Jeremy Hunt will tomorrow present his second Autumn Statement to the House of Commons. The Office for Budget Responsibility is also set to publish its revised forecasts for the economy and public finances. There is much speculation that their figures will show that the Chancellor has greater-than-anticipated ‘fiscal headroom.’ This is thanks to the positive effect of a higher inflation rate on tax revenues, outweighing the upwards pressure of higher interest rates on government spending.

With the government on track to meet its debt targets, Hunt reportedly now has enough headroom to make around £15 billion of tax cuts or spending increases. But with the Tories lagging in the polls, the Chancellor is facing pressure from within his own party to focus on the former rather than the latter. On Monday, the Prime Minister suggested that he too shared this analysis, pledging to use business tax cuts to boost economic growth as he promised to reduce the tax burden ‘carefully and sustainably’ and ‘over time’. Below are some of the measures that the Treasury has been considering in recent months:

Full expensing

Earlier this month, Hunt told the BBC that ‘My priority is growth, so cutting business taxes is the most important thing at this stage.’ Maintaining high levels of business investment will be central to boosting growth. One way to do this would be to make permanent the full expensing scheme he introduced back in April. Under this tax relief scheme, companies can immediately deduct 100 per cent of the cost of qualifying plant and machinery investments when calculating profits. Currently, the scheme only exists on a temporary basis and is set to end in March 2026. Making it permanent could cost up to £10 billion.

Income tax

The billions in extra headroom could be spent on tax cuts for low and middle earners. Reports suggest that the Treasury is considering a 1p, or even 2p, cut in income tax or lowering the thresholds when these rates are payable. However, Hunt may choose to defer these until the Spring Budget instead.

National Insurance

As an alternative to cutting income tax, Hunt could choose to focus on cutting the headline rate of National Insurance. This would enable him to present his statement as being on the side of British workers, with a cut to ‘Class 4 National Insurance Contributions (NICs)’ for the self-employed reportedly being considered to help out plumbers, electricians and builders.

Welfare reform

This will be a central theme of the Autumn Statement, with Hunt making much of it in his party conference speech. A ‘Back to Work Plan’ has already been announced, with plans to remove benefits and step up monitoring of welfare recipients in an effort to bring more people into work. It’s likely that the Chancellor will announce changes to the Work Capability Assessment too.

Benefits spending

One major row could be over any changes that Hunt makes to the uplifting of benefits as he seeks to find savings for tax cuts. In recent years, ministers have calculated the annual universal credit increase in April by using the measure of inflation from the previous September. But given the substantial fall in the rate of inflation in recent months, minsters are considering whether to pin the uprating to figures from October 2023, which would save around 2 per cent off the uprating in April 2024.

Separately, the government is also weighing up whether to boost housing support for benefit claimants to help low-income families with rising living costs. This would be done by unfreezing Local Housing Allowance, which has remained the same in cash terms since 2020 despite soaring rents.

Pensions

One way to make hundreds of millions in savings would be by ‘tweaking’ the triple pension lock. This ensures pensions increase by whichever is the highest of average earnings, inflation or 2.5 per cent each year. The inflation rate in September was 6.6 per cent but the average earnings increase for May to July was 8.5 per cent, meaning the latter figure will be used. However, as the earnings figure was distorted by a surge in bonus payments for public-sector workers the Chancellor could choose to strip out the effect. This would leave a figure of 7.8 per cent for the triple lock.

Inheritance tax

There have been numerous briefings about the scrapping of inheritance tax, or a reduction in the rate from 40 per cent to 20 per cent on estates above £325,000. If the tax rate is not cut in half, there have also been suggestions it could be lowered by 30 per cent or 20 per cent. However, Hunt’s recent interviews have stressed the importance of ‘growth’ – on which inheritance tax has minimal impact.

Fuel duty

The Chancellor is likely to cancel a planned 5p increase in fuel duty from April next year, a move which will cost £6 billion. Fear of a backlash from Conservative MPs and motorists mean that none of Hunt’s predecessors in No. 11 have increased this levy since 2011.

Stamp duty

Sunak and Hunt’s focus on halving the rate of inflation has meant a premium is placed on tax cuts which are likely to have the least inflationary consequences. There are therefore doubts as to whether a mooted cut in stamp duty will actually go ahead, given concerns that it could stimulate the housing market. The point at which people start paying stamp duty is currently set at 5 per cent of the value of a property over £250,000, increasing to 10 per cent over £925,000. But Hunt might simply choose to defer any changes until March, when the rate of inflation is hoped to have fallen further.

One alternative policy for first-time buyers would be an extension to the mortgage guarantee scheme which helps them get a loan with a 5 per cent deposit. The scheme was set to end in December 2023 but it could be extended for another year. Another option would be by reforming the government’s Lifetime Isa, which gives first-time buyers a boost to their savings when buying their first property.

Council tax

With local authorities warning of shortfalls, one measure being considered by Hunt is allowing them to increase their council tax rates by around 5 per cent from April next year. This would allow councils to charge over £2,000 a year for Band D homes from 2024, with the average family likely paying around £120 more each year.

Personal savings

Hunt is reported to be considering merging cash and stocks and shares Isas, as well as introducing a new Isa for UK investments in a bid to encourage more business.

Other measures

There are likely to be further updates on an ongoing review into improving public sector productivity and reforms to unlock pension fund investment.