UK's Jeremy Hunt to announce tax cuts aimed at reviving stagnant economy

This is CNBC's live coverage of U.K. Finance Minister Jeremy Hunt's Autumn fiscal statement.

U.K. Finance Minister Jeremy Hunt will deliver his Autumn Statement budget announcement on Wednesday, facing pressure from within the ruling Conservative Party to implement tax cuts as the country's economy stagnates.

Prime Minister Rishi Sunak's government has adopted a cautious approach to fiscal policy in the wake of the bond market panic unleashed by his predecessor Liz Truss' disastrous "mini-budget" last fall.

The U.K. economy flatlined in the third quarter , and Hunt is expected to announce measures intended to bolster the country's anemic growth outlook by attracting business investment and removing barriers to large scale infrastructure projects.

Headline inflation came in at an annual 4.6% in October, its lowest reading in two years and sharply lower than the 11.1% rate when Hunt took over the country's finances in October 2022. However, it remains well above the Bank of England 's 2% target and continues to weigh on household finances.

Hunt will have more money at his disposal than a year ago and is under pressure from the right of his party to enact tax cuts.

Tax levels in the U.K. currently sit at their highest levels since records began 70 years ago, but while Hunt has not decisively ruled out tax cuts, he has emphasized the fragile state of the economy and reiterated that reducing living costs is the government's priority.

The U.K. Treasury last week announced £4.5 billion ($5.6 billion) in funding for British manufacturing to boost investment in eight sectors across the U.K., available for a five-year period from 2025.

National Living Wage increased to £11.44 per hour

Hunt will announce an increase to the National Living Wage of more than £1,800 ($2,253.78) per year for a full-time worker, and extend the threshold to cover 21-year-olds for the first time.

The increase of almost 10% will take hourly pay to £11.44 an hour, while National Minimum wage rates for younger workers will also rise, with 18-20-year-olds receiving an hourly boost of £1.11 to take the minimum wage to £8.60 per hour.

The Department for Business and Trade estimates 2.7 million workers will directly benefit from the National Living Wage increase.

- Elliot Smith

Cuts to National Insurance and business tax, tougher benefit sanctions expected

Hunt is set to announce a cut to National Insurance contributions for millions of workers on Wednesday, along with a reduction in business taxation and tougher treatment of benefits claimants, multiple British news outlets reported Tuesday.

The BBC reported that Hunt will announce measures to boost business investment by £20 billion ($25.04 billion) per year in a bid to "get Britain growing."

The government has also pre-announced plans to withdraw support for benefit claimants who fail to find work after 18 months, unless they undertake a work experience placement.

- Elliot Smith

Berenberg: 'Too many problems, too little time'

Sticky global inflation and domestic supply-side challenges mean the government is unlikely to break from the cautious approach seen over the past year, according to Berenberg Senior Economist Kallum Pickering, who said Hunt faces "too many problems, too little time."

Despite the suggestion of incoming tax cuts on Wednesday, Pickering said Hunt will struggle to announce policies that could "materially improve the near-term economic outlook," and will likely focus on reducing the deficit and debt as a percentage of GDP.

"Any large and immediate debt-financed tax cuts or spending increases would likely stoke fresh inflation worries and a renewed spike in government borrowing costs, rather than boosting growth hopes," Pickering said in an email Tuesday.

"Looking further out, Hunt may set out plans to cut taxes more quickly from 2026 onwards once inflation risks have further subsided."

However, he noted that any such delayed tax plans would only be implemented after the country's next General Election, due before the end of January 2025 but likely to be called late next year.

With the main opposition Labour Party holding a commanding lead in the polls, any forward-looking tax changes announced on Wednesday may never materialize.

- Elliot Smith

IFS director: 'Dozens' of better options than cutting inheritance tax

Speculation has abounded in the British press in recent days that Hunt could be set to announce a cut to the U.K.'s inheritance tax.

Inheritance tax is a 40% levy on the value of the estate of someone who dies, including their property, money and possessions, exceeding the minimum threshold of £325,000. The tax is only charged on the excess above the threshold, and only around 4% of estates in the U.K. are subject to it.

"There are dozens of tax cuts that would be some combination of more equitable and better designed to promote economic efficiency and growth," said Paul Johnson, director of the Institute for Fiscal Studies .

"We are in the middle of a record-breaking increase in the tax burden on income and earnings. Effective tax rates on wealth have been falling for decades. A cut in the tax on inherited wealth looks particularly ill-timed."

The IFS estimates that the rumored cuts would raise a "relatively paltry" £7 billion per year, and about half the total is paid by the 1% of estates valued at more than £2 million.

"As you'd expect, the beneficiaries of bequests big enough for inheritance tax to be paid are much more likely themselves to have high earnings and high levels of wealth than the average: those from better-off backgrounds earn more and accumulate more wealth even before they benefit from any inheritance," Johnson explained.

- Elliot Smith

Treasury already earmarked £4.5 billion for British manufacturing

The Treasury last week announced £4.5 billion in funding for British manufacturing to boost investment in eight sectors across the U.K., available for a five-year period from 2025.

This includes £960 million for clean energy, over £2 billion for the automotive industry, £975 million for aerospace and £520 million for life sciences manufacturing.

The entire manufacturing sector makes up over 43% of all U.K. exports and employs around 2.6 million people, and Finance Minister Jeremy Hunt said the government was targeting funding to "support the sectors where the U.K. is or could be world-leading."

"Our £4.5 billion of funding will leverage many times that from the private sector, and in turn will grow our economy, creating more skilled, higher-paid jobs in new industries that will be built to last," Hunt said in a statement.

- Elliot Smith