National Research University Higher School of Economics

AD Macroeconomics

Team project

As its economy sputters, Britain cuts taxes ahead of election

Team #9:
1 – Shumilova Viktoria
2 – Keelus Diana
3 – Maksimenkio Diana
4 – Bekhruz Nuraliev
5 – Emmanuel Brobbey
6 – Adebisi Olawadanilare Amos
7 – Mohan Padmapriya
8 – Peprah Ronaldo Asiedu
9 – Iftikhar Sanwal
10 – Palani Swetha
11 – Polz Lukas

Moscow – 2023
Содержание
1 Introduction: A quick overview of the major economic problems in the
UK 1

2 Article discussion 4

3 Economic shocks 5

4 Main assumptions 6

5 Model assumptions 6

6 Modelling the shocks 9

7 Conclusion 11

1 Introduction: A quick overview of the major economic

problems in the UK

The UK has been experiencing one of the biggest economic crises in its history. The
forecast of the UK’s GDP growth does not look good either. Even though many experts
say that the UK can avoid recession in 2023, the GDP is expected to have been flat in Q3
of 2023, and it is expected to grow by 0.1% in Q4 of 2023, which is weaker than previously
projected (The Bank of England). The total annual GDP growth is expected to be 0.5%
in 2023 (IMF). An increase in GDP is projected to flatline in 2024 at approximately 0.6%
(IMF). Annual CPI inflation has been a major ailment in the UK’s economy since 2021
when it started to deviate from the Bank of England’s target level of 2%. In 2022, annual
average inflation rate in the UK reached its peak level of 9%, the highest since 1989.
The highest monthly inflation rate was observed in October of 2022, approximately 11%.
However, the Bank of England states that because of consecutive interest rate increases
in 2023, the monthly inflation rate was lowered or as the Prime Minister Rishi Sunak said
“taken under control”. As a matter of fact, the key rate was raised from 0.1% in December
2022 to 5.25% in November 2023.The last Monetary Policy Committee meeting took place
on the 1st of November 2023 during which it was decided to maintain the key rate at 5.25%
via unanimous voting. Later in the Monetary Report the Bank of England announced its
forecast on inflation. According to the report, CPI inflation is expected to fall sharply to
4.75% in 2023 Q4 (and it already did as the current inflation rate in the UK is 4.6%),
4.5% in 2024 Q1 and 3.75% in 2024 Q2. This decline is expected to be accounted for by

1
lower energy, core goods and food prices inflation and, beyond January, by some fall in
services inflation.

In the MPC’s latest most likely, or modal, projection conditioned on the market-
implied path for Bank Rate, CPI inflation returns to the 2% target by the end of 2025.
The MPC included its forecast in the Monetary Policy report after the meeting on 1
November 2023. It is given below:

• (a) Figures in parentheses show the corresponding projections in the August 2023 Monetary Policy
Report.

• (b) Unless otherwise stated, the numbers shown in this table are modal projections and are
conditioned on the assumptions described in Section 1.1 in the Monetary Policy Report.

• (c) Four-quarter growth in real GDP.

• (d) Four-quarter inflation rate. The modal projection is the single most likely outcome. If the risks
are symmetrically distributed around this central view, this will also provide a view of the average
outcome or mean forecast. But when the risks are skewed, as in the current forecast, the mean
projection will differ from the mode.

2
 • (e) ILO definition of unemployment. Up to June 2023, this projection is based on LFS unemployment
data. Beyond this point, the Committee is drawing on the collective steer from other indicators of
unemployment to inform its projection.

• (f) Per cent of potential GDP. A negative figure implies output is below potential and a positive
that it is above.

• (g) Per cent. The path for Bank Rate implied by forward market interest rates. The curves are
based on overnight index swap rates.

