The Chancellor’s Challenging Autumn Statement 2023

After countless resets, relaunches and reshuffles, it’s time for the last major political set-piece event of the year: the Autumn Statement. In theory, this is supposed to be an opportunity for the Chancellor to update the House on the state of the country’s finances. In practice, this is now a major fiscal event and a crucial opportunity for the government to set the political and economic agenda in the run-up to the general election.

The Chancellor has multiple audiences that he needs to speak to in the Autumn Statement:

  • The markets, who want reassurance that the UK’s public finances are on a stable footing. Hopefully this can lead to lower interest rates on government debt which means room for tax cuts/spending on public services next year.
  • The public, who need to feel that they are benefiting from more money in their pockets and that there is greater funding being set aside to spend on public services.
  • Businesses, who need to feel that they are getting the support and stability they need to invest and grow.
  • The Labour Party, who the Chancellor will be hoping will fall into some of his political traps on borrowing and tax rises and where Labour stands on its future commitments.
  • Tory backbenchers, who are clamoring for tax cuts now, regardless of the potential economic impact on inflation.
  • The media, with political and economic commentators analyzing and interpreting the Statement.

Keeping these different audiences happy whilst framing it all around a clear economic message and consistent political strategy is a tricky balancing act, and not one that this government has always succeeded in maintaining.

Ultimately, Sunak and Hunt hope that the tax cut giveaways in the Autumn Statement (and especially in next year’s budget) are gamechangers in terms of the Government’s re-election prospects. That hope may seem forlorn, but they will try and use today’s National Insurance cuts as ‘down payments’ with the electorate by saying ‘the economy is beginning to improve thanks to our steady hand and long-term decisions which is why we can begin to cut your taxes now, don’t let Labour wreck it and let us finish the job’.

These tax cuts are especially tricky with their implications for tackling inflation, which continues to be well above the official 2% target and has negative implications for people remortgaging their homes and getting dragged into higher income tax bands. This challenge, along with the closer proximity of the Budget to the next general election date, means the more substantial income tax cuts will wait until the Spring. Whether these tax cuts are enough to placate an electorate that continues to be hit by the cost-of-living crisis remains to be seen.

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