A defining moment
Chancellor George Osborne’s Autumn Statement delivered today will prove to be a defining moment for the Coalition Government. Set against the backdrop of the continuing Eurozone crisis, the OECD warning that the UK is likely to slip back into recession, the Office of Budget Responsibility lowering its growth forecasts, borrowing set to rise and looming public sector strikes.
The Chancellor said the Government would “do whatever it takes” to protect Britain from the “debt storm”. As expected Mr Osborne identified growth as the number one priority for Government and announced a swathe of measures aimed at creating the right conditions to allow businesses to grow and said the Government would provide “leadership for tough times”.
The Chancellor decided to target tax credits and public sector pay today rather than the welfare system to fund new initiatives such as infrastructure spending. This is a political quandary for the government, whilst they can claim this a fairer method of saving money it is likely to give further credence to Labour’s “squeezed middle” mantra.
The war of words between the public sector trade unions and the Government looks set to continue for the foreseeable future and makes reaching an agreement on pensions even more difficult.
Cutting the deficit
Mr Osborne told the Commons that the Government is still on track to cut the deficit within the lifetime of this Parliament. Despite being helped by a reduction in debt repayment charges of £22bn to do this he will extend the public spending cuts beyond 2014-15, when they are scheduled to end.
The Office of Budget Responsibility says Growth this year will be 0.9%, next year it will fall to 0.7%. For 2013, 2014, 2015 the economy will grow by: 2.1%, 2.7%, 3% respectively.
National Infrastructure Plan
The Chancellor announced the publication of an infrastructure plan with £5bn worth of additional spending. Key announcements below:
· 500 new infrastructure projects will be funded over the next decade.
· 35 new road and rail schemes will be given the go-ahead today.
· a new urban broadband fund that will create up to ten ‘super-connected cities’ across the UK, with superfast broadband, including Edinburgh, Belfast, Cardiff and London.
To drive forward the Government’s infrastructure programme, the Prime Minister has asked the Chief Secretary to the Treasury to chair a new Cabinet Committee on infrastructure. The Government will update on further progress delivering the priority programmes and projects before the end of 2012.
The Government will publish its Innovation and Research Strategy shortly to set out how it will support innovation in the UK.
The Government will invest an additional £75 million in supporting technology-based SMEs to develop, demonstrate and commercialise new products and services.
The Government will introduce an ‘above the line’ tax credit in 2013 to encourage research and development (R&D) activity by larger companies.
The Government will consult on the detail at Budget 2012 and will ensure that SME R&D incentives are not reduced as a result of this change. This builds on measures from the 2011 Budget to increase the generosity and accessibility of R&D tax credits for SMEs.
Following a consultation over the summer 2011, the Government will publish on 6 December 2011 further details of the Patent Box and of its reform of the Controlled Foreign Company rules and R&D tax credits.
The Government will launch a new Seed Enterprise Investment Scheme (SEIS) from April 2012, offering 50 per cent income tax relief on investments, and will offer a capital gains tax exemption on gains realised in 2012–13 and then invested through SEIS in the same year.
The Government will invest £600 million to fund an estimated 100 additional Free Schools by the end of this Parliament. This will include new specialist maths Free Schools for 16-18 year olds.
The Government will invest an additional £600 million from 2012-13 to support those local authorities with the greatest demographic pressures.
The Government will increase the Regional Growth Fund for England by £1 billion, plus Barnett consequentials for the devolve administrations, and extend it into 2014-15 to provide ongoing support to grow the private sector in areas currently dependent on the public sector.
The Government announced 100 per cent capital allowances will be made available in the Black Country, Humber, Liverpool, North Eastern, Sheffield and Tees Valley Enterprise Zones.
The Government announced a £20 million Rural Community Broadband Fund to help ensure more rural homes and businesses receive superfast broadband. If it is successful the Government will consider extending it.
The Statement headlines
- These are the key points from today’s Autumn Statement:
- Working age benefits will be uprated in line with the Consumer Price Index's September level of 5.2%.
- The permanent bank levy will rise by 0.088%, which will ensure the Treasury raises the £2.5bn it needs.
- Public sector pay will rise by 1%, rather than 2%.
- A National Loan Guarantee Scheme worth £20bn for small and medium-sized business will be introduced over the next two years.
- Employment regulations will change to help businesses, including a change to TUPE regulations and cutting health and safety rules.
- Pension age to rise to 67 by 2028.
- The planned January fuel duty hike has been cancelled. The fuel duty rise for August will be limited to 3p.
- Free nursery places will be extended and an extra £1.2bn will be spent on new school places and 100 new free schools.
- Unemployed young people will be offered a Youth Contract.
- Business rate holiday for small firms will be extended until 2013.