The UK government debt is another factor that clearly demonstrates the crisis that
the country is in. The UK general government gross debt was £2,636.9 billion at the
end of Quarter 2 (Apr to June) 2023, equivalent to 101.2% of gross domestic product
(GDP) (Office for National Statistics). The debt-servicing burden has increased, with
nominal interest payments reaching £0.11 trillion in 2023. This surge in interest payments
contributes to the overall fiscal burden and highlights the importance of managing debt
levels effectively. The UK’s debt interest costs as a proportion of revenue have jumped
in recent years, surpassing the average among western Europe and North American
countries. This surge in debt interest costs reflects the growing burden of servicing the
UK’s substantial debt.
The UK unemployment rate was estimated at 4.3%, 0.5 percentage points higher
than the previous quarter and 0.3 percentage points higher than before the coronavirus
(COVID-19) pandemic. Even though unemployment rate is one of the lowest in the
country’s history, the number of claimants for unemployment benefits has been rising.
The unadjusted claimant count was 1.57 million in October 2023, which was 18,000 more

3
than the month before, 49,000 more than in October 2022 and 338,000 more than the
pre-pandemic month of March 2020. This in turn adds additional burden to the country’s
budget.

2 Article discussion

In the light of economic crisis as well as upcoming elections the chancellor of Exchequer
Jeremy Hunt announced that the UK government will be cutting taxes. The goal of
these measures is stimulating the country’s stagnant economy by encouraging corporate
investment and attracting more people to work. Specifically,

• national insurance, a tax paid by employers and workers that funds state pensions
and some benefits, will be cut by two percentage points to 10%, saving an average
employee about 450 pounds ($560) in January 2024

• permanent tax breaks for capital spending for businesses. This measure
means companies get £250,000 off their tax bill for every £1 million invested

4
 According to the article, the measures that are about to be taken will not break
fiscal policy rule because of a squeeze on government spending that is scheduled to start
after 2025 and static public investment. The director of the Institute for Fiscal Studies
said: “Because of that squeeze on spending, there’s a material risk that those plans prove
undeliverable and today’s tax cuts will not prove to be sustainable” in his statement. The
Office for Budget Responsibility, on the other hand, stated that these measures would
reduce debt levels to 94% of GDP in five years, in line with the Treasury’s rules. Earlier this
year, in April 2023, the main corporation tax rate was increased from 19% to 25%. At the
same time, the base was narrowed through a temporary ‘full expensing’ policy which allows
companies to immediately deduct 100% of the cost of qualifying plant and machinery
investments when calculating profits as a part of Spring 2021 Budget announced by Rishi
Sunak (Institute of Fiscal Studies). Furthermore, Rishi Sunak announced a freeze on the
thresholds for different income tax brackets when he was a chancellor as a part of the
same Spring 2021 Budget. This has meant people pay more taxes as their wages have
risen in the recent high inflation period. All these tax reforms that are already working,
intuitively the words of the director of the Institute for Fiscal Studies should be put
into question. This paper will analyze if the changes mentioned above will help the UK’s
economy overcome the current crisis.

3 Economic shocks

For our analysis we considered the changes in taxation in the past and in foreseeable
future periods, and government spending. The considered changes take place in 2023, 2024
and 2025.
2023:
• Reduction of the tax base for companies by the amount of investment.

• An increase of corporate tax rate from 19% to 25%.

For decades, UK corporation tax policy followed a broad pattern of rate cutting and base
broadening. This pattern has now sharply reversed. In April 2023, the main corporation
tax rate was increased from 19% to 25%. At the same time, to somehow offset the
effect of 6% increase in corporate tax the base was narrowed through a temporary "full
expensing"policy which allows companies to immediately deduct 100% of the cost of
qualifying plant and machinery investments when calculating profits (Institute of Fiscal
Studies).
2024:
• A decrease of 2% in national insurance, a tax paid by employers and
workers that funds state pensions and some benefits.

