On 29 November 2023 the House of Lords is due to debate the autumn statement.

1. Economic background to the statement

In March 2023, at the spring budget, the Office for Budget Responsibility (OBR) reported the economy was facing “significant structural challenges” and having “weak underlying momentum”, with low growth and high inflation contributing to a squeeze in living standards.[1] Since then growth has continued to be weak. The Office for National Statistics (ONS) reported zero growth in the third quarter of 2023 (July to September), following a 0.2% expansion the previous quarter.[2]

Inflation was recorded at 4.6% in October 2023.[3] This is significantly lower than its peak of 11.1% in October 2022 but still remains well above its 2% target. Over the last couple of years the Bank of England has increased interest rates to 5.25%, their highest level since 2008, in an attempt to reduce inflation. At its most recent meeting on 2 November 2023, the Bank’s monetary policy committee projected that “monetary policy is likely to need to be restrictive for an extended period of time” for inflation to be reduced back to its target.[4]

2. Main measures in the statement

The chancellor of the exchequer, Jeremy Hunt, delivered the autumn statement to the House of Commons on 22 November 2023, labelling it as an “autumn statement for growth” and claiming the package contained “110 growth measures”.[5] Mr Hunt said that because of “difficult decisions we have taken in the last year” the fiscal situation now allowed him to deliver a package of tax cuts to support growth.

As illustrated in table 1 below, the total cost of the policy decisions announced in the autumn statement amounts to £14.3bn in the forthcoming financial year (2024/25) and £21.1bn by the end of the forecast period (2028/29), with the vast majority of this cost going towards tax reductions, rather than increases in public spending.

Table 1. Total cost of policy decisions across the forecast period (£bn)
2023/24 2024/25 2025/26 2026/27 2027/28 2028/29
Total tax policy decisions 1.9 11.4 9.8 16.2 19.8 20.3
Total spending policy decisions 4.8 2.9 2.7 1.9 1.2 0.8
Total policy decisions* 6.7 14.3 12.4 18.1 21.0 21.1

*Figures for 2025/26 do not add due to rounding.

(HM Treasury, ‘Autumn statement 2023’, 22 November 2023, CP 977)

2.1 Taxation

As outlined above, tax reductions were, in terms of cost, the most significant fiscal policy decisions announced by the chancellor. Key tax measures announced by the chancellor included the following:[6]

  • National insurance contributions (NICs):
    • From 6 January 2024, the main rate of class 1 employee NICs will be reduced from 12% to 10%.
    • From 6 April 2024, no one will be required to pay class 2 self-employed NICs.
    • From 6 April 2024, the main rate of class 4 self-employed NICs will be reduced from 9% to 8%.
  • Capital allowances. Full expensing of plant and machinery investment costs, previously introduced up until April 2026, will be made permanent.
  • Business rates. The current 75% relief for retail, hospitality and leisure sectors is being extended for 2024/25, with up to £110,000 cash support available for eligible businesses.
  • Alcohol duty. Duties will be frozen until 1 August 2024.
  • Tobacco duty. Duty rates on tobacco products will increase by retail price index (RPI) inflation plus 2%, with duties on hand-rolling tobacco products increasing by RPI inflation plus 12%.

2.2 Spending

The government reaffirmed its plan—first outlined at the spring budget earlier this year—for planned departmental resource spending, for the years beyond the current spending review period (2025/26 to 2028/29), to grow at 1% a year on average in real terms and for public sector capital spending to be frozen in cash terms. Given that the government has existing input targets and commitments which imply real-terms spending growth beyond this figure for certain areas (for example, commitments for defence or official development assistance spending to be a certain proportion of gross domestic product (GDP)), these spending targets for 2025/26 onwards imply real-terms spending reductions for ‘unprotected’ departments. The OBR estimates that the spending of unprotected departments would need to fall by 2.3% per year in real terms from 2025/26, a figure which could increase to 4.1% per year, should the government follow through on its ambition to increase defence spending to 2.5% of GDP and return overseas development assistance to its 0.7% of gross national income target.[7]

Shorter-term spending measures included the following:[8]

  • Universal credit. Working age benefits will be uprated in April 2024 by 6.7%, in line with September’s inflation figure.
  • Triple lock. The state pension will be uprated in April 2024 by 8.5%, in line with annual earnings growth for May to July 2023.
  • Renter support. Local housing allowance, currently frozen in cash terms, will be raised to the 30th percentile of local market rents from April 2024.
  • Restart scheme. The programme of employment support for the long-term unemployed has been extended for two years with expanded eligibility criteria.

