5 December 2012
While Chancellor George Osborne conceded that he would miss his own target for reducing the national deficit, extending austerity measures to 2018, he told MPs that Britain was still “on the right track”, adding that “turning back now would be a disaster”.
Giving his annual Autumn Statement in response to the Office for Budgetary Responsibility’s (OBR) latest annual growth and borrowing figures, Mr Osborne told Parliament that the economy was now forecast to shrink rather than grow as previously forecast, but pledged to continue working to cut the deficit.
Britain was heading in the right direction, he said, adding: “The road is hard, but we’re making progress.”
- Economic growth and borrowing
- Pensions, benefits and savings
- Infrastructure and transport
- View official documents and full Autumn Statement
The OBR significantly downgraded its growth forecast for 2012 from the 0.8% announced in March’s Budget to -0.1%. It has also downgraded its growth forecasts for the next four years: 1.2% (down from 2.1%) for 2013, 2% (down from 2.7%) for 2014, 2.3% (down from 3%) for 2015, and 2.7% (down from 3%) for 2016, with a growth forecast of 2.8% for 2017.
The deficit, which has fallen by a quarter in the last two years, is forecast to fall from 7.9% to 6.9% of GDP this year and continue falling to 1.6% by 2017-18.
Cash borrowing is also forecast to fall this year, although Mr Osborne admitted that the point at which debt was predicted to begin falling had now been delayed by a year to 2016-17.
The forecast for debt interest payments is £33 billion lower than predicted two years ago.
A spending review will take place in the first half of 2013.
This year’s Autumn Statement had a strong focus on businesses, with Mr Osborne reiterating comments made in previous Budget announcements that “Britain is open for business”.
One of the measures most likely to be welcomed by business owners was a ten-fold increase in the Annual Investment Allowance on expenditure on capital equipment from £25,000 to £250,000 from 1 January 2013. Mr Osborne also announced a further 1% reduction in the headline rate of Corporation Tax from April 2014, bringing it down to 21%. This, said the Chancellor, would mean Britain had the lowest rate of any major western economy, making it more attractive to potential investors.
There was also good news for smaller firms with the announcement that the temporary doubling of the small business rate relief would be extended by a further year to April 2014.
Plans for a new business bank which will focus on lending to small and medium-sized businesses were confirmed by the Chancellor, who pledged extra capital of £1 billion.
Mr Osborne announced a further £235 increase in the income tax personal allowance from next year, bringing it up to £9,440. This rise will also be extended to higher rate taxpayers.
The threshold for the 40% rate of income tax will rise by 1% in 2014 and 2015, increasing it from £41,450 to £41,865 and then £42,285.
The Inheritance Tax threshold will rise from £325,000 to £329,000 between now and 2015-16, while the Capital Gains Tax annual exempt amount will increase by 1% over the same period until it reaches £11,100.
The Chancellor also revealed that the Government expects to claw back £5 billion over six years from UK residents with undisclosed Swiss bank accounts as the result of a treaty between the two countries.
Mr Osborne pledged to continue cracking down on illegal tax evasion, as well as aggressive tax avoidance schemes, announcing that HM Revenue and Customs would not have its budget cut, instead receiving a further £77 million to fund its fight against tax avoidance by corporates and wealthy individuals.
There was also good news for motorists after Mr Osborne announced that he was cancelling the planned 3p per litre rise in fuel duty which had been due to take effect in January 2013. There will also be no new tax on property.
The bank levy rate will increase from 0.088% to 0.130% next year.
The lifetime pension relief allowance will be reduced from £1.5 million to £1.25 million from 2014-15, while the annual tax-free allowance will be cut from £50,000 to £40,000.
A 2.5% rise in the basic state pension from next year will see people receiving £110.15 a week, while the capped drawdown limit for pensioners will be increased from 100% to 120%.
Most working age benefits will increase by 1% for the next three years, including jobseekers’ allowance, the employment and support allowance, income support, child tax credits and working tax credits.
Child benefit will rise by 1% for two years from April 2014.
Mr Osborne also announced that the overall ISA limit will be increased to £11,520 from next year.
Consultation will be carried out to include small and medium enterprises equity markets such as the AIM and comparable markets.
The annual average spend on the country’s infrastructure now stands at £33 billion, Mr Osborne revealed as he unveiled plans for greater capital investment in this area.
This included super-fast broadband being rolled out across 12 smaller cities, including Cambridge, Derby, Oxford and York, while £600 million is to be invested in scientific research.
An extra £1 billion has been earmarked for work to upgrade key sections of the A1, linking the A5 with the A1, upgrading the M25 and turning the A30 into a dual carriageway. A £1 billion loan will be provided to extend London’s Northern Line to Battersea, while the controversial High Speed 2 rail link, which is planned to run from London to Birmingham, will be extended to the North West and North Yorkshire.
The Chancellor announced that £1 billion would be used to improve good schools and build a further 100 free schools and academies, while £270 million will be invested in improvements at further education colleges.
Capital expenditure will also be used to fund 120,000 new homes, as well as flood defence schemes.