Autumn statement unlikely to put big dent in tax burden – here’s why

Published

2 years ago

November 21, 2023

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It’s autumn statement time.

Once upon a time, these winter budgets used to be brief updates on the fiscal forecasts, never overshadowing the far more substantial main budget in the spring. Or at least so we’re told.

In practice, for as long as I’ve been covering economics, the autumn statement (or, as Gordon Brown used to call it, the pre-budget report) has simply been the chancellor’s second bite of the fiscal apple – a budget in all but name.

In other words, these statements are quite a big deal.

They have been used to raise taxes and cut them, to lift spending and lower it.

Indeed, it was at Jeremy Hunt’s first autumn statement last year that he introduced some of the tough measures designed to clear up the economic mess following predecessor Kwasi Kwarteng’s mini-budget – freezing income tax and national insurance thresholds all the way until 2028, consigning millions of families to higher taxes.

This time around, we’re all being told that the story will be very different – in particular that tax cuts are now imminent.

We’ll get to those cuts in a moment – and the bizarre pantomime of a government claiming it is cutting taxes even as it does precisely the opposite – but let’s start by getting the “headroom” stuff out of the way.

If you’ve been following any of the coverage of the impending autumn statement, you’ll doubtless have read about how the chancellor may now be ready to start cutting taxes, because he’s been told he has enough “headroom” to do so.

It all sounds rather scientific, doesn’t it – as if a universal measure of fiscal probity has determined that now would be a sensible point to reduce taxation. Except, of course, it isn’t.

Actually in this case, “headroom” means something very specific indeed.

This government, like most of its predecessors since Gordon Brown, has set itself some fiscal rules designed to shore up confidence in its policymaking.

The main rule facing Mr Hunt is that he has committed to getting the national debt falling as a percentage of gross domestic product (GDP) within five years.

This is, I can’t emphasise enough, a self-imposed rule. Sure: in the light of what happened to the previous Tory government (which briefly eschewed fiscal rules) there’s a strong argument for these rules. But they are not, by any means, tablets of stone.

Regardless, the debt rule is where that notion of “headroom” comes from. By the end of the five-year forecast horizon mapped out in March (the budget – the last time these figures wreak havoc updated) the UK’s net debt was falling ever so slightly. The fall was equivalent to roughly £6.5bn. Voila: that’s the headroom!

Roll on another six months and a few things have changed.

First, the economy looks a bit bigger than it did in March. This is partly because it has grown a little faster than expected, but mostly because the Office for National Statistics has reassessed its opinion of the size of the economy.

Also, because inflation was higher than expected, the cash size of the economy looks a bit bigger, while the national debt’s size is less changed.

Tot it all up and, due to these mostly statistical artefacts, all of a sudden the national debt as a percentage of that GDP figure looks a bit smaller. The upshot is the apparent “headroom” against this rule is significantly larger: possibly £15bn or maybe even over £20bn.

These sums are, it’s worth underlining, quite arbitrary. They mostly don’t reflect either that the economy is much healthier than it was back in March, or indeed that the government’s decisions have made much difference to the scale of the national debt. They are marked against an entirely self-written fiscal rule. And anyway, the “headroom” the chancellor is left with is still smaller than his predecessors tended to enjoy.

Despite all of those provisos, the government is likely to use these rules as a justification to start cutting taxes.

Yet there’s a big proviso here too. The total tax burden (the amount of taxes we as a country pay as a percentage of our national income) is rising.

Indeed, on the basis of the latest Office for Budget Responsibility numbers, it’s far higher now than it was before Rishi Sunak became prime minister, and is set to rise to the highest level since comparable records began in 1948.

These are the pieces of context it’s worth bearing in mind ahead of this event.

The economy is flatlining. The scale of Britain’s total debt is now far, far higher than before the pandemic. And it’s hard to envisage a scenario where the overall tax burden ends the coming year lower than when this chancellor took over.

None of this will stop Mr Hunt and Mr Sunak putting as positive a gloss on the economic update as they can. But their task will not be easy.

Business

Administrators lined up for North Sea oilfield services group Petrofac

Published

8 hours ago

October 25, 2025

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Administrators are on standby this weekend to handle the collapse of Petrofac, the oil and energy services group – an insolvency which could threaten the future of more than 2,000 jobs in Scotland.

Sky News has learnt that directors of Petrofac has lined up Teneo for an administration process which could be confirmed as early as Monday morning.

The company’s board, chaired by former Anglo American finance director Rene Medori, is said to be holding emergency talks this weekend.

One industry executive said a decision to file for administration was likely to be taken before the stock market opens on Monday.

Ed Miliband, the energy secretary, and other ministers have been briefed on the situation, with more than 2,000 Scottish-based jobs potentially at risk.

Kroll, the advisory firm, has been engaged by the Department for Energy Security and Net Zero to work with ministers and officials on the unfolding crisis.

Government sources claimed this weekend that Petrofac’s UK operations were “growing”.

“This government is supporting jobs and investment in Scotland including building a world leading carbon capture industry in the North Sea, alongside our biggest ever investment in offshore wind,” one official said.

A source close to Petrofac said on Saturday that the UK arm of the group had not been beset by any lossmaking contracts and would be in a strong position to secure its future.

The administration process would affect the parent company, Petrofac Limited, which does not directly employ the company’s workforce, they added.