2.3 Other measures

A number of other policy decisions were also announced by the chancellor, including:[9]

  • Minimum wage. From 1 April 2024, the national living wage will increase by 9.8% to £11.44 an hour for eligible workers across the UK aged 21 and over.
  • The government has finalised four new devolution deals across England with Greater Lincolnshire, Hull and East Yorkshire, Lancashire, and Cornwall.
  • Investment zones. The investment zones programme in England will be extended from five to 10 years.
  • The government intends to fully exit its shareholding in NatWest banking group by 2025/26.

3. Fiscal forecast

The OBR published its ‘Economic and fiscal outlook: November 2023’ alongside the budget. The OBR said that the fiscal position had improved since its previous forecast in March 2023:

More persistent, domestically driven inflation boosts nominal tax revenues compared to March. But it also raises the cost of welfare benefits, and higher interest rates raise the cost of servicing the government’s debts. It is mainly due to the chancellor’s decision to leave departmental spending broadly unchanged that higher inflation and other forecast changes reduce borrowing by £27bn in 2027/28 compared to our March forecast.

The OBR suggested that the chancellor had “spent” this £27bn windfall, notably on the tax reductions highlighted in section 2.1 above.

3.1 Public sector borrowing, debt and fiscal targets

The OBR forecasts that public sector net borrowing will be £124bn, or 4.5% of GDP, in 2023/24, a reduction of £7.7bn, or 0.6% of GDP, compared to what it was forecasting in March. The OBR expects public sector net borrowing to fall to £35bn, or 1.1% of GDP, by 2028/29.

The OBR forecasts that public sector net debt (excluding the Bank of England) is due to rise from 89.0% in 2023/24 to 93.2% in 2026/27 and 2027/28, before falling slightly to 92.8% in 2028/29.

As a result of the above, the OBR assesses the government to be meeting its two fiscal targets to have public sector net debt (excluding the Bank of England) falling and public sector net borrowing below 3% of GDP by the fifth year of the forecast (2028/29).

The government has an additional fiscal target requiring “welfare spending (excluding the state pension and payments most closely linked to the economic cycle) to be contained within a predetermined cap and margin in 2024/25”. The OBR forecasts that the government is not due to meet this target, with the welfare cap due to be exceeded by £8.6bn in 2024/25.

3.2 Tax and spend as a share of the economy

The OBR assessed that the tax changes announced in the autumn statement reduced taxation as a share of the economy by 0.7 percentage points. However, in total, tax as a share of the economy is still due to rise “in every year to a post-war high of 37.7% of GDP by 2028/29”. The OBR stated that income tax increases explain most of this increase, driven by “threshold freezes and strong nominal earnings growth”.

The OBR forecasts that public spending as a share of the economy is due to fall from 44.8% to 42.7% of GDP over the forecast period. However, this would still see it remain 3.1 percentage points above its pre-pandemic level.

4. Economic forecast

The OBR assessed that “the economy recovered more fully from the pandemic and weathered the energy price shock better than anticipated”. It said:

ONS revisions now show that the economy recovered its pre-pandemic level at the end of 2021 and was 1.8% above it in mid-2023, rather than 1.1% below as we had assumed in March. Revisions to growth rates in the last couple of years were more muted, but the economy has so far also proven more resilient than we expected in the face of higher energy prices, inflation, and interest rates, with cumulative growth nearly 1 percentage point stronger in the first half of 2023 than our March forecast. The combined effect of the historical revisions and latest outturns leaves the level of real GDP at the start of this forecast almost 3% higher than we thought in March.

4.1 Inflation

A corollary of the unexpected “resilience” is that inflation is now forecast to remain “higher for longer”. The OBR has assessed inflation to be “more persistent and domestically fuelled” than previously thought and expects that it will now take until the second quarter of 2025 before it returns to target, more than a year later than the OBR was forecasting in March.

The OBR has forecast that consumer price index (CPI) inflation will be 3.6% in 2024.

