Thursday 20 June 2024
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Autumn Statement: Full speech from the Chancellor

Autumn Statement 2023 speech as delivered by Chancellor Jeremy Hunt with no edits.

Mr Speaker. After a global pandemic and energy crisis, we have taken difficult decisions to put our economy back on track. We have supported families with rising bills, cut borrowing and halved inflation.

Also read: All the details as Chancellor delivers Autumn Statement

Rather than a recession, the economy has grown. Rather than falling as predicted, real incomes have risen. Our plan for the British economy is working. But the work is not done. Under this Prime Minister we take decisions for the long term.

In today’s Autumn Statement for Growth our choice is not big government, high spending and high tax because we know that leads to less growth, not more. Instead we reduce debt, cut taxes and reward work. We deliver world class education. We build domestic sustainable energy.

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And we back British business with 110 growth measures – don’t worry, I’m not going to go through them all – but in summary they…

…remove planning red tape

…speed up access to the national grid

…support entrepreneurs raising capital

…get behind our fastest growing industries

…unlock foreign direct investment

…boost productivity

…reform welfare

…level up opportunity to every corner of the country

…and cut business taxes.

The Office for Budget Responsibility say that the combined impact of these measures will raise business investment, get more people into work, reduce inflation next year and increase GDP. A dynamic economy depends on the energy and enterprise of people more than any diktats or decisions by ministers.

So, today’s measures do not just remove barriers to investment, they reward effort and work.  I will go through the measures in three parts.

In the first, I will use updated OBR forecasts to show the progress we are making against the Prime Minister’s economic priorities.

UK Parliament Jessica Taylor 39909 scaled
©UK Parliament / Jessica Taylor

The second part sets out growth measures to back British business.

Finally, I conclude with measures to make work pay.

Progress on the Prime Minster’s priorities

Before I start with the forecasts, I want to express my horror at the murderous attack on Israeli citizens on October 7th and the subsequent loss of life on both sides. I will remember for the rest of my life – as I know many other hon members will – being taken to Auschwitz by the Rabbi Barry Marcus and the remarkable Holocaust Educational Trust. But I am deeply concerned about the rise of antisemitism in our country. So, I am announcing up to £7m over the next three years for organisations like the Holocaust Educational Trust to tackle antisemitism in schools and universities. I will also repeat the £3m uplift to the Community Security Trust.

When it comes to anti-Semitism and all forms of racism, we must never allow the clock to be turned back.

I now move on to the OBR’s economic and fiscal forecasts, and I thank Richard Hughes and his team for their sterling work in preparing them. Three of my Rt Hon Friend the Prime Minister’s five pledges at the start of the year were economic: to halve inflation, grow the economy and reduce debt. Today I can report to the House that we are delivering on all three.

Inflation

Let’s start with inflation. When the Prime Minister and I took office, inflation was at 11.1%. Last week, it fell to 4.6%. We promised to halve inflation and we have halved it. Core inflation is now lower than in nearly half of the economies in the EU.  And the OBR say headline inflation will fall to 2.8% by the end of 2024, before falling to the 2% target in 2025.

I will not take risks with inflation, and the OBR confirm that the measures I take today make inflation lower next year than it would otherwise have been. I thank the Independent Bank of England Monetary Policy Committee for their crucial role in bringing down inflation.  We will continue to back them to do whatever it takes until the job is done. But as we do, we will continue to support families in difficulty.

Today I add four further measures to help with the cost of living. Firstly, for those on the lowest incomes. I understand the concerns some have about the effect on work incentives of matching benefit increases to inflation.

I know there has been some speculation that we would increase benefits next year by the lower October figure for inflation. But cost of living pressures remain at their most acute for the poorest families. So instead, the government has decided to increase Universal Credit and other benefits from next April by 6.7% in line with September’s inflation figure, an average increase of £470 for 5.5m households next year.  Vital support to those on the very lowest incomes.

Second, because rent can constitute more than half the living costs of private renters on the lowest incomes, I have listened closely to many colleagues as well as the Institute for Fiscal Studies, the Resolution Foundation, Citizens Advice UK and the Joseph Rowntree Foundation who said unfreezing the Local Housing Allowance was an ‘urgent priority’.

I will therefore increase the Local Housing Allowance rate to the 30th percentile of local market rents. This will give 1.6 million households an average of £800 of support next year.

