Irrational Hunt Stakes: Autumn Statement Forecast

With the Chancellor poised to unveil his Autumn Statement tomorrow, we're on the brink of discovering what potential tax changes might be galloping over the horizon.

The Treasury, known for its skilful jockeying in the field of expectation management, often strategically trots out ideas to gauge public and media reaction.

They're adept at stirring the waters to see which policies float the electorate's boat, and which ones have the left-wing media chomping at the bit, keen to avoid a repeat of last year’s mini Budget that fell at the first hurdle.

We witnessed this over the last week with the rumblings about cutting Inheritance Tax – a move that seemed to spur more jeers than cheers, nudging it towards a potential Spring reveal.

So, let's saddle up and explore my list of Autumn Statement runners and riders.

Front Runners

Cutting Individual NICs

Reducing National Insurance Contributions is emerging as a strong favourite. A 1% reduction in the main rates for employees and the self-employed, with an estimated cost of around £5 billion annually, offers a budget-friendly yet impactful fiscal move. This policy is like a frontrunner in the race, leading the pack with its potential to positively impact the workforce.

Raising the Personal Allowance

The current freeze on personal allowance might see a turnaround under Chancellor Jeremy Hunt. Although a reversal – which might cost around £1 billion for a 1% increase – might seem like a deviation from previous policy, it could be a strategic shift to gain an edge, similar to a jockey navigating a new path on the track.

Gaining Ground

Income Tax Reduction

Revisiting the idea of a 19% basic rate, set for 2024, is a classic move with a significant financial commitment of about £7 billion annually. It's a strategy that often brings a Chancellor into the spotlight, much like a seasoned racer making a calculated surge.

Corporation Tax Cut

Reconsidering the planned increase in corporation tax would be a significant change. Although the focus is currently on full expensing for businesses, a reduction, which could cost about £3.5 billion annually for each 1% cut, remains a potential but less favoured policy.

Long Shots

Inheritance Tax Reduction or Abolition

The idea of reducing or abolishing inheritance tax, though initially gaining traction, has now tapered off. Affecting only about 4% of estates, any reduction might appear beneficial mostly to wealthier individuals. This policy, potentially costing around £7.5 billion, might be reserved for a future announcement.

Full Expensing for Corporate Investment

Continuation of full expensing for corporate investments in plant and machinery, while economically sound, lacks the direct public appeal of other tax cuts. With an estimated annual cost of around £10 billion, this policy is like a strong but less flashy contender in the race.

Business Rates Multiplier Freeze

Freezing the business rates multiplier, in light of the significant planned increase, would provide considerable relief to businesses. Estimated to cost about £2.3 billion per year, this move, though costly, could be a game-changer for many businesses.

As we approach the finish line of our analysis, it's important to remember the Treasury's knack for surprise moves. The highlight of the Autumn Statement could well be a policy not yet in the public eye, a dark horse waiting to emerge.

This ongoing speculation keeps both the financial world and the public engaged, much like the suspense and excitement of a horse race, underscoring the complex interplay between economic policy and political strategy.