4.2 Economic growth

The OBR has revised down its estimate of the “medium-term potential growth rate of the economy” to 1.6%, down from 1.8% in its previous forecast. This revision is largely driven by a “weaker forecast for average hours per worker”, which reflects the OBR’s assessment of demographic changes that will see the composition of the working population shift towards “younger and older age groups who work shorter hours on average”. In addition, recent data and historical revisions point to a “weak near-term outlook” for productivity growth. The impact of these downward revisions is only partly offset by “higher migration, stronger business investment, lower energy prices, and the policy measures which further boost labour supply and business investment”.

Taken together, the OBR expects cumulative real GDP growth from 2023 to 2027 to be 2.4 percentage points lower than it had forecast in March.

4.3 Unemployment and earnings

Unemployment is expected to rise to 1.6 million people, or 4.6% of the labour force, in the second quarter of 2025, before falling back to its “assumed structural rate” of 4.1% by the end of the forecast period.

In nominal terms, average earnings are expected to grow more strongly than the OBR had previously expected over the coming years. However, the OBR expects this increase in earnings to be outweighed by higher inflation; therefore, it has reduced its expectations for real-terms earnings growth. For example, in March the OBR forecast real earnings growth of 0.1%, 0.7% and 1.3% for 2023, 2024 and 2025, respectively, whereas it now expects real earnings growth of -0.3%, 0.3% and 0.3% respectively for those same years.

4.4 Living standards

Living standards, measured by real household disposable income (RHDI) per person, are forecast to be 3.5% lower in 2024/25 than their pre-pandemic level. This is less than half of the fall that the OBR had forecast in March. However, the OBR says it still “represents the largest reduction in real living standards since ONS records began in the 1950s”. The OBR expects RHDI per person to recover to its pre-pandemic level by 2027/28.

4.5 Summary of forecast for key economic indicators

A selection of economic indicators from the OBR’s forecast are set out in table 2 below.

Table 2. Selection of economic indicators, 2023–28
2023 2024 2025 2026 2027 2028
GDP growth (%) 0.6 0.7 1.4 2.0 2.0 1.7
CPI inflation (%) 7.5 3.6 1.8 1.4 1.7 2.0
Unemployment rate (%) 4.2 4.6 4.6 4.4 4.2 4.1
RHDI growth (%) 0.6 -0.9 1.9 1.7 2.1 2.0

(Office for Budget Responsibility, ‘Economic and fiscal outlook: November 2023’, 22 November 2023)

5. Reaction

Much of the reaction to the autumn statement focused on the source of funding for the announced tax reductions, with many commentators pointing out that they come at the expense of a real-terms squeeze in public services and investment. Some individual measures, such as making full expensing permanent, were welcomed.

5.1 Political

In her response to the statement, shadow chancellor Rachel Reeves said that the chancellor had “lifted the lid on 13 years of economic failure”.[10] Pointing to the downgraded forecasts for growth over the coming years, she claimed that “under the Conservatives, growth has hit a dead end” and that life for working people had been made harder. However, Ms Reeves did not oppose the headline measures of the statement. For example, she welcomed the decision to make full expensing permanent (something she said Labour “had been calling for”) and did not oppose the NICs reductions, saying that she had “long argued that taxes on working people are too high”.

Drew Hendry, shadow economy spokesperson for the SNP, said “prices and costs for people in their homes are still going up day by day” and that the chancellor had tried to “pull the wool over many people’s eyes”.[11] Like Rachel Reeves, Mr Hendry also welcomed the headline tax measures included in the statement, but criticised the chancellor for not doing more to “help people who are struggling with the cost of living crisis”.

Sarah Olney, shadow treasury spokesperson for the Liberal Democrats, said that the statement was “a deception from the chancellor after years of unfair tax hikes”.[12] With growth “flatlining” and public services “on their knees”, Ms Olney claimed that the chancellor had failed on his commitment to deliver both a strong economy and good public services.

5.2 Thinktanks

The director of the Institute for Fiscal Studies, Paul Johnson, said in response to the statement that it was worth being clear that “the public finances haven’t meaningfully improved”.[13] Mr Johnson noted that higher than expected inflation had, in net terms, nominally increased the “proceeds” available to the chancellor, and that these proceeds had been spent cutting taxes rather than increasing tax thresholds or compensating public services for higher costs. He said that “announcing immediate tax cuts in response to highly uncertain changes in assumptions about the UK’s medium-term economic prospects” did not feel like “a recipe for good management of the public finances”. Mr Johnson also highlighted the fact that fiscal space to cut taxes had been gained by promising years of very low real-terms increases in public service spending and freezing public investment in cash terms, both of which “may prove hard to deliver”.

