern Ireland “can only be broken through a fundamental reform of how public services in Northern Ireland are funded.”