Petrofac’s potential collapse comes at a sensitive time for Mr Miliband, who is coming under enormous pressure to permit more North Sea oil and gas drilling despite Labour’s manifesto commitment not to grant licences on new fields.

Petrofac employs about 7,300 people globally, according to a recent stock exchange filing.

It designs, constructs and operates offshore equipment for energy companies.

The company’s shares have been suspended since April.

Petrofac, which now has a market capitalisation of barely £20m, has been mired in financial trouble for years.

Once-valued at more than £6bn, it has been drowning in a sea of debt, and faced a Serious Fraud Office investigation which resulted in a 2021 conviction for failing to prevent bribery, and the payment of more than $100m in penalties.

In a stock exchange announcement on Thursday, Petrofac said the cancellation of a contract by TenneT, an operator of electricity grids in Europe which is its biggest customer, meant that a solvent restructuring was now not viable.

“Having carefully assessed the impact of TenneT’s decision, the Board has determined that the restructuring, which had last week reached an advanced stage, is no longer deliverable in its current form,” the company said.

“The group is in close and constant dialogue with its key creditors and other stakeholders as it actively pursues alternative options for the group.

“In the meantime, Petrofac remains focused on serving its clients and maintaining operational capability and delivery of services across its businesses.”

Founded in 1981 in Texas, Petrofac has been in talks about a far-reaching financial restructuring for more than a year.

A formal restructuring plan was sanctioned by the High Court in May 2025 with the aim of writing off much of its debt and injecting new equity into the business.

This was subsequently overturned, prompting talks with creditors about a revised agreement.

If Petrofac does fall into administration, it is expected to be broken up, with some of its assets – including key contracts – likely to be taken over by other industry players.

Petrofac has been contacted for comment.

A DESNZ spokesman declined to comment.

Business

Jaguar Land Rover cyberattack pushes overall UK car production down more than a quarter

Published

1 day ago

October 24, 2025

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Jaguar Land Rover cyberattack pushes overall UK car production down more than a quarter

UK car production fell by more than a quarter (27.1%) last month as a cyberattack at Jaguar Land Rover halted manufacturing at the plant, industry figures show.

The total number of vehicles coming off assembly lines – including cars and vans – fell an even sharper 35.9%, according to September data from the Society of Motor Manufacturers and Traders (SMMT).

“Largely responsible” for the drop was the five-week pause in production at Jaguar Land Rover (JLR) due to a malicious cyber attack, as other car makers reported growth.

Money latest: Restaurant sends bitter message to customers

JLR’s assembly lines in the West Midlands and Halewood on Merseyside were paused from late August to early October as a result.

During this time, not a single vehicle was made. Production has since restarted, but the attack is believed to have been the “most financially damaging” in UK history at an estimated cost of £1.9bn, according to the security body the Cyber Monitoring Centre.

It was the lowest number of cars made in any September in the UK since 1952, including during the COVID-19 lockdown.

Despite the restart, the sector remains “under immense pressure”, the SMMT’s chief executive Mike Hawes said.

The phased restart of operations led to a small boost in manufacturing output this month, according to a closely watched survey.

Of the cars that were made, nearly half (47.8%) were battery electric, plug-in hybrid or hybrid.

The vast majority, 76% of the total vehicles output, were made for export.

The top destinations are the European Union, US, Turkey, Japan and South Korea.

JLR was just the latest business to be the subject of a cyberattack.

Harrods, the Co-Op, and Marks and Spencer, are among the companies that have struggled in the past year with such attacks.

Business

English Championship side Sheffield Wednesday file for administration

Published

1 day ago

October 24, 2025

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Championship club Sheffield Wednesday have filed for administration, according to a court filing, which will result in the already struggling side being hit with a 12-point deduction.

The South Yorkshire club currently sit bottom of the Championship, the second tier of English football, with just six points from 11 games.

Known as The Owls, Wednesday are one of the oldest surviving clubs in world football, with more than 150 years of history.

Court records confirm the club have filed for administration. A notice was filed at a specialist court at 10.01am.

What has happened?

The Owls, who host Oxford United on Saturday, have been in turmoil for a long time.

On 3 June, owner Dejphon Chansiri, a Thai canned fish magnate who took over the club in 2015, was charged with breaching EFL regulations regarding payment obligations.

Weeks later, Mr Chansiri said he was willing to sell the club in a statement on their official website.

Their crisis deepened just days later when another embargo was imposed on the club relating to payments owed to HMRC, before players and staff were not paid on time on 30 June.

In the months that followed, forwards Josh Windass and Michael Smith left the club by mutual consent. Manager Danny Rohl, now at Rangers, also left by mutual consent.

The Owls were forced to close the 9,255-capacity North Stand at Hillsborough after a Prohibition Notice was issued by Sheffield City Council.

‘Current uncertainty’

On 6 August, the EFL released a statement, saying: “We are clear that the current owner needs either to fund the club to meet its obligations or make good on his commitment to sell to a well-funded party, for fair market value – ending the current uncertainty and impasse.”

On 13 August, the Prohibition Notice was lifted, but a month later, news emerged of a winding-up petition over £1m owed to HMRC.

Last season, Wednesday finished 12th. They had already been placed under registration embargoes in the last two seasons after being hit by a six-point deduction during the 2020/21 campaign, for breaching profit and sustainability rules.

With a 12-point deduction, the Owls would be 15 points away from safety in the Championship.