5
In his Autumn statement 2023 the chancellor of Exchequer Jeremy Hunt announced this
tax cut in order to attract more people to work. This tax information and impact note
covers a reduction in the main rate of Primary Class 1 National Insurance contributions
from 6 January 2024, the main rate of Class 4 National Insurance contributions from
6 April 2024 and the removal of the requirement to pay Class 2 National Insurance
contributions (gov.uk).
2025:

• A decrease of government spending.

4 Main assumptions

In our analysis we make the following assumptions:

• We consider changes in prices since 2017. Taking into consideration the continuous
relatively big inflationary gap that the UK has been experiencing since 2016 BREXIT
referendum, we assume that prices has been changing since 2017 and, therefore,
there is no price rigidity.

• The Bank of England’s Monetary Policy Committee conducts flexible inflation

targeting. It does it in a way that helps sustain growth and employment.

• There is high capital mobility in the country. Statistics show that the United
Kingdom recorded a capital and financial account surplus of 16425 GBP Million in
the second quarter of 2023 (tradingeconomics.com).

• We have to assume that the UK is a small open economy in order for IS-BP-MP
model to work.

• The UK’s has big budget deficit.

• The Bank of England does not intervene actively in the currency market. Therefore,
we consider that CB conducts floating exchanege rate policy.

5 Model assumptions

There are 2 types of income: workers’ income and entrepreneurs’ one. Let’s denote α as
the share of national income which is gained by workers. Therefore, entrepreneurs
gain (1 − α)Y .

6
 We are going to analyze, how the changes in corporate tax affect the economics,
therefore, we differ corporate taxes tc and income taxes t, which are gained only from
workers’ income.
Therefore, total consumption we can derive as: C = C0 + mpcw (1 − t)αY + mpce YDe ,
where YDe is entrepreneurs’ disposable income. We derive it specifically because of the
changes in investment politics in the next period in our model. mpcw and mpcw are
marginal propensity to consume of workers and entrepreneurs accordingly.
Disposable income of the entrepreneurs is the their net income after taxation
and after deduction of investments: YDe 1 = (1 − tc )(1 − α)Y − I1 , where I1 is the amount
of investments in the type of model, when the tax base does not include investment costs.
In the next period (in 2023) the policy ... goes into the effect and entrepreneurs can
reduce their tax base by the amount of investments. In such case, their disposable income
is: YDe 2 = (1 − tc )((1 − α)Y − I2 ).
Investments in both model specifications are:
I1 = I0 + mpi1 Y − br and I2 = I0 + mpi2 Y − br, accordingly.
Government expenditures differs in 2 model specifications:
G1 = G0 + αtY + (1 − α)tc Y and G2 = G0 + αtY + ((1 − α)Y − I2 )tc Y
Net export equals: N X0 − zY
To sum up, our model has 2 specifications according to the tax-investment policy.
So, our model has these inputs:
C = C0 + mpcw (1 − t)αY + mpce YDe
YDe 1 = (1 − tc )(1 − α)Y − I1
YDe 2 = (1 − tc )((1 − α)Y − I2 )
I1 = I0 + mpi1 Y − br
I2 = I0 + mpi2 Y − br
G1 = G0 + αtY + (1 − α)tc Y
G2 = G0 + αtY + ((1 − α)Y − I2 )tc Y
N X = N X0 − zY

We use IS-MP-BP model in order to show all the effects of the policy in the UK.
So, in the first specification of our model IS is derived as:
Y = C + I + G + N X = C0 + mpcw (1 − t)αY + mpce YD e
+ I0 + mpi1 Y − br +
 G0 +
c w e c
αtY + (1 − α)t Y + N X0 − zY = C0 + mpc (1 − t)αY + mpc (1 − t )(1 − α)Y − I1 +I0 +
mpi1 Y − br + G0 + αtY + (1 − α)tc Y + N X0 − zY

⇕
(1 − mpce )(I0 − br) + C0 + G0 + N X0
Y =
(1 − t)(1 − mpcw )α + (1 − tc )(1 − α)(1 − mpce ) − (1 − mpce )mpi + z

In the second specification (after the changes in the taxation of investments)