Third, although I am going to increase duty on hand-rolling tobacco by an additional 10% above the tobacco duty escalator, I know that for many people going to the pub has become more expensive. I have listened closely to the persuasive arguments on alcohol duties from my Honourable Friend for Moray and my Rt Hon Friend for Dumfriesshire, Clydesdale and Tweeddale, fierce champions of the Scotch whisky industry. I’ve also listened to defenders of the great British pint such as my Rt Honourable Friends for the Vale of Glamorgan and Buckingham; in my constituency to Councillor Jane Austin who is a big supporter of the Jolly Farmer pub in Bramley; and indeed to The Sun newspaper. So, as well as confirming our Brexit Pubs Guarantee, which means duty on a pint is always lower than in the shops, I have decided to freeze all alcohol duty until August 1st next year. That means no increase in duty on beer, cider, wine or spirits.

Finally, pensioners. The triple lock has helped lift 250,000 older people out of poverty since it was instituted in 2011 and been a lifeline for many during a period of high inflation.  There have been reports that we would uprate it by a lower amount to smooth out the effect of high public sector bonuses in July, but that would have been particularly difficult for one million pensioners whose only income is from the state.

So instead, today we honour our commitment to the triple lock in full. From April 2024, we will increase the full new state pension by 8.5% to £221.20 a week, worth up to £900 more a year. That is one of the largest ever cash increases to the state pension – showing this government will always back our pensioners.

Including today’s measures, our total commitment to easing cost of living pressures has risen to £104 billion. That includes paying around half the cost of the average energy bill since last October and amounts to an average of £3700 per household.

We are able to do that only because we reduced the deficit by 80% ahead of the pandemic.

Borrowing and debt

Next, I turn to my Rt Hon Friend the Prime Minister’s pledge to reduce debt.  Before I took difficult decisions at last year’s Autumn Statement, debt was predicted to rise to almost 100% of GDP by the end of the forecast. Since then, the economy has outperformed expectations and I have taken difficult decisions to reduce borrowing. As a result, headline debt is now predicted to be 94% of GDP by the end of the forecast. The OBR today forecast underlying debt will be 91.6% of GDP next year, 92.7% in 2024-25, 93.2% in 2026-27, before declining in the final two years of the forecast to 92.8% in 2028-29. That is lower in every year compared to forecasts in the Spring. We therefore meet our fiscal rule to have underlying debt falling as a percentage of GDP in the final year of the forecast, with double the headroom compared to the OBR’s March forecast.

And we continue to have the second lowest government debt in the G7 – lower than the United States, Canada, France, Italy or Japan.

I turn to borrowing. According to the OBR, borrowing is lower this year and next, and on average across the forecast by £0.7 billion every year compared to the Spring Budget forecasts.  It falls from 4.5% of GDP in 2023-24, to 3.0%, 2.7%, 2.3%, 1.6% and 1.1% in 2028-29. That means we also meet our second fiscal rule – that public sector borrowing must be below 3% of GDP – not just by the final year, but in almost every year of the forecast. Some of this improvement is from higher tax receipts from a stronger economy, but we also maintain a disciplined approach to public spending.

As I set out in the Spring Budget, resource spending will increase by 1% a year from 2025-26 in real terms and we are sustaining the record 2020 increase in capital spending in cash terms until the end of the forecast. Within this, we will meet our NATO commitment to spend 2% of our GDP on defence, critical at a time of global threats to the international order most notably from Putin’s evil war in Ukraine. We also support a group of people to whom we owe our freedom: our brave veterans. I will extend National Insurance relief for employers of eligible veterans for a further year and provide £10m to support the Veterans’ Places, Pathways and People programme. We have shown that we are prepared to increase funding for vital public services, with record numbers of police officers, doctors, nurses and teachers. We are nearly doubling the numbers of doctors and nurses we train, having given the NHS its first ever long-term workforce plan, as I promised to do a year ago. We are also tackling the greatest single preventable cause of mortality the NHS has to deal with by bringing forward plans for a smokefree generation. But alongside extra funding and support, we need to see reform. We need a more productive state not a bigger one.

