Hm Treasury
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.
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 todays 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.
And we back British business with 110 growth measures dont worry, Im 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, todays 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 Ministers economic priorities.
The second part sets out growth measures to back British business.
Finally, I conclude with measures to make work pay.
Progress on the Prime Minsters 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 OBRs 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 Ministers 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
Lets 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 Septembers 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. Ive 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 todays 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 Ministers pledge to reduce debt. Before I took difficult decisions at last years 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 OBRs 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 Putins 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 firs