Surprises from the Autumn Statement
Filed under: News
Much of George Osborne's statement was predicted, but where they any surprises in this update on the state of the nation's balance sheet?
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Autumn Statement 2012
1. Borrowing and deficit down
Forecasts that both borrowing and deficit would rise were dispelled when Mr Osborne confirmed that both have fallen considerably this year with further cuts predicted. The Chancellor admitted that while both rates were still far too high for comfort, Britain is heading in the right direction
The deficit - the gap between what the government spends and what it receives in tax revenue - is forecast to fall from 7.9% last year to 6.9% this year, then 6.1%, 5.2%, 4.2%, and 2.6%, reaching 1.6% in 2017-18.
Net borrowing is also forecast to fall, from £159billion to £108bn next year.
2. Growth forecasts slashed
Debts may be down, but so is growth and the latest OBR predictions contrast considerably to those made in the Chancellor's Budget statement in March. Growth is predicted to be -0.1% in 2012, down from 0.8% predicted in March.
OBR growth forecasts for next few years are: 1.2% in 2013, 2% in 2014, 2.3% 2015, 2.7% in 2016 and 2.8% in 2017.
While the Chancellor's major measures announced today - including a 1% cut in corporation tax and £5 billion investment in infrastructure - are aimed at boosting growth, pundits are calling for greater urgency.
"There were welcome measures but some of these are not due until 2014," said Stephen Robertson, director general of the British Retail Consortium. "Retail sales are flat. 2013 will be another tough year. Much more needs to be done to support the retail sector in its contribution to overall growth.
"The Chancellor's failure to offer immediate support for struggling high streets by announcing a business rates freeze is disappointing."
3. Fuel duty freeze
The planned fuel duty rise of 3p a litre for January was not postponed until the spring as predicted, but cancelled altogether. The Chancellor confirmed that fuel duty has not risen for two and half years.
"This is a welcome victory for motorists," says Gareth Kloet, head of car insurance at Confused.com.
"Drivers have enough to contend with this December as the EU gender ruling is expected to push insurance costs up for female drivers, so it will be a particular relief to women to hear that they don't have the double-whammy of a rise in petrol duty too."
4. Crackdown on tax havens
The Chancellor said that while the vast majority of people pay their taxes, there are still too many who illegally evade and this must be stopped. He announced an 2,500 increase in the number of tax inspectors going after evaders and avoiders, plus a new treaty signed with Switzerland from which Britain expects to receive £5 billion over the next six years from the undisclosed Swiss bank accounts of UK residents.
The Chancellor said that this is "the largest tax evasion settlement in British history." Further action includes the closure of millions of pounds of tax loopholes with immediate effect and a crackdown on the abusive use of partnerships.
5. Mixed message on pensions
Retirement planning faces confusion following a cut in tax relief on pension contributions, yet a boost for ISAs and an increase in the income drawdown rate for pensioners.
Today the Chancellor announced a cut in the lifetime allowance from £1.5 million to £1.25 million and a cut the annual allowance from £50,000 to £40,000, to come into effect from 2014-15. He said that this will reduce the cost of tax relief to the public purse by an extra £1 billion a year by 2016-17.
He admitted that the "measures will not be welcomed by all" but backed his move by stating that 98% of people currently approaching retirement have a pension pot worth less than £1.25 million, and 99% of pension savers make annual pension contributions of less than £40,000.
"The Chancellor delivered mixed news for the future of pensions," said Malcolm Small, director oat the Tax Incentivised Savings Association (TISA). "Cutting tax reliefs will be yet more evidence for a suspicious public that the Treasury views pension savings as a cash cow. That is another blow to public confidence at a time when we should be encouraging people to put money aside.
"By contrast, increasing the drawdown rate and expanding the scale and range of tax exemptions for ISAs are both welcome steps. What we need is a coherent strategy for retirement saving - rather than giving with one hand and taking with the other."