That is why I want the public sector to increase productivity growth by at least half a percent a year, the level at which the size of our state starts to reduce as a proportion of GDP. I have already announced plans to cap and reduce the size of the Civil Service to pre-pandemic levels. Today I pay tribute to the excellent former Chief Secretary to the Treasury, the Rt Hon Member for Salisbury, who started our Public Sector Productivity Programme.  It will now be pursued by his formidable successor, the Rt Hon Member for Sevenoaks who has already been with me to meet police, fire and ambulance personnel to understand where bureaucracy is holding them back. Through this vital work we will ensure that over time the growth in public spending is lower than the growth in the economy whilst always protecting the services the public value. I will also provide HMRC with the resources they need to ensure everyone pays the tax they owe, raising an additional £5 billion across the forecast period.

Growth

My Rt Hon Friend the Prime Minister also promised to grow the economy. Since 2010, we have presided over faster growth than many of our major competitors including Spain, Italy, France, Germany or Japan. But all of us have faced a pandemic and energy shock. As a result, last autumn the OBR forecast a recession in which the economy was expected to shrink by 1.4% in 2023.  Instead, it grew – in fact it has grown faster than the Euro area. Revised numbers from the ONS now say the economy is 1.8% larger than pre-pandemic.

And looking ahead, the OBR expects the economy to grow by 0.6% this year and 0.7% next year. After that, growth rises to 1.4% in 2025, then 1.9% in 2026, 2% in 2027 and 1.7% in 2028. If we want those numbers to be higher, we need higher productivity.  The private sector is more productive in countries like the United States, Germany and France because it invests more – on average 2 percentage points more of GDP every year. The 110 measures I take today help close that gap by boosting business investment by £20 billion a year. They unlock investment with supply side reforms that back British business in the following areas.

Growth measures

Skills

First, skills. No economy can prosper without investing in the potential of its people.  Despite strong opposition, we took the difficult decisions to reform our schools. England’s 9-10-year-olds are now the 4th best readers in the world and since 2015 our 15–16-year-olds have risen 7 places in the OECD rankings for maths, thanks not least to the efforts of the brilliant Rt Hon Member for Bognor Regis and Littlehampton. But 9 million adults in England still have low basic literacy or numeracy skills. Last month the Prime Minister set out the new Advanced British Standard to ensure all school leavers reach minimum standards in maths and English.

So following engagement with Make UK and others, I am announcing funding of £50m over the next two years to pilot ways to increase the number of apprentices in engineering and other key growth sectors.

Infrastructure, housing and planning

Next, planning. It takes too long to approve infrastructure projects and business planning applications. Many businesses say they would be willing to pay more if they knew their application would be approved faster. So, from next year, working with the Communities Secretary, I will reform the system to allow local authorities to recover the full costs of major business planning applications in return for being required to meet guaranteed faster timelines. If they fail, fees will be refunded automatically with the application being processed free of charge.

A prompt service or your money back – just as would be the case in the private sector.

Many planning applications are for housebuilding so today we take further decisions to unlock the building of more homes. We will invest £110m over this year and next to deliver high quality nutrient mitigation schemes, unlocking 40,000 homes. We will invest £32m to bust the planning backlog and develop fantastic new housing quarters in Cambridge, London and Leeds which will lead to many thousands of additional dwellings. We will allocate £450m to the Local Authority Housing Fund to deliver 2400 new homes. And we will consult on a new Permitted Development Right to allow any house to be converted into two flats provided the exterior remains unaffected.

It is also taking too long for clean energy businesses to access the electricity grid. So, after talking to businesses such as National Grid, Octopus Energy and SSE, we today publish our full response to the Winser review and Connections Action Plan. These measures will cut grid access delays by 90% and offer up to £10,000 off electricity bills over 10 years for those living closest to new transmission infrastructure. Taken together these planning and grid reforms are estimated to accelerate around £90 billion of additional business investment over the next 10 years.

FDI

Next, foreign direct investment. I am extremely grateful to Lord Harrington for his excellent report on how to increase foreign direct investment. We accept all his headline recommendations. In particular, we will put in place a concierge service for large international investors modelled on the best such services offered by our competitors and will increase funding for the Office for Investment to deliver it.

Pension fund reforms

I now turn to pension fund reforms that will increase the flow of capital going to our most promising growth companies in a way that also improves outcomes for savers. I will take forward my Mansion House reforms starting with measures to consolidate the industry. By 2030, the majority of workplace DC savers will have their pension pots managed in schemes of over £30 billion and by 2040 all local government pension funds will be invested in pools of £200 billion or more.

