Autumn Statement: What can you expect and what could it mean for us here in Wales? 

Whatever the Chancellor announces in the Autumn Statement tomorrow (Wednesday, 22 November) will shape not just the economic future but our political future too. 

Any changes to taxes and benefits will affect hundreds of thousands of us here in Wales while the political choice set out from tomorrow on could help decide next year’s UK General Election and so who will be in charge in the years to come. 

It’s the third roll of the dice for Rishi Sunak’s government following on from the Prime Minister’s conference speech which saw the scrapping of the controversial HS2 rail project’s northern leg and the recent reshuffle in which Suella Braverman was sacked and David Cameron brought back. 

Wednesday’s Autumn Statement isn’t a full Budget with lots of tax and spending changes including duty on cigarettes and alcohol - that will come in March next year. 

In normal times the Autumn Statement acts as a point to tweak spending plans and send signals of future plans. 

But given the political circumstances and the persistently bad poll figures seen by the Conservatives, there will be extra attention and extra pressure.  

The Welsh Government wants to see more investment from the UK Government in areas such as coal tip safety and rail infrastructure. 

The Finance Minister Rebecca Evans has written to the Chancellor calling for £20m of funding for coal tip safety and said that the controversial HS2 rail scheme “is an England-only project and Wales should be provided with its fair share of consequential funding, including the £270m we have missed out on to date.

"We are also calling for a wider review of how rail projects are classified, and for the UK Government to re-engage with the work of the joint UK and Welsh Government Wales Rail Board to deliver a rolling programme of investment which provides the rail infrastructure Wales needs.”

Both are unlikely to be priorities in this Autumn Statement. 

So what can you expect and what could it mean for us here in Wales? 

Taxes

Tax cuts are on their way. After a long period of saying that the economic situation isn’t right for them, both the Prime Minister and the Chancellor have made it clear that they now think the time is right. But what sort?

If it is to attract the attention of wavering voters any change must be noticeable and not something that you might only spot buried in a P60 sometime in the next few years. 

It’s been reported that reductions are being considered to Income Tax itself or National Insurance which is paid by everyone in employment. 

It could be that the Chancellor states that a cut is coming in next year’s Budget or it could be that thresholds are increased - these are the levels of income you have to earn before you pay different rates of tax. 

They’ve been frozen in recent years to save money but that means more and more people are paying income tax. 

There are other tax-cutting options being considered by the Chancellor. 

Inheritance Tax

The Chancellor is said to have been looking at cutting inheritance tax, a move that would be popular with many Conservative voters but could leave him facing accusations of favouring the better-off.

As things stand, inheritance tax is charged at 40% on estates worth more than £325,000. However, there are a number of allowances for property being passed onto children or grandchildren, allowances that can be doubled by married couples so that a £1m estate can be passed on tax-free. 

In Wales, there are far fewer estates of that value - 790 paid inheritance tax in 2020/21. That shouldn’t be a surprise - after all the average property value here is below £190,000.

It’s thought the Prime Minister has faced severe criticism about the prospect of cutting tax for the wealthiest from Conservative MPs in “red wall seats” - constituencies like Wrexham and Bridgend which turned blue in 2019 but are not guaranteed to do so again next year. 

Outside the party, the General Secretary of Wales TUC, Shavanah Taj condemned the idea as “obscene” and added that “Virtually no one is affected by inheritance tax in Wales, but if it is cut our public services will be starved of much-needed funding yet again.“Slashing it would be an act of levelling down.”

Paul Johnson of the Institute for Fiscal Studies think tank said that It would be more important to reform the inheritance tax than to cut it.

He told Times Radio “The problem with inheritance tax is that if you're properly wealthy, if you've got a few million pounds, then it's really incredibly easy to avoid it. Whereas if you are like most people who pay a bit of inheritance tax, most of your wealth is tied up in the family home, then you can't really avoid it."

Stamp Duty

There have been reports that there could be a cut in stamp duty, which is the tax paid when buying a house in England. 

If so that won’t immediately affect buyers here in Wales who pay Land Transaction Tax (LTT) set by the Welsh Government. 

You currently don’t pay it if the property you’re buying is worth less than £225,000 (and you don’t own any others.)

After that, you pay LTT at the following rates:

6% on the portion of value between £225,000 and £400,00 - 7.5% on the portion between £400,000 and £750,000 - 10% on the portion between £750,000 and £1.5m - 12% on the portion over £1.5m

As noted above, in relation to inheritance tax, property prices are much lower here in Wales than in parts of England. 

First-time buyers

The Chancellor is said to be expanding its scheme to guarantee mortgages for first-time buyers with a 5% deposit. It’s due to finish in December but may be extended for another year. 

The equivalent scheme in Wales, Help to Buy Wales, offers a shared equity loan for homes up to the value of £300,000 for first-time buyers who have a 5% deposit. 

Benefits and pensions

It seems that benefits will see a bigger increase than had been recently reported but that would come alongside a tougher benefits regime. 

Both benefits and pensions are not devolved and remain the responsibility of the UK Government so any change will affect people living and working here in Wales. 

In a speech on Monday the Prime Minister it was a “national scandal” that around two million working-age people were not in employment.

He added that “we must do more to support those who can work to do so, and we will clamp down on welfare fraudsters because the system must be fair for taxpayers who fund it.”

The UK Government now seems likely to increase benefits in line with September’s inflation rate of 67% despite previous reports that it would use October’s figure (4.6%) to save £3bn. 

Freeports

The Chancellor will extend the period when businesses based in freeports in England can claim tax relief from five years to ten, until September 2031.

Freeports are a way of focussing tax relief, grants and aid on certain areas based around a port. There are to be two in Wales - one on Anglesey and one covering Milford Haven and Port Talbot. 

There’s no guarantee yet that the Welsh freeports will see the same extension only that “the UK Government will work with the Scottish and Welsh governments with the intention of delivering the same extension to Investment Zones and Freeports in Scotland and Wales.”

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