ALEX BRUMMER: The Chancellor has restored order to the economy – and we’re reaping the rewards

The business community can no longer claim that the government is not listening.

Chancellor Jeremy Hunt is not only offering investment incentives to key domestic companies, he is also trying to revive direct investment from foreign companies.

We should not underestimate the major change in thinking in Downing Street. For much of the past year, Hunt and the prime minister, Rishi Sunak, have focused on restoring Britain’s budget credibility and turning inflation upside down.

Now that some of the hard grind is behind us and the cost of living crisis has receded, the big focus is on strengthening a resilient UK economy, boosting productivity and growth, and persuading those who have dropped out of the labor market to return to the labor market. jobs.

The Chancellor has clearly concluded that with electoral destruction staring the Tories in the face, there is no choice but to be radical and deliver tax cuts – and has even made sure to save money for more stimulus in the spring .

Had he postponed all tax benefits until next year, it would simply have been too late to turn persistent public and business opinion in the Tories’ favor.

Instead, he chose his Autumn Statement to remind businesses of all kinds, from the hospitality industry to the self-employed and regiments of small businesses responsible for much of the nation’s production, that the Conservatives are their natural allies.

There will be bitter disappointment that Hunt has done nothing to ease the burden of the ‘tourist tax’ – which has seen international shoppers flee to Paris and Milan to buy goods instead of London – although he suggested this still needs to be reviewed could come.

But he has managed to push Labor into the background with its tax breaks for hard-working Brits – both those on PAYE benefits and the self-employed – by delivering a 2 per cent cut in the nominal National Insurance rate, which is around £8. will cost 70. billion in the first full year.

Of course, we should not forget that this is paid for by the damaging effect of the fiscal barrier: the freezing of income tax thresholds, which has dragged millions of ordinary working people into higher tax brackets. The Chancellor is in effect giving back some of what he has already taken.

Similarly, making full corporate spending a permanent feature of the corporate tax landscape – with companies able to offset expenses such as IT, office equipment and machinery – could be made possible thanks to Hunt’s decision last year to restore the headline corporate tax rate to 25 percent . from the 19 per cent in last year’s discredited Liz Truss ‘mini-budget’.

However, there is a cloud hanging over this improved business landscape: the disappointing projection from the independent Office for Budget Responsibility (OBR) that the economy will grow by around one percent this year and in 2024 and 2025.

Perhaps these predictions can be taken with a grain of salt. For forecasters at the Bank of England and the OBR have consistently been wrong about the strength of UK plc.

If the Bank of England had been right a year ago in predicting that the British economy was heading for the longest recession in history, the country would currently be entrenched in gloom and unemployment would be soaring. Yet Britain’s nimble service economy – with its world-leading financial services, its hi-tech industries and its creative and life sciences – means we are far surpassing manufacturing-rich Germany and many other countries in a hardened EU. .

So instead of a recession, Britain is at near full employment and at least 700,000 vacancies – and Chancellor Hunt is taking tough action to get people off the ever-growing sick list and growing benefit queues into work.

At the heart of any autumn statement or budget are public finances, and the government must show that these are being managed responsibly. Otherwise, the market for government bonds – the debt securities issued to pay for government loans – will go into disarray, as we learned in October 2022 during the Truss interregnum.

Admittedly, there was a small rise in bond yields yesterday, the return on government bonds or gilt-edged shares, when the Chancellor pulled his rabbit out of the hat with the major cuts to national insurance.

However, markets should be reassured as they delve into the detailed spending and tax figures in the Autumn Statement documents. They show that borrowings so far this year have come in £20bn lower than forecast – reflecting higher tax revenues and an iron grip on government spending.

Similarly, the forecast for borrowing in 2027-2028 will be £27 billion lower than previously thought. This means that government debt, the accumulation of years of borrowing, will peak at 93.2 percent of output in 2026-2027 and will not reach the feared 100 percent level.

It also means Britain is doing better than almost all its rivals among the richest G7 countries. Hunt and Sunak have underlined their Tory credentials as a party of entrepreneurship and entrepreneurship and brought order to public finances.

That’s quite an achievement.