I will support the establishment of investment vehicles for pension funds to use including through the LIFTS competition, a new Growth Fund run by the British Business Bank and opening the PPF as an investment vehicle for smaller DB pension schemes.

I will also consult on giving savers a legal right to require a new employer to pay pension contributions into their existing pension pot if they choose, meaning people can move to having one pension pot for life. These reforms could help unlock an extra £75 billion of financing for high growth companies by 2030 and provide an extra £1000 a year in retirement for an average earner saving from 18.

Alongside this, I am also progressing further capital market reforms to boost the attractiveness of our markets, and the UK one of the most attractive places to start, grow and list a company. As part of this I will explore options for a Natwest retail share offer in the next 12 months subject to supportive market conditions and achieving value for money. It’s time to get Sid investing again.

Innovation industries

Next, I move on to measures to support our most innovative industries. In the last decade we have grown to become…

…the third largest technology sector in the world, double the size of Germany and three times the size of France

…the biggest life sciences industry in Europe

…Europe’s third largest generator of renewable electricity after Germany or Norway

… and the eighth largest manufacturer in the world

When it comes to tech, we know that AI will be at the heart of any future growth. I want to make sure our universities, scientists and start-ups can access the compute power they need.

So, building on the success of the supercomputing centres in Edinburgh and Bristol, I will invest a further £500m over the next two years to fund further innovation centres to help make us an AI powerhouse. Our creative industries already support Europe’s largest film and TV sector. This year’s all-Californian blockbuster Barbie was filmed in the constituency of the Hon Member for Watford, where the sun always shines. I know that even more could be invested in visual effects if we increased the generosity of the film and high-end TV tax credits, so I will today launch a call for evidence on how to make that happen. British-discovered vaccines and treatments saved more lives across the world during the pandemic than those from any other country and I’m incredibly proud of our Life Sciences industry. To further support research and development, I am creating a new simplified R&D tax relief, combining the existing R&D Expenditure Credit and SME schemes.

I will also reduce the rate at which loss-making companies are taxed within the merged scheme from 25% to 19% and lower the threshold for the additional support for R&D intensive loss-making SMEs that I announced in Spring, to 30%, benefiting a further 5,000 SMEs.  And because 2028 marks the centenary of the invention of penicillin by Alexander Fleming I am giving £5m to Imperial College and Imperial College Healthcare NHS Trust to set up a Fleming Centre to inspire the next generation of world-changing innovations.

For our advanced manufacturing and green energy sectors, international investors say the biggest thing we can do is to announce a longer-term strategy for their industries.

So, with the Secretaries of State for Business and Trade and Energy Security and Net Zero, I am today publishing those plans. I confirm that we will make available £4.5 billion of support over the 5 years to 2030 to attract investment into strategic manufacturing sectors.

That includes support of £2 billion for zero emission investments in the automotive sector, something that has been warmly welcomed by Nissan and Toyota; £975m for aerospace, building on decades of success from firms like Airbus and Rolls Royce; and £520m for life sciences to build on the strength of world-class British pharma companies like AstraZeneca and GSK.  We will also provide £960m for the new Green Industries Growth Accelerator focused on offshore wind, electricity networks, nuclear, CCUS and hydrogen. These targeted investments will ensure the UK remains competitive in sectors where we are already leaders and innovative in areas where we are not. Taken together across our fastest-growing innovation sectors, this support alone will attract an estimated £2 billion of additional investment every year over the next decade.

Levelling up

One of the reasons we support our manufacturing and clean energy sectors is they help to level up growth across the United Kingdom, so I now turn to further levelling up measures.  In the Spring, I announced that we would deliver 12 new Investment Zones – 12 mini-Canary Wharfs – where government, industry and research institutes collaborate across the UK.  Since then, the Exchequer Secretary – the Hon Member for Grantham and Stamford – has done outstanding work across government to bring this vision to fruition. Following tenacious representations by the Hon Member for Ynys Mon and the unstoppable Mayor of Tees Valley, I have today decided to extend the financial incentives for Investment Zones and tax reliefs for Freeports from 5 years to 10 years. I will also set up a new £150m Investment Opportunity Fund to catalyse investment into the programme.

