| 29 November 2011
Introduction
Despite warnings this week that the UK
was likely to slip back into recession,
Chancellor George Osborne has said that
the Office for Budget Responsibility’s (OBR)
latest annual growth and borrowing figures
do NOT predict this happening. However he
added, the figures do show that the bust
was deeper and had an even bigger effect
on Britain than first thought.
Giving his Autumn Statement in response
to the OBR’s report, Mr Osborne updated
MPs on the current state of the economy,
as well as outlining the Government’s
plans for its future growth.
Referring to the ongoing eurozone
crisis, the Chancellor said that the
Government would do “whatever it takes” to
protect Britain from the debt storm.
Economic growth and borrowing
The OBR downgraded its growth forecast
for 2011 from the 1.7% announced in
March’s Budget to just 0.9%. An even
bigger drop is forecast for 2012, down
from 2.5% to 0.7%.
However, things start to look better
after next year, with growth forecasts of
2.1% for 2013, 2.7% for 2014 and 3% for
both 2015 and 2016.
UK borrowing forecasts were also
increased, with borrowing this year being
£127 billion - £5 billion more than first
thought. Borrowing will be £19 billion
higher next year and £30 billion higher in
2013/2014. These increases come as a
result of the reduced expected growth
levels, according to the Chancellor.
Debt to GDP ratio will peak at 78% by
2014/2015 and will fall afterwards.
Business
Increasing lending to UK businesses,
particularly smaller firms which continue
to face difficulties obtaining funding,
formed a key part of the Autumn Statement,
with Mr Osborne outlining a number of
measures designed to tackle this problem.
As first hinted by the Chancellor
during the Conservative party conference
in October, the Government is to launch a
credit-easing programme, the National Loan
Guarantee Scheme, which will underwrite up
to £40 billion in low-interest loans to
small and medium-sized firms. New loans
and overdrafts to businesses with a
turnover of less than £50 million will be
eligible for the scheme, which will be up
and running within the next few months.
A £1 billion Business Finance
Partnership will also be set up to help
secure funding for mid-sized firms. This
will involve the Government investing in
funds that lend directly to these firms,
in partnership with other investors such
as pension funds and insurance companies,
and is designed to provide mid-sized firms
with a new source of funding. Mr Osborne
said he would increase the Partnership’s
size if it proved successful.
The Regional Growth Fund will receive a
further £1 billion in funding, while a
£250 million support package will be
available for energy-intensive firms.
In a bid to create jobs for unemployed
young people, the Government will launch a
£1 billion ‘youth contract’ to subsidise
six-month work placements for up 410,000
individuals.
The bank levy will be increased to
0.088% from January 2012.
Tax
The Enterprise Investment Scheme is to
be extended to become the Seed Enterprise
Investment Scheme (SEIS). Under this
scheme, anyone who invests up to £100,000
in a qualifying new start-up business will
be eligible for Income Tax relief of 50%,
regardless of their respective tax rate.
The Autumn Statement brought further
good news for small firms with the
announcement that the business rate relief
holiday would be extended for another year
until April 2013. For all other
businesses, the Government will allow them
to defer 60% of the increase in business
rates next year to the two following
years.
The annual exempt allowance for Capital
Gains Tax will be frozen at £10,600 for
2012/2013, with tax being waived for one
year only on capital gains invested
through the Start-Up Britain scheme in
2012.
Capital allowances of 100% will be
available to encourage manufacturing and
other industries in Enterprise Zones such
as Liverpool, Sheffield, the Tees Valley,
Humber, the Black Country and the North
East.
Mr Osborne also announced an “above the
line” research and development (R&D) tax
credit in 2013 to encourage research and
development activity by larger companies.
This will be consulted on for the 2012
Budget to ensure that SME R&D tax credits
are not reduced as a result of such a
change.
There will be a below-inflation
increase in some working tax credits,
while the above-inflation £110 rise in the
child element of the child tax credit will
be scrapped altogether.
Pensions and benefits
The rise in state pension age to 67 is
to be brought forward by 10 years from
2036 to 2026.
The basic state pension will rise to
£107.45 per week – an increase of £5.35.
Pension credit will rise by the same
amount. Meanwhile, benefit payments will
be uprated by 5.2% next year, in line with
inflation.
Public sector workers will face a 1%
cap on pay rises from 2013 to 2015, after
the current pay freeze has ended.
Infrastructure and transport
Looking at the cost to people
travelling to and from work, Mr Osborne
announced that the planned fuel duty rise
of 3p in January 2012 will be scrapped,
with the duty rise planned for August 2012
being reduced from 5p to 3p.
Meanwhile, the rise in regulated rail
fares will be capped at 6.2% - 1% above
inflation – in January 2012. This is down
from the 8.2% originally planned, which
the Chancellor said was “too much”.
In terms of infrastructure, £5 billion
is to be spent in this area, including £1
billion on the national rail network.
Up to 35 new road and rail projects
across England will receive the go-ahead.
The Government will aim to unlock a
further £20 billion in investment for
infrastructure projects from pension
funds.
Housing
Housing played an in important part in
the Autumn Statement, with Mr Osborne
announcing that the mortgage indemnity
scheme will help up to 100,000 people buy
homes with a 5% deposit.
Meanwhile, £400 million will be used to
‘kick-start’ construction projects which
have stalled for whatever reason.
The Government’s Right to Buy scheme
will offer a 50% discount for social
tenants who wish to purchase their own
homes.
View official documents and
full Autumn Statement
http://www.hm-treasury.gov.uk |
