The government is committed to sustained economic growth. Growth funds high quality public services, raises living standards and keeps down government debt. To create the confidence and stability needed to achieve stronger growth, the government is taking decisive action to ensure sustainable public finances. The UK has fundamental strengths that support growth. It has flexibly regulated labour and product markets, independent and respected institutions, it is a world-leading financial centre, and the UK hosts many innovative businesses and globally recognised universities. However, the UK’s productivity growth has slowed since the Global Financial Crisis and lags behind comparative economies. There are further economic headwinds which pose risks to UK prosperity. The effects of the COVID-19 pandemic and the war in Ukraine have also pushed up the price of energy and other commodities, and exacerbated supply chain issues across developed economies. Stronger economic growth requires a long-term plan and commitment to see it through - there are no quick fixes to the challenges the UK faces. Growth can come both from increasing labour supply and increasing productivity, which the government will facilitate by:
investing in the UK’s people, including by ensuring that they have the skills that businesses and public services need
creating the right environment for business investment
investing in the economic infrastructure that connects the country and secures the UK’s energy independence
backing the UK’s world-leading researchers and innovative firms
The government is committed to reforming retained EU law. As part of this programme, the government will move rapidly to review retained EU law in key growth industries - including digital technology, life sciences, green industries, financial services, and advanced manufacturing - to identify changes that can be made over the next year which have the greatest potential to unlock growth. This work is already underway in several of these sectors, including the government’s ambitious programme of reforms in financial services. The government will also task the Government Chief Scientific Adviser and National Technology Officer, Sir Patrick Vallance, to bring together the best minds to advise how the UK can better regulate emerging technologies, enabling their rapid and safe introduction. People Since the 2008 Global Financial Crisis, much of the UK’s growth has been driven by an increase in the number of hours worked.[footnote 25] This was partly due to falling unemployment – which is now close to its lowest rate in 50 years – and increased labour market participation after 2008, particularly amongst women.[footnote 26] However, since the COVID-19 pandemic the trend in participation has reversed, seen particularly acutely within those aged over 50. There are now 630,000 more working age inactive individuals than there were pre-pandemic.[footnote 27] The Department for Work and Pensions will thoroughly review workforce participation. This work will conclude in early 2023. To help tackle the barriers to progression faced by individuals on lower earnings, the government will bring forward the nationwide rollout of the In-Work Progression offer, starting with a phased rollout from September 2023. This will mean that over 600,000 Universal Credit claimants that are in work will be required to meet with a dedicated work coach so that they have support to increase their hours or earnings. This is in addition to the government’s recent announcement to raise the Administrative Earnings Threshold from January 2023, from the equivalent of 12 hours to 15 hours at the National Living Wage, which will bring more claimants in-work and on low earnings into a more intensive regime of work coach support. Since leaving the European Union (EU), the government has refocused the immigration system towards securing the skilled labour businesses need to stay competitive and innovative. Over the last year a high number of visas have been issued,[footnote 28] partly reflecting the UK’s action to welcome those from Ukraine and Hong Kong and international students returning after the COVID-19 pandemic. As these temporary factors ease over time, the government expects net migration to return broadly to pre-pandemic levels. The government will continue to strike the balance between reducing overall net migration in the longer term with ensuring businesses have the skills they need. Inward migration can ease short-term skills gaps, however it is crucial that over the long term, the UK’s domestic workforce is equipped with the skills necessary to maximise their productivity and drive economic growth. Despite around 50% of adults being educated at tertiary level, the UK underperforms on basic and technical skills compared to similar developed countries.[footnote 29] That is why the government is taking steps to ensure the education system provides the skills current and future employers need, for example through T-Levels, Higher Technical Qualifications, Skills Bootcamps and Apprenticeships. The government recognises the importance of supporting upskilling throughout people’s lives, and so is introducing the Lifelong Loan Entitlement from 2025 to provide more flexible finance for adults to study throughout their lives. Investment In addition to economic stability, policy certainty is fundamental to giving businesses the confidence to invest. The government remains committed to supporting businesses to invest and grow by:
keeping the UK’s headline Corporation Tax Rate internationally competitive at 25% – the lowest in the G7 – and protecting 70% of trading companies at 19% with the Small Profit Rate
setting the Annual Investment Allowance (AIA) at its highest ever permanent level of £1 million from 1 April 2023
reducing the burden of business rates by providing £13.6 billion of support for businesses over the next five years
The government is unlocking tens of billions of pounds for investment from UK insurers in long-term productive assets by publishing the final reforms to Solvency II. During this Parliament there has been a step change in public investment in infrastructure. The Autumn Statement protects the public capital budget at record levels, meaning government will invest over £600 billion over the next five years. Investing in high quality infrastructure is crucial for boosting economic growth and productivity. Infrastructure spreads opportunity and prosperity across communities by connecting people to new jobs through faster and more reliable routes. Infrastructure is also the foundation for securing our energy independence and transitioning to net zero. The government will seek to accelerate delivery of projects across its infrastructure portfolio, rather than focus on the list of projects that were flagged for acceleration in the Growth Plan. The government will continue to ensure that all infrastructure is delivered quickly through reforms to the planning system, including through updating National Policy Statements for transport, energy and water resources during 2023, and through sector-specific interventions. The government is placing the UK Infrastructure Bank on a statutory footing. This will cement its status as a key institution that will facilitate long-term investment in infrastructure to tackle climate change and support