7
investments are deducted from the tax base, so it affects the functional form of IS:

Y = C(YDe 2 ) + I2 + G2 + N X
⇓

(1 − mpce − tc )(I0 − br) + C0 + G0 + N X0

Y =
(1 − t)(1 − mpc )α + (1 − tc )(1 − α)(1 − mpce ) − (1 − mpce − tc )mpi + z − 1
w

In the second specification, corporate taxes increase, so it affects the slope of the IS
curve. Moreover, the highest point of the curve ships down:

r1max = Io − N X0 + C0 +e G0 and r2max = Io − N X0 + Ce0 + Gc 0

1 − mpc 1 − mpc − t
r1max > r2max

Fischer formula (r = i∗ − π e ) explains the relationship between the interest rates

and the inflation expectation. We assume that inflation expectation does not change.
Therefore, since r1max > r2max , we will get the following relation:

imax
1 > imax
2

The intersection of IS2 with BP will be over MP because the increase in the corporate
tax rate applies only to large firms, while the ability to change the tax base applies to
all firms. That is, it will stimulate not only large businesses but also small companies to
invest more, which will push the economy forward. The return on investment will give an
opportunity to increase output in the future and it can also affect the level of technology
which will affect the long term output.

8
6 Modelling the shocks

Now it is time to turn to the analysis of fiscal policy shocks in the UK between 2023
and 2025. Specifically, we are interested in how serial fiscal policy measures over three
years would affect the national economy in the context of two macroeconomic models:
IS-MP-BP and AD-AS. The first shock we considered is related to the temporary full-
expensing policy and the increase in corporate tax for large businesses from 19% to 25%
in 2023.

The next shock is related to the interest rate increase (intersection of BP2 and BP).
This will cause UK assets to become more profitable, so foreigners will start investing in
them. Capital inflows in the financial market will cause BP to shift to the right.
In the third period our model does not change. Only workers’ tax rate changes, as
their insurance is not deducted from their income, so it is equivalent to decreasing of t.
This leads to the IS curve’s slope changing.
We assume that the Central Bank of the UK strictly targets inflation due to specifics
of the UK economy. We use the following formula for monetary policy rule:

MP: i = i∗ + µ(π − π ∗ )

From IS and MP equations AD schedule can be derived:

(1 − mpce − tc )(I0 − b(i∗ + µ(π − π ∗ ) − π e )) + C0 + G0 + N X

AD: Y =
(1 − t)(1 − mpcw )α + (1 − tc )(1 − α)(1 − mpce ) − (1 − mpce − tc )mpi + z − 1

The equations for BP and SRAS schedules are presented below:

9
 e
BP ≡ KA + CA = N X0 (Y f ) − βε − zY + cf (i − if + E E− E) = 0

SRAS = Y ∗ + γ(π − π e )

Where: C0 – autonomous consumption, I0 – autonomous investments, G0 – autonomous

government expenditures, N X0 – net export, mpcw - marginal propensity to consume
of workers, mpce - marginal propensity to consume of entrepreneurs, mpi - marginal
propensity to invest, z - marginal propensity to import, t - income tax, tc - corporate tax,
α - share of national income which is gained by workers, (1 − α) - share of national income
which is gained by entrepreneurs, b - sensitivity of investment demand to interest rate, r
- real interest rate, Y - real output or GDP, Y ∗ - potential output, cf - capital mobility
parameter, ε - real exchange rate, π - actual inflation, π e - inflationary expectations,
π ∗ - inflation target, µ - aggressiveness of Central Bank when π deviates from inflation
target, i∗ - interest rate target, if - foreign interest rate, E - exchange rate, E e - expected
exchange rate, γ - sensitivity of output to unexpected price changes, Y f - foreign output.
In the second period decreasing t will change the IS slope angle (it will become flatter).
BP shifts for the same reasons as BP2 . This further increases Y. However, if we pay
attention to the AD-SRAS model, we can see the following curve shifts:

AD becomes more flat because of the reduction in the tax rate for employees. SRAS
shifts to the left due to an increase in the corporate tax rate. Inflation becomes higher
and higher

10
 Next, consider the shock of 2025: the cuts in public spending that the UK government
plans to make because of foreign debt.A decrease in G will result in a parallel shift of IS
and AD.