On Monday, I confirmed a new Investment Zone in West Yorkshire. Today having listened to representations from the West Midlands salesman-in-Chief, Andy Street, as well as the Hon Member for Mansfield and the Hon Member for Bury North I am also announcing three further Investment Zones focused on advanced manufacturing in the West Midlands, East Midlands and Greater Manchester. Together, local partners expect these will help catalyse over £3.4 billion of private investment and 65,000 new jobs.

And having listened to the Hon Member for Wrexham and the Hon Member for Clwyd South, I can announce a second Investment Zone in Wales in the fantastic region of Wrexham and Flintshire, which I will visit tomorrow. We are publishing new devolution deals with four areas including Hull and East Yorkshire and offering devolved powers to even more county areas.

On Monday we saw the announcement of £1 billion of funding through Round 3 of the Levelling Up Fund, supporting projects following the campaigning efforts of the Members for Keighley, Dewsbury, Doncaster, Scunthorpe …and of course, Mr Speaker, Chorley.

I can also confirm we will proceed with over £50m of funding for high-quality regeneration projects in communities such as Bolsover, Monmouthshire, Warrington, and Eden Valley all of which have particularly effective local MPs as their champions.

And I’m announcing £80m for new Levelling Up Partnerships in Scotland, £500,000 to support the Hay Festival in Wales and £3m of additional funding to support the successful Tackling Paramilitarism programme in Northern Ireland.

Small businesses

Next small business. I ran my own one for 14 years and have always known that every big business was a small business once. The Federation of Small Businesses say that the biggest thing I could do to help their members is end the scourge of late payments. The Procurement Act we have passed means that the 30-day payment terms which are already set for public sector contracts will automatically apply throughout the sub-contract supply chain.

But from April 2024 I will also introduce a condition that any company bidding for large government contracts should demonstrate they pay their own invoices within an average of 55 days, which will reduce progressively to 30 days. Any small business will also tell you the biggest frustration is the tax you pay before making a penny of profit – not least business rates. This government has already taken a third of properties out of rates completely through Small Business Rates Relief. We have frozen the tax rate for the last three years at a cost of £14.5 billion. We have removed downwards caps from Transitional Relief.

And for retail, hospitality and leisure businesses we have introduced a one year 75% discount on business rates up to £110,000. These measures have saved the average independent shop over £20,000. It is not possible to continue with temporary support measures forever. But whilst the standard multiplier, which applies to high-value properties, will rise in line with inflation, I have today decided that we will freeze the small business multiplier for a further year. And following extensive discussions with the FSB and many colleagues in the House, I have also decided to extend the 75% business rates discount for Retail Hospitality and Leisure businesses for another year. This will save the average independent pub over £12,800 next year and at a cost of £4.3 billion, it is a large tax cut which recognises the role of pubs and high street shops in our communities. I thank the Members for Stockton South, Barrow and Furness and East Devon for their tenacious campaigning on this issue.

Finally, I turn to the smallest of all businesses – those run by the self-employed. These are the people who literally kept our country running during the pandemic. The plumbers who fixed our boilers in lockdowns. The delivery drivers who brought us our shopping. The farmers who kept food on our plates. As part of our plans to grow the economy I want to reform and simplify the taxes paid by the self-employed. So today I am announcing a major reform of one of those taxes. It is one most people haven’t heard of, but it is a big deal for those who have to pay it. Class 2 National Insurance is a flat rate compulsory charge, currently £3.45 a week, paid by self-employed people earning more than £12,570 which gives state pension entitlement. Today, after careful consideration and in recognition of the contribution made by self-employed people to our country, I can announce we are abolishing Class 2 National Insurance altogether, saving the average self-employed person £192 a year.

Access to entitlements and credits will be maintained in full and those who choose to pay voluntarily will still be able to do so.  But this change simplifies and cuts tax for nearly 2 million self-employed people whilst protecting the interests of those on the lowest pay. Because we value their work, I’m also taking one further step for the self-employed. They also pay Class 4 National Insurance at 9% on all earnings between £12,570 and £50,270. Today, I have decided to cut that tax by 1 percentage point to 8% from April. Taken together with the abolition of the compulsory Class 2 Charge, these reforms will save around 2 million self-employed people an average of £350 a year from April.

Mr Speaker, we are backing small business by freezing their business rates, extending retail, hospitality and leisure relief, abolishing compulsory Class 2 National Insurance payments and reducing Class 4 National Insurance by one percentage point in today’s Autumn Statement for growth. Small businesses work so hard for us, so tis government is working hard for them.