regional and local growth. The Autumn Statement recommits to the government’s transformative growth plans for our railways. These include East West Rail, core Northern Powerhouse Rail, and High Speed 2 to Manchester. These will provide fast, more reliable services and connect people to new job opportunities. The government also remains committed to supporting digital infrastructure investment through Project Gigabit, with an ambition to reach at least 85% gigabit-capable broadband coverage by 2025 and nationwide coverage by 2030. This will ensure that every corner of the UK can access fast and reliable gigabit-capable broadband, driving economic growth and productivity. The government will continue to secure the UK’s energy security through delivering new nuclear power, including Sizewell C (subject to final agreement), and the roll-out of cheap, clean renewables, including wind and solar. This will support the government’s commitment to reduce emissions, decarbonise the power system by 2035 (subject to security of supply) and reach net zero by 2050. The government remains committed to levelling up and spreading opportunity across all areas of the UK. To support this, the Autumn Statement confirms that the second round of the Levelling Up Fund will allocate at least £1.7 billion to priority local infrastructure projects. Successful bids will be announced before the end of the year. The government also remains committed to giving more local areas greater power to drive local growth and tackle local challenges. This includes delivering the commitment to agree devolution deals with all areas in England that want one by 2030. Building on other devolution deals agreed this year, the government has agreed a further mayoral devolution deal with Suffolk County Council and is in advanced discussions on mayoral devolution deals with local authorities in Cornwall, Norfolk and the North East of England. Taken together, these deals will increase the proportion of people living under a directly elected mayor with devolved powers in England to over 50%.[footnote 30] The government will deliver the Levelling Up White Paper commitment to sign new ‘trailblazer’ devolution deals with Greater Manchester and the West Midlands Combined Authorities by early 2023. The government is in discussion with the mayors of these areas to devolve powers to deliver levelling up in areas such as skills, transport and housing. These ‘trailblazer’ deals will act as a blueprint for other areas to follow. As part of negotiations on trailblazer deals, the government will explore with Greater Manchester Combined Authority and West Midlands Combined Authority the potential to provide single departmental-style settlements at the next Spending Review. This could give local partners more flexibility and accountability over key economic growth funds, moving away from competitive bidding processes. Subject to progress of these discussions, the government will consider the eligibility of other mayoral combined authorities for these settlements, noting the need to ensure appropriate accountability structures are in place. The government will refocus the Investment Zones programme. The government will use this programme to catalyse a limited number of the highest potential knowledge-intensive growth clusters, including through leveraging local research strengths. The Department for Levelling Up, Housing and Communities will work closely with mayors, devolved administrations, local authorities, businesses and other local partners to consider how best to identify and support these clusters, driving growth while maintaining high environmental standards, with the first clusters to be announced in the coming months. The existing expressions of interest will therefore not be taken forward. The government is grateful to local authorities for their work to develop proposals. Innovation Science and innovation are some of the UK’s greatest strengths. With less than 1% of the world’s population, the UK hosts 3 of the world’s 10 best universities,[footnote 31] has produced up to 13% of the world’s most impactful research[footnote 32] and has the second highest number of Nobel Laureates of any nation.[footnote 33] The UK also ranks fourth in the Global Innovation Index.[footnote 34] These remarkable achievements in R&D and innovation generate significant economic and social benefits for the whole of the UK and beyond. Government spending on R&D plays a crucial role in stimulating private sector investment. Public spending on R&D will increase to £20 billion a year by 2024-25, a cash increase of around a third compared to 2021-22. This is the largest increase in R&D spend ever over a Spending Review period.[footnote 35] As part of this increase, Innovate UK programmes were allocated £2.6 billion across the Spending Review period, which will support the UK’s most innovative companies and leverage in private sector investment. The government is also now confirming that funding for the UK’s nine Catapults will increase by 35% compared to the last 5-year funding cycle. This £1.6 billion investment will allow Catapults to continue to support innovation and commercialisation by providing access to world-leading facilities, skills, and equipment across the UK. This includes the Compound Semiconductor Applications Catapult in Wales, the Digital Catapult centre in Northern Ireland and the Offshore Renewable Energy Catapult centre in Scotland. The government will help more small and medium sized manufacturing firms boost their productivity through advanced digital technology by extending the Made Smarter Adoption programme to the East Midlands. This follows the positive feedback the Made Smarter Adoption programme has already received in the North East, West Midlands, North West, Yorkshire & the Humber. As part of the ongoing review of R&D tax reliefs, the government is reforming the reliefs to ensure taxpayers’ money is spent as effectively as possible. There is significant error and fraud in the small and medium-sized enterprises (SME) scheme, with the generosity of the relief making it a target for fraud. By contrast, the separate R&D expenditure credit is better value but has a rate that is less internationally competitive. The government is therefore rebalancing the rates of the reliefs. The government is committed to ensuring cutting-edge innovative firms have access to finance to invest and grow. As previously announced, the government is increasing the generosity and availability of the Seed Enterprise Investment Scheme and Company Share Option Plan. The government remains supportive of the Enterprise Investment Scheme and Venture Capital Trusts and sees the value of extending them in the future. The government will also continue to champion institutional investment into innovation so that UK savers can benefit from the growth of high potential businesses. Competition is fundamental for growth and productivity. The government will bring forward the Digital Markets, Competition and Consumer Bill in the third Parliamentary session to provide the Competition and Markets Authority with new powers to promote and tackle anti-competitive practice in digital markets. Opening these markets to greater competition will encourage new challenger firms, spur innovation, and provide consumers with higher quality products and greater choice.