LRAS changes after all of described changes in taxation policy because of the increasing
in investments which lead to developing of technologies. So, in the long run effect, there
will be grater potential output.

7 Conclusion

The analysis made above shows that in the long run the increase in investments
achieved by the above-mentioned measures will result in an increase of the real and
nominal GDP of the UK in the long run despite the squeeze in the government spending
in 2025. In other words, the negative effect of the decrease in government spending will
be less than the positive effect of increase in investments made by firms. However, the
inflation will increase. In other words, inflation rate will be higher than the Bank of
England’s target. Also according to our model, it turns out that future generations will
not suffer from higher tax rates, following a sharp decline in government revenues. This
is because fiscal policy measures will lead to growth by increasing long-term output. This
in turn will allow more taxes to be collected through a larger tax base, without increasing
the rates themselves. Moreover, according to Oaken’s law, higher output will lead to lower
unemployment (which is precisely the priority of politicians before elections). Moreover,
if we consider still the impact of the Central Bank on the interest rate (it will conduct a

11
restrictive monetary policy, since π4 > π0 ), it will lead to shifts MP up, BP to the left,
AD down. That is, the equilibrium may come to the original equilibrium. It turns out
that all measures before the elections will have an effect only in the short term.

12
 References
1. Stuart Adam and Helen Miller (6 October 2023), “Full expensing and the corporation tax rate”. Green Budget 2023, Chapter 10.
Institute of Fiscal Studies. https://ifs.org.uk/publications/full-expensing-and-corporation-tax-base
2. The Bank of England (02 November 2023), Monetary Policy Report – November 2023.
3. United Kingdom Inflation rates: 1989 to 2023 (15 November 2023), https://www.rateinflation.com/inflation-rate/uk-historical-
inflation-rate/
4. The Bank of England database. Official Bank Rate History. https://www.bankofengland.co.uk/boeapps/database/Bank-
Rate.asp
5. Mary McDougal (25 July 2023), “UK to run up highest debt interest bill in developed world”. Financial Times.
https://www.ft.com/content/b25903fd-2ebe-4f65-aa20-c21d873946f3
6. UK Unemployment Rate 1991-2023. https://www.macrotrends.net/countries/GBR/united-kingdom/unemployment-rate
7. Brigid Francis-Devine, Andy Powell and Isabel Buchanan (14 November 2023), “People claiming unemployment benefits by
constituency”. https://commonslibrary.parliament.uk/research-briefings/cbp-8748/
8. Office for National Statistics (29 September 2023), “Households (S.14): Households’ saving ratio (per cent): Current price: £m:
SA”. https://www.ons.gov.uk/economy/grossdomesticproductgdp/timeseries/dgd8/ukea
9. UNCTAD World Investment Report 2022 (9 June 2022). “International tax reforms and sustainable investment”.
https://unctad.org/publication/world-investment-report-2022
10. United Kingdom Capital Flows. https://tradingeconomics.com/united-kingdom/capital-flows
11. Jen Siebrits, Chris Brett, Steven Devaney, and Nick Baring (7 March 2023), “UK Capital Flows In & Out”.
https://www.cbre.co.uk/insights/reports/uk-capital-flows
12. Stephen J. Entin (1 November 2023), “Investment in the United Kingdom Increased following Pro-Investment Tax Reforms”.
https://taxfoundation.org/research/all/eu/uk-business-investment-tax-reforms/
13. Office for Budget Responsibility (November 2023), “The impact of the corporation tax changes on business investment”.
https://obr.uk/box/the-impact-of-corporation-tax-changes-on-business-investment/
14. Philip Inman (21 June 2023), “UK government debt rises above 100% of GDP for first time since 1961”. The Guardian,
https://www.theguardian.com/business/2023/jun/21/uk-government-debt-above-100-per-cent-of-gdp-first-time-since-1961
15. Antony Seely (29 Wednesday 2023), “Corporate tax reform”, House of Commons Library,
https://commonslibrary.parliament.uk/research-briefings/cbp-9178/
28.11.2023, 01:11 U.K. Cuts Workers’ Taxes as Sunak Faces Election and Stagnant Economy - The New York Times

