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Chancellor’s Autumn Statement: What can we expect?

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Written by:
03/12/2012
As Chancellor George Osborne prepares to deliver his Autumn Statement on Wednesday, we look at some of the main measures he may announce.
Chancellor’s Autumn Statement: What can we expect?

Osborne himself set the tone for the Autumn Statement in his article for the Sun on Sunday: “The economic situation we and the rest of the world face remains very difficult. After the biggest financial crisis in our history it was always going to be a hard road to recovery.”

He said his statement would be based on three core principles: Britain is on the right track and turning back now would be a disaster; we are still all in this together and there is no point solving today’s problems if you don’t also prepare for tomorrow.

Budget deficit

On the subject of tackling Britian’s budget deficit since the Coalition came to power, he said: “Now the deficit is down by a quarter in just two years and the world has confidence that Britain can pay its way… Of course, the scale of the challenge has been greater than anyone thought.

“As a result it is taking longer than we hoped to put things right. But the last thing we should do now is change course.”

He said the ongoing eurozone crisis, higher oil prices and emerging market problems had hit Britain’s recovery.

Extra borrowing

The Independent reports economists’ warnings that Osborne will be forced to incur as much as £81bn in extra borrowing in future years and resort to “dark arts” to meet fiscal targets.

He could be forced to impose further austerity measures as the Office for Budget Responsibility prepares to revise borrowing forecasts.

George Buckley, Deutsche Bank’s chief economist, said Osborne may be forced to add a cumulative £45bn to the deficit, while Philip Shaw, Investec’s chief economist, said the damage could be £81bn by 2015/16.

Business

However, The Scotsman reports Osborne will try to support growth, including a £1bn fund to help small businesses wanting to export to growing economies elsewhere in the world.

Pensions raid on high earners

The Sunday Times reports the Chancellor is preparing a raid on the pension benefits of high earners.

He is expected to reduce the amount people can pay into their pensions each year with tax relief from £50,000 to £40,000 or even £30,000.

The paper reports such a move could raise £600m if the threshold is reduced to £40,000 and up to £1.8bn if cut to £30,000. Another option is to cut the level of pension tax relief higher earners can claim.

Osborne has bowed to pressure from Liberal Democrat leader Nick Clegg to tax the wealthy in return for keeping the benefits bill under control, according to The Sunday Times.

It says the move will be condemned by the pensions industry and business leaders. They have already warned cutting the £50,000 threshold would “hit swathes of middle-income earners”.

Mansion Tax

However, The Telegraph reports the chancellor is understood to have resisted a Liberal Democrat push for a new property tax on the highest-value homes.

Ministers do not expect a mansion tax, extra council tax “bands” or higher stamp duty in Wednesday’s Statement.

-Osborne will also meet a key demand of Conservative MPs by scrapping the planned 3p-a-litre rise in the cost of fuel which was slated for the start of January, the paper said.

Welfare

-The chancellor is expected to provide help for people on lower incomes, probably by raising the personal allowance.

-However, he is also expected to announce changes to benefits, including freezing payments to the unemployed and those on income support or housing benefit, at their present levels.

-The Autumn Statement could also bring a new round of welfare cuts and £3bn of savings from Private Finance Initiative deals used to fund public works such as schools and hospitals, according to The Scotsman.

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