Shoosmiths' experts react to the Autumn Statement 2023

The chancellor, Jeremy Hunt, has today unveiled the contents of the Autumn Statement. Our experts give their views on the measures announced, below.

Commercial partner, Alex Kirkhope, comments on the government’s £500m pledge to fund new AI innovation centres: “With AI having been front and centre of the government’s (and the prime minister’s) minds following on from the high profile AI Safety Summit at Bletchley Park earlier this month, it’s perhaps no surprise that AI featured prominently in today’s statement. One of the key challenges facing the UK’s adoption of AI is the lack of existing and planned compute capacity to access, host and exploit the huge datasets on which AI relies, so the chancellor’s announcement that £500m has been allocated to fund new AI innovation centres over the next two years will be welcomed across the technology, data centre and broader digital infrastructure sectors.

“One of the notable announcements of the AI Summit was the formation of an AI Safety Institute, intended to work alongside major tech providers to oversee, evaluate and test emerging complex AI models, but without the necessary computing capacity it was unclear to what extent the UK would be in a position to stand alongside global partners like the US and EU in supporting and policing rapidly evolving AI systems, and providing the tech sector with the necessary confidence to continue to invest in their UK AI capabilities.

“Looking ahead, with the government due to publish its response to the consultation on its AI White Paper during the remainder of this year, it would be good to see today’s important announcement of additional funding followed up with more concrete proposals around the legal framework that will apply to the development and deployment of AI solutions in the UK.”

Head of tax, and VCT and EIS lead, Tom Wilde, commented on VCT and EIS scheme extensions: “The whole start-up and scale-up industry breathed a collective sigh of relief today as the chancellor finally announced that the EIS and VCT schemes would be extended by 10 years to 2035, with that change being legislated in the Autumn Finance Bill 2023. This extremely welcome certainty allows businesses and investors to plan their future fundraising and investing strategies in an orderly fashion and, combined with the announced cuts in national insurance, gives the whole venture capital market a very welcome shot in the arm.”

Tax partner, Kate Garcia, touched upon the government’s ‘full expensing’ and freeport announcements: “The government has announced that ‘full expensing’ – which essentially allows companies to write off the cost of investment up-front – will be made permanent, rather than ending in 2026 (as had been the plan following the Spring Budget). This should enable long-term investment decisions to be made with confidence. A technical consultation has also been launched on wider changes to the capital allowances legislation, since ‘full expensing’ could help pave the way to a welcome simplification in this area. 

“Also, with a view to the longer term, the Treasury announced on Monday that the window to claim Freeport tax reliefs will be extended for English Freeports from 5 to 10 years. This announcement had been a long time coming and is welcome news for the Freeport operators and those businesses looking to set-up within the relevant zones.” 

Head of Shoosmiths’ real estate tax practice, Dan Kennedy, discusses changes to the Construction Industry Scheme (CIS): “There was welcome news for landlords, tenants and their advisers today when the government committed to removing a long-standing problem which commonly arises on lease transactions caused by the application of the Construction Industry Scheme (CIS). The CIS is an anti-avoidance measure which is meant to address tax fraud in the construction sector. In an announcement published as part of the Autumn Statement, the government has promised to legislate to take most payments from landlords to tenants outside of the scope of the CIS. 

“This change to the scheme should allow for greater efficiency and flexibility for landlords and tenants in agreeing how works to a building (including structural, “Cat A” and fit-out works) should be undertaken prior to a letting of that building. The detail of the updated legislation is awaited, but the announcement today indicates that the government has listened to industry’s criticism that, in its current form, the CIS is applying to persons who have no connection to the construction sector.”  

Wayne Gibbard, commercial partner in the firm’s financial services sector, comments on the Statement’s lack of financial announcements: “In contrast to the 2023 Autumn statement, where major reform of the UK financial services sector was a top priority, Jeremy Hunt’s 2024 Autumn statement, presented earlier today, focussed on 110 measures to raise business investment.

“These measures hope to increase GDP and to help get more people back to work. Hunt’s failure to specifically mention his strong 2023 reform position does not mean the financial services sector can take their foot off the pedal. With the introduction of the Consumer Duty earlier this year and other reforms in the pipeline, there is no time to rest. Firms’ need to continue to work to ensure their compliance, keep an eye on future reforms and monitor the vulnerability of the consumer market as a whole.” 

Pensions partner, Paul Carney reviewed the chancellor’s triple lock and ‘pot for life’ announcements: “The chancellor has re-affirmed the government’s commitment to the so-called “triple lock”. The triple lock applies to the uprating of the basic state pension and was introduced by the then coalition government in 2011. The triple lock provides that the state pension should increase each year in line with earnings, prices or 2.5%; whichever is the greater. In confirming that the government will continue to apply the triple lock, the chancellor announced that state pensions would increase by 8.5% from April 2024 so that the benefit paid would increase to £221.20 a week. An increase of 8.5% acknowledges the prevailing rate of inflation however it should be noted that the government’s forecasts suggest that inflation will reduce over the next year, ultimately to its target rate of 2.5% by 2025. 

“The triple lock has been criticised lately partly because of its expense. In particular, the DWP’s own forecasts indicate that the total state pension expenditure in 2023-24 will be £124.3bn.  In retaining the triple lock, the government appears to be acknowledging its political importance to persons of a certain age but, perhaps more pertinently, the government’s argument appears to be based on the triple lock being designed to protect the poorest pensioners. HM Opposition will argue that the device protects pensioners at the expense of younger unemployed persons. My own sense is that the continued commitment is somewhat surprising given the cost its retention – particularly when coupled with the downgraded forecasts for economic growth. I think a number of commentators expected one of the relevant measures to be dropped.

“In addition to this, the government has announced that it will consult in relation to the so-called “pot for life” plan whereby individuals will be given the right to require their employer to contribute to their existing / personal pension as opposed to their employer-based scheme. We will put to one side the fact that the use of the term “pension pot” is highly misleading. The initiative, based on a design common in Australia, has already come in for wide criticism from commentators. While the initiative might encourage individuals to shop around for better returns, such a move seems likely to result in pension funds investing more in higher growth but higher risk funds which, it could be argued, would make it more important that individuals take financial advice. Financial advice on pensions matters tends to be expensive and relatively hard to obtain and, in our experience, lower paid individuals tend not to take it (for those reasons). We expect the response to consultation to highlight this risk in particular.”