As Its Economy Sputters, Britain Cuts Taxes Ahead of Election

The U.K.’s top financial official, Jeremy Hunt, outlined measures to spur business investment and push more people into jobs.

By Eshe Nelson
Reporting from London

Nov. 22, 2023

With a general election at most 14 months away, the British government said on Wednesday that it will cut taxes for millions of
workers starting early next year.

Jeremy Hunt, Britain’s top financial official, announced a slew of measures intended to jolt the nation’s stagnant economy by
encouraging corporate investment and pushing more people into the work force. At the same time, his political party, the
Conservatives, hopes that the tax giveaways will improve its electoral chances, as it languishes 20 points behind the opposition
Labour Party in the polls.

National insurance, a tax paid by employers and workers that funds state pensions and some benefits, will be cut by two percentage
points to 10 percent for employees, Mr. Hunt said, saving an average employee about 450 pounds ($560) next year. This tax is
separate from other income taxes, which were not changed.

The government will also expand tax breaks for business investment and reduce taxes for the self-employed, Mr. Hunt said. In total,
the measures introduced on Wednesday would increase business investment by £20 billion a year, he said.

“Because of the difficult decisions we have taken in the last year,” Mr. Hunt said in a speech to lawmakers in Parliament on
Wednesday, inflation is slowing and government borrowing is lower than previously forecast. “I said we would cut taxes when we
could, but only responsibly and only in a way that did not fuel inflation,” he added.

In recent days, government officials including Prime Minister Rishi Sunak have said the British economy had turned a corner that
allowed for tax cuts. Last week, data showed that Britain’s inflation rate had dropped to 4.6 percent in October, and Mr. Sunak
declared victory in his pledge to halve inflation this year.

But the country’s economic outlook is still weak. Though inflation is at its slowest in two years, it was still more than double the Bank
of England’s 2 percent target and higher than in the United States and Western Europe. The bank recently projected that economic
growth would flatline through 2024 and into 2025. At the same time, the country’s debt pile is already about 98 percent of gross
domestic product, the highest since the 1960s, and the cost of servicing that debt has risen because of higher interest rates and rising
prices.

In the past few years, Britain’s public finances have been hit by the pandemic and £104 billion in support for households during the
recent energy price shock. The government’s fiscal credibility was also severely damaged by the unfunded tax cuts of Liz Truss’s
short premiership. When Mr. Hunt was installed as chancellor of the Exchequer a year ago, he took a cautious approach to the nation’s
money and abandoned nearly all of Ms. Truss’s plans. He said there was little scope for spending increases and tax cuts.

Now, with the election in sight, Mr. Hunt has found the money to offer some sweeteners, like lower taxes and even a freeze on the
alcohol tax. He is able to do this and still follow fiscal rules because of a squeeze on government spending that is scheduled to start
after 2025 and static public investment.

Because of that squeeze on spending, “there’s a material risk that those plans prove undeliverable and today’s tax cuts will not prove
to be sustainable,” Paul Johnson, the director of the Institute for Fiscal Studies, said in a statement.

The Office for Budget Responsibility, which provides independent forecasts for the government, said Mr. Hunt’s plan would reduce
debt levels to 94 percent of gross domestic product in five years, in line with the Treasury’s rules.

The fiscal watchdog also updated its economic and inflation forecasts. On growth, it was more optimistic than the central bank,
projecting the economy would grow 0.7 percent next year, though that is much lower than the 1.8 percent growth the office forecast six
months ago. It slightly lowered the forecasts for the following few years because of the impact of higher interest rates and more
persistent inflation.