Full expensing

I turn now to my final measure to back British business, Mr Speaker. Since 2010, we have seen the second highest growth in investment of any G7 country.  However, if we are to raise productivity, we need to increase business investment further. In 2021, my Rt Hon Friend the Prime Minister introduced the super-deduction for large businesses to further stimulate business investment, and this Spring, I introduced “full expensing” for three years.

This means that for every million pounds a company invests, they get £250,000 off their tax bill in the very same year.

The CBI, Make UK, Energy UK and 200 other business leaders from companies including BT Open Reach, Siemens and Bosch have said making this measure permanent would the “single most transformational” thing I could do for business investment and growth. The Centre for Policy Studies say it would ‘maximise business investment, boost productivity and deliver higher levels of GDP.’ But because it costs £11 billion a year, I made clear that I would only do so when it was affordable. Well, with inflation halved… borrowing down… and debt falling, today I deliver on that promise. I will today make full expensing permanent. That is the largest business tax cut in modern British history. It means we have not just the lowest headline corporation tax rate in the G7 but its most generous capital allowances.

The OBR say it will increase annual investment by around £3 billion a year and a total of £14 billion over the forecast period. The way to back British business is to increase the incentives to invest.  We do that today by introducing one of the most generous tax reliefs anywhere in the world, a huge boost to British competitiveness in an Autumn Statement for Growth. Skills, planning and infrastructure reform, pension fund reform, support for innovation industries, levelling up, backing small business and full expensing… Taken together, the overall impact of today’s growth measures will be to increase business investment in the UK economy by around £20 billion a year within a decade, nearly 1% of GDP at today’s level. That is the biggest ever boost for business investment in modern times, a decisive step towards closing the productivity gap with other major economies and the most effective way we can raise wages and living standards for every family in the country.

Work

As well as backing business, you need to back the people without whose effort no businesses can succeed. The entrepreneur taking risks. The builder working weekends. The nurse working nights. And the jobseeker leaving benefits behind. I therefore conclude with three further supply-side reforms designed to improve the incentives to work in a modern, dynamic economy.

Welfare

I begin with welfare, and I start by thanking the outstanding Work and Pensions Secretary for his help in developing these reforms. He builds on the work of my Rt Hon Friend for Chingford and Woodford Green who introduced Universal Credit. Those reforms helped to reduce unemployment, which has fallen by over one million.  But post-pandemic we still have over seven million adults of working age, excluding students, who are not working despite nearly one million vacancies in the economy. Many can and want to work – but our system makes that too hard.

In the Spring Budget I introduced 30 hours of free childcare for working parents of 1- & 2-year-olds. That plan, still opposed by the party opposite, starts rolling out in April. It will help tens of thousands of parents return to work without having to worry about damaging their career prospects.

Today we focus on helping those with sickness or disability and the long term unemployed. Every year we sign off over 100,000 people onto benefits with no requirement to look for work because of sickness or disability. That waste of potential is wrong economically and wrong morally. So, with the Secretary of State for Work and Pensions, last week I announced our Back to Work Plan. We will reform the Fit Note process so that treatment rather than time off work becomes the default. We will reform the Work Capability Assessment to reflect greater flexibility and availability of home working after the pandemic. And we will spend £1.3 billion over the next five years to help nearly 700,000 people with health conditions find jobs. Over 180,000 more people will be helped through the Universal Support Programme and nearly 500,000 more people will be offered treatment for mental health conditions and employment support.

Over the forecast period, the OBR judge these measures will more than halve the net flow of people who are signed off work with no work search requirements. At the same time, we will provide a further £1.3 billion of funding to offer extra help to the 300,000 people who have been unemployed for over a year without having sickness or a disability.

But we will ask for something in return. If after 18 months of intensive support jobseekers have not found a job, we will roll out a programme requiring them to take part in a mandatory work placement to increase their skills and improve their employability. And if they choose not to engage with the work search process for six months, we will close their case and stop their benefits. Taken together with the labour supply measures I announced in the Spring, the OBR say we will increase the number of people in work by around 200,000 at the end of the forecast period, permanently increasing the size of the economy. We should unlock the potential we have right here at home, which we do with the biggest set of welfare reforms in a decade in today’s Autumn Statement for Growth.