The Institute for Government (IfG) made a similar point in its response to the autumn statement, claiming that the chancellor had “spent a fiscal windfall in pursuit of growth at the expense of public services”.[14] The IfG also noted that the chancellor had prioritised private sector growth. For example, it highlighted the fact that the combination of measures announced by the chancellor was likely to increase employment and “raise economic output by 0.3%” by the end of the forecast period, but that the reductions in public investment—which helped fund said measures—would, according to the OBR, likely have a “material, negative impact on potential output beyond the forecast horizon”. The IfG noted that public spending will likely need to be “topped up” over the coming years, but that “short-term emergency funding pots, which make it difficult for service leaders to plan effectively and implement productivity enhancing reforms, are poor value for money”.

The Resolution Foundation said that the chancellor’s statement reflected “the pressures not only of an upcoming election, but of governing a sicker, older, slower-growing Britain, amid an era of far higher interest rates”.[15] It noted that higher inflation had led to the “largest upward revision to tax revenues since the OBR was founded” and that the chancellor had “spent almost all of this (96%) delivering a package of tax cuts”. However, the foundation noted that “the autumn statement’s £20bn of tax cuts compare to around £90bn of tax rises (including higher corporation tax) already announced this parliament” and that tax receipts as a share of the economy were due to rise by 4.5% of GDP between 2019/20 and 2028/29, the equivalent of “an extra £4,300 for every household”.

In its response to the statement, the Institute for Public Policy Research published analysis suggesting that the NICs reductions announced by the chancellor would “largely benefit the best-off households”.[16] It said that for every £100 the statement spent on personal tax cuts “£46 will benefit the richest fifth of households” and “only £3 of every £100 of tax cuts will go to the worst-off families”. It also said that London and the South East of England were the biggest regional beneficiaries of the tax cuts, with those in the North East, Yorkshire and the Humber, and Wales seeing the smallest benefit.

The Centre for Policy Studies (CPS) welcomed the decision to make full expensing permanent, claiming it to be a “vital step in counteracting Britain’s chronically low rate of capital investment”.[17] The CPS also welcomed the announcement of the national insurance cut, while noting it would have preferred “the government to have halted the relentless ratchet of fiscal drag via frozen thresholds”. It said that the government’s decision to maintain the triple lock and increase pensions by 8.5% was “welcome news for pensions” but “yet another example of a country which prioritises older people at the expense of younger workers”. It said that for the government to increase growth over the coming years it would need to balance such policies with those which “enable home ownership and increase housebuilding, as well as easing burdens on working families”.

6. Read more

Cover image by Kirsty O’Connor/HM Treasury on Flickr.


  1. Office for Budget Responsibility, ‘Economic and fiscal outlook: March 2023’, 15 March 2023. Return to text
  2. Office for National Statistics, ‘GDP first quarterly estimate, UK: July to September 2023’, 10 November 2023. Return to text
  3. Office for National Statistics, ‘Consumer price inflation, UK: October 2023’, 15 November 2023. Return to text
  4. Bank of England, ‘Monetary policy report: November 2023’, 2 November 2023. Return to text
  5. HM Treasury, ‘Autumn statement 2023 speech’, 22 November 2023. Return to text
  6. HM Treasury, ‘Autumn statement 2023’, 22 November 2023, CP 977. Return to text
  7. Office for Budget Responsibility, ‘Economic and fiscal outlook: November 2023’, 22 November 2023. Return to text
  8. HM Treasury, ‘Autumn statement 2023’, 22 November 2023, CP 977. Return to text
  9. As above. Return to text
  10. HC Hansard, 22 November 2023, cols 337–42. Return to text
  11. HC Hansard, 22 November 2023, cols 344–5. Return to text
  12. HC Hansard, 22 November 2023, col 348. Return to text
  13. Institute for Fiscal Studies, ‘Autumn statement 2023 response’, 22 November 2023. Return to text
  14. Institute for Government, ‘Six things we learnt from the 2023 autumn statement’, 22 November 2023. Return to text
  15. Resolution Foundation, ‘A pre-election statement’, 23 November 2023. Return to text
  16. Institute for Public Policy Research, ‘Revealed: Autumn statement tax cuts benefit London and South East, with the richest fifth of households taking almost half’, 22 November 2023. Return to text
  17. Centre for Policy Studies, ‘CPS welcomes permanent full expensing’, 22 November 2023. Return to text