“The Chancellor has delivered an Autumn Statement that rightly focuses on tackling the UK’s main economic problem, stagnant long-term growth. The only way to sustainably do so is to improve the productive capacity of the economy. Policies such as permanent full expensing of capital allowances and R&D tax credit reform represent a strong forward step in this regard.

Unfortunately, despite the 2 percentage point decrease in National Insurance contributions, the overall tax burden for workers remains high. While the tax bands are broadly similar to a few years ago, higher inflation means that many more workers have been dragged into higher earnings brackets, acting as a stealth tax. Therefore, presenting today’s cut as a giveaway is misleading. It is also worth noting that the OBR is now anticipating inflation remaining above target till 2025, which nonetheless remains overly optimistic compared to Cebr’s forecast of above-target inflation till the late 2020s.”

Making full expensing of capital allowances permanent will boost capital investment in the long term, providing certainty when planning investments which sometimes span decades. The impact of this policy will be much greater than the temporary version we have seen over the past few years, which primarily resulted only in some investments being brought forward.

Creating more flexibility in the sickness benefit system makes sense, and it is positive that this change has come alongside much-needed funding for supporting people properly into work. This could help the labour market marginally, with 2.6m currently inactive due to long-term sickness. The government must continue to review the system to ensure it provides the right level of flexible support to people with mental and physical disabilities back into the workplace.

Planning reforms are desperately needed, they remain a major blockage to investment in housing and other much-needed infrastructure. The Chancellor’s pledge to guarantee prompt service is welcome but must come alongside support for efficiency improvements, which would actually make this possible. Given the higher-than-expected yet historically small fiscal headroom afforded to the Chancellor for this Autumn Statement, today’s measures are a step in the right direction but don’t go far enough. Reducing the tax burden and boosting growth further must continue to be the priorities for government in future fiscal events.”

For more information, please contact:

Christopher Breen, Head of Economic Insight
Email: cbreen@cebr.com, Phone: 020 7324 2866

Cebr is an independent London-based economic consultancy specialising in economic impact assessment, macroeconomic forecasting and thought leadership. For more information on this report, or if you are interested in commissioning research with Cebr, please contact us using our enquiries page.