Britain’s inflation rate would slow to 2.8 percent at the end of next year before meeting the central bank’s target in the first half of
2025, a year later than the watchdog previously forecast.

For months the government has said combating inflation was its top priority, and, until recently, there was little expectation of any tax
reductions in Wednesday’s fiscal statement. But Mr. Sunak has been trailing in the polls and under pressure from the right wing of his
party to cut taxes ahead of the general election, which must be held by January 2025.

This week, Mr. Sunak signaled a switch in emphasis, saying he had made “difficult decisions” on inflation, such as resisting big pay
raises for striking public sector workers. “Now you can trust me when I say we can start to responsibly cut taxes,” he said.

https://www.nytimes.com/2023/11/22/business/uk-economy-autumn-statement-jeremy-hunt.html 1/3
28.11.2023, 01:11 U.K. Cuts Workers’ Taxes as Sunak Faces Election and Stagnant Economy - The New York Times

While the cut to national insurance might generate some positive headlines, few people are likely to feel much better off. That’s
because a freeze on the thresholds for different income tax brackets, announced by Mr. Sunak when he was chancellor, has meant
people pay more taxes as their wages have risen in the recent high inflation period. The cut to national insurance offsets only about a
quarter of the increase in tax burden generated by the frozen income tax thresholds, the Office for Budget Responsibility said on
Wednesday.

And so, British tax revenues are expected to rise to 38 percent of gross domestic product, the highest tax burden since World War II,
the watchdog said. This Parliament, which took office in 2019, is set to be the biggest tax-increasing one since comparable records
began, according to the Institute for Fiscal Studies.

Several of Mr. Hunt’s measures targeted some of the most intractable issues holding back the British economy.

He aims to spur more business investment by making tax breaks for capital spending permanent. Previously, companies could write
off 100 percent of their investments only until 2026. The measure means companies get £250,000 off their tax bill for every £1 million
invested. It is expected to cost the government about £9 billion a year.

Mr. Hunt called it the“largest business tax cut in modern British history.”

Although the government has been accused of falling behind on funding its commitment to cut greenhouse gas emissions and
insufficiently supporting infrastructure building, Mr. Hunt announced plans to accelerate investment in clean energy and the green
transition. He said he would take steps to speed up planning applications, connecting to the electricity grid and providing
compensation for people living near new pylons and electricity substations.

Mr. Hunt also said £4.5 billion would be steered toward the manufacturing sector, particularly for clean energy and automotive,
aerospace and the life sciences industry. But the funding would not be available until after 2025, or after the next election.

Before Wednesday’s statement, the Treasury had announced some measures to get more people into work. The number of Britons out
of the work force has been pushed higher by an increase in long-term sickness, including mental health conditions.

Over 100,000 people each year are approved for state benefits “with no requirement to look for work because of sickness or disability,”
Mr. Hunt said. “That waste of potential is wrong economically and wrong morally.”

One new measure would mean people receiving benefits risked losing payments if they didn’t show sufficient progress or engagement
in looking for work.

The government also announced an increase in the hourly minimum wage by nearly 10 percent to £11.44, and said it would extend it to
21-year-olds.
Stephen Castle contributed reporting.

Eshe Nelson is a reporter in London, where she writes about the British and European economies. More about Eshe Nelson
A version of this article appears in print on , Section B, Page 1 of the New York edition with the headline: U.K. Plans Tax Cut Ahead of Election

https://www.nytimes.com/2023/11/22/business/uk-economy-autumn-statement-jeremy-hunt.html 2/3
28.11.2023, 01:11 U.K. Cuts Workers’ Taxes as Sunak Faces Election and Stagnant Economy - The New York Times

https://www.nytimes.com/2023/11/22/business/uk-economy-autumn-statement-jeremy-hunt.html 3/3