Ending low pay

Mr Speaker, if we are to incentivise work, we must also tackle low pay. People who get up early, put in the hours and work hard for their families deserve to be paid fairly. Since 2010, those on the minimum wage – now the National Living Wage – have seen their hourly wage go up from £5.80/hour to £10.42/hour. That’s a real terms increase of more than 20%. Because we’ve also doubled the threshold at which you pay tax or national insurance, their after-tax income has gone up not by 20% but by 25% – more than any other income group.

Today, I confirm we will go further and accept the Low Pay Commission recommendation to increase the National Living Wage by 9.8% to £11.44 an hour.

That is the largest ever cash increase in the National Living Wage, worth up to £1800 for a full-time worker. Since the National Living Wage has been introduced, the proportion of people on low pay, defined as earning less than two thirds of national median hourly income, has halved. But at the new rate of £11.44 an hour it delivers our manifesto commitment to eliminate low pay altogether. That means by next year someone working full time on the National Living Wage will see their real take-home after-tax pay go up not by 25% but by 30% compared to 2010. The best way to tackle poverty is through work. By reforming the welfare system, reducing workless households and tackling low pay we have helped lift 1.7 million people out of absolute poverty since 2010 because a central part of our plan for growth is to make work pay.

Tax

And so I move to the final supply side measure in today’s Autumn Statement for Growth. Because of the difficult decisions we have taken in the last year, today’s OBR forecast shows that…

…borrowing will be lower than forecast in the Spring …

… debt as a proportion of GDP will be lower than forecast in the Spring…

… inflation will continue to fall…

…and our fiscal headroom has doubled.

I said we would cut taxes when we could – but only responsibly and only in a way that did not fuel inflation. The OBR today confirm I can deliver a package which does just that. For businesses, I have today delivered the biggest business tax cut in modern British history with the most competitive investment allowances of any large economy.

For the self-employed, I have simplified and reformed their taxes by abolishing the compulsory Class 2 charge and cutting Class 4 National Insurance. But high employment taxes on 27 million people working in the public and private sectors also disincentivise the hard work we should be encouraging. On top of income tax at 20%, they pay 12% National Insurance on earnings between £12,570 and £50,270 – that’s a 32% marginal tax rate. If we want people to get up early in the morning, if we want people to work nights, if we want an economy where people go the extra mile and work hard then we need to recognise that their hard work benefits all of us. So today, Mr Speaker, I am going to cut the main 12% rate of employee National Insurance.

If I cut it by 1 percentage point to 11%, that would be an extra £225 in the pockets of the average worker every year. But instead, I’m going to go further and cut the main rate of Employee National insurance by 2 percentage points from 12% to 10%. This change will help 27 million people. It means someone on the average salary of £35,000 will save over £450. For the average nurse, it is a saving of over £520 and for the typical police officer it is a saving of over £630 every single year. Mr Speaker, I would normally bring in a measure like this for the start of the new tax year in April, but instead tomorrow I’m introducing urgent legislation to bring it in from January 6th, so that people can see the benefit in their payslips at the start of the new year.

The OBR say reducing a tax on work means more people in work – and today’s measures ON JUDT National Insurance will lead to the equivalent of 94,000 more full-time employees in our economy. Because lower tax means higher growth.

We cut taxes to help bigger businesses invest. We cut taxes to help smaller businesses grow. We cut taxes for the self-employed who keep our country running.

And from January, we cut taxes for 27 million working people whose hard work drives our economy forward.

Conclusion

Mr Speaker, the best universities, the cleverest scientists and the smartest entrepreneurs have given us Europe’s most innovative economy. We can be the most prosperous too.

In the face of global challenges, we have halved inflation, reduced our debt and grown our economy. As a country we are sticking to a plan that is working. This Autumn Statement for Growth will attract £20 billion additional business investment a year in the next decade…

… bring tens of thousands more people into work

… and support our fastest growing industries.

In a package which leaves borrowing lower…

… debt lower…

… and keeps inflation falling…

We are delivering…

… the biggest business tax cut in modern British history…

… the largest ever cut to employee and self-employed National Insurance…

… and the biggest package of tax cuts to be implemented since the 1980s.

An Autumn Statement for a country that has turned a corner.

An Autumn Statement for Growth, which I commend to the House.

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