NAVCA have produced a short briefing providing the headlines relevant to our sector from the November Autumn Statement – 22 November 2023;
Headlines
- Class 1 employee National Insurance Contributions reduced from 12% to 10% from 6 January 2024.
- From 1 April 2024 national living wage will increase by 9.8% to £11.44, with the age threshold reduced to 21 years old.
- Working age benefits for 2024-25 will be increased by the September CPI inflation figure of 6.7%.
- Pension triple lock remains, so that pensions will rise in line with average earnings growth of 8.5%.
- Local housing allowance will be increased to the 30th percentile of local market rates. It is expected to give 1.6 million households an average of £800 extra support in 2024-25.
- An effective cut of £19.1Bn to public services by 2027-28.
Looking beyond the headlines
- There have been no changes to the budgets of government departments or increased funding for the delivery of public services [with a few exceptions].
- To create space for the reduction in national insurance contributions, Departmental Expenditure Limits have been increased by only £5Bn per year beyond 2024-25. This will result in an overall £19.1Bn reduction in the real value of departmental spending by 2027-28. This limited increase is unrealistic and sets a significant fiscal trap for the next Parliament. The implications of this, particularly if defence spending increases to 2.5% of GDP, is that there would be real terms cuts of 2.3% across the board, with spending of unprotected departments [i.e. not health and education] needing to fall by 4.1%, which is simply unworkable.
- There is no increase for local government and no reform of the local government funding formula.
- Inflation will remain higher for longer than predicted in March 2023, reducing to 4.8% by end of 2023, and not reaching the 2% target until second quarter of 2025.
- Tax allowances, the point at which people start paying tax, will remain frozen, meaning almost another 4 million people will be paying tax in 2028-29, raising an extra £44.6Bn.
- The potential growth rate of the economy has been revised down by the Office of Budget Responsibility to 1.6% [from 1.8% in March 2023].
- The Office of Budget Responsibility estimates that real household disposable income per person is forecast to be 3.5% lower in 2024-25 than its pre-pandemic level.
Changes to Benefits
- £2.5Bn Back to Work Plan over the next five years to help people look for work and stay in it, whilst managing health conditions and reducing the numbers of people able to claim sickness related benefits. This has the aim of getting 200,000 people into work.
- The Work Capability Assessment (WCA) will be reformed to reduce the number of people signed onto benefits with no requirement to look for work. This will also include requiring people to work from home. FIT notes will be reformed to move from time off to treatment plans and access to specialist work and health support.
- The WorkWell service has been launched today to help people find and stay in work. It will be delivered by the Departments of Work and Pensions and Health and Social Care, initially in 15 areas of England. A prospectus for ICSs will be launched in the next few weeks, for them to develop their localised work and health strategy.
- There will be extra help for people unemployed for over one year, but if after 18 months they have not found a job, they will have to complete mandatory work placements. All benefits will be stopped if a person fails to co-operate at any stage with the JobCentre.
- Stricter sanctions will be applied to all benefit claimants refusing to engage with the process or that have been on open-ended sanctions for over six months.
Levelling Up
- The Investment Zones programme will increase from 5 to 10 years, increasing the envelope of funding and tax relief available in each Investment Zone to £160M. This is supported by a new £150M Investment Opportunity Fund.
- Three new Investment Zones in England: Greater Manchester, West Midlands and East Midlands.
- A new single funding settlement will be implemented at the next Spending Review for the West Midlands and Greater Manchester Combined Authorities.
- A new level 4 devolution framework will allow devolved institutions with a directly elected leader to deliver new powers over local transport, adult skills and housing.
- The aim is to negotiate a new devolution deal for the North East and finalise it in spring 2024.
- Four new devolution deals: Greater Lincolnshire, Hull and East Yorkshire – Level 3 deals; Cornwall and Lancashire – Level 2 deals with no directly elected mayor.
- £50M to support regeneration in Bolsover, the Isles of Scilly, Warrington, North Norfolk and Eden. All these areas are represented by Conservative MPs.
- Level 2 devolution powers will be offered to councils with a functional economic or whole county area.
Other measures relevant to VCSE
- Reforms to Energy Saving Materials VAT Relief: VAT relief will be available on the installation of energy-saving materials and bringing buildings used solely for a relevant charitable purpose within scope.
- Under the terms of the Procurement Act 2023, government will require that from April 2024, firms bidding for government contracts over £5 million will have to demonstrate they pay their own invoices within an average of 55 days, tightening to 45 days in April 2025, and to 30 days at some unspecified point after that.
- Business rate support will include freezing the small business multiplier for a further year. Retail Hospitality and Leisure relief will be extended.
- £7M over next 3 years to address antisemitism in schools and universities
- £3M uplift to Community Security Trust
- £10M to support veterans
Policy Papers on the Autumn Statement 2023 available at: https://www.gov.uk/government/publications/autumn-statement-2023
Office for Budget Responsibility economic and fiscal outlook: https://obr.uk/efo/economic-and-fiscal-outlook-november-2023/
Analysis by the Resolution Foundation https://www.resolutionfoundation.org/press-releases/pre-election-giveaways-arrive-early-with-biggest-tax-cuts-since-1988-but-taxes-are-up-not-down-rising-by-4300-per-household/