George OsborneNick Ansell/PA Wire

When George Osborne stood up to deliver his Autumn Statement we were braced for bad news. And he didn't disappoint. His catchphrase may have been 'It is a hard road but we are making progress' - but most of us are going to notice the hardness of the road a great deal more than the progress.

So what does the statement hold for you?



The economy

The seemingly endless stream of economic data did what the pundits predicted and what has become a Chancellor's art - it broke some terrible news and made it sound upbeat.

He revealed that the recession had been deeper than anyone had thought - with GDP falling 6.3% - making it the largest shock to the economy since the second world war. And he added that the recovery would be slower than he had predicted back in March, with GDP falling 0.1% this year, then growing 1.3%, 2%, 2.3%, 2.7% and 2.8% in subsequent years.

He was keen to highlight the impact of the world economy - particularly Europe - on these figures, but it still makes very troubling reading.

Targets

Osborne said that the Office of Budget Responsibility said he was on course to balance the cyclically adjusted budget. However, he admitted he was going to fail in his plan to start shrinking borrowing by 2015/16 - and was going to have to postpone it for a year.

In fact borrowing is going to grow alarmingly between now and then, peaking at almost 80% of GDP in 2015/16.

Austerity

As a result of all these changes in targets and forecasting, he extended the government's austerity drive for another year of pain. The idea is that the current rate of cuts is going to continue 'on the current trajectory' for additional year. He argued: "The decision to cut spending is never easy but those who object must explain whether they would prefer higher taxes or higher borrowing or both."

Public Sector

Today sees the publication of the report into regional pay, which he says he will be implementing. National pay meanwhile will increase by 1%.

Whitehall will also come under more pressure, with cuts of 1% in administration budgets this year and 2% next year - although the MoD will have the budget flexibility to ensure this doesn't mean manpower cuts, and education and the NHS will be exempt.

Infrastructure

The new spending in this statement is to a large extent coming through expenditure on infrastructure.

Osborne announced four major new road projects, the expansion of High Speed 2 rail to the North West and Yorkshire, and a £1 billion loan to extend the London Underground Northern Line to Battersea Power Station, and build a massive new development on the site.

He also announced 120,000 new homes, new commitments to flood defences, and ultra-fast broadband to 12 new smaller cities.

Education infrastructure also got a boost, with £600 million more for scientific research infrastructure, £270 million more for further education colleges, improving schools and building 100 new free schools and academies.

Pension funds will also unveil their platform for investing in infrastructure next year, and the government is set to announce an alternative to PFI - so we can expect to see even more investment.

Tax avoidance

Osborne made much of 'fairness' in the statement, saying: "Those with the most will contribute the most." He highlighted the efforts already underway to catch tax evaders, and confirmed that there would be a general anti-avoidance rule set out imminently, which will make it harder to avoid tax.

He announced a major agreement with Switzerland, which will mean £5 billion will be paid in tax by British nationals who have been hiding money away in Swiss bank accounts.

He added that tax loopholes would be closed with immediate effect, and that the government would be investigating abusive use of partnerships.

And he pledged £77 million more to fighting tax avoidance from wealthy individuals and multinational companies. He expects the end result to be £2 billion a year more in revenue from anti-avoidance and evasion activities.

Property tax

Osborne ruled out a new property tax (which saw Nick Clegg shaking his head in disgust). He argued that the council tax revaluation required for new council tax bands would be invasive and expensive. He also argued that if they started down this route it would open up a new avenue for future chancellors to go even further increasing council tax bands for everyone.

Pensions

Tax relief on pensions for higher earners was clobbered - as expected. Osborne reduced the lifetime allowance from £1.5 million to £1.25 million. He also reduced the annual allowance from £50,000 to £40,000.

He argued that 98% of people currently have a pension pot beneath £1.25 million and that 99% contribute less than £40,000 - so we ought not to have rules that unfairly help the richest 1%. However, those contributing more will have an altogether different view.

Osborne also announced another increase in the basic rate state pension next year - up 2.5% to £110.15 a week.

Drawdown

There was some relief for those operating drawdown arrangements on their pensions, who have seen their income capped at smaller and smaller levels each year. Osborne increased the cap from 100% to 120%, so that those who want to, can take more income from their pension.

Savings - ISAs

There was surprisingly good news for ISA savers, as the overall limit was raised to £11,520. He also launched a consultation on whether investors ought to be able to invest directly in companies listed on AIM rather than the main stockmarket - in order to boost investment in smaller companies.



Benefits

This is where much of the pain will be felt. He reiterated the intention to cap benefits for working age benefit recipients, so they cannot receive more than the average person in work. He also pledged £1 billion to fight benefit fraud, error and debt.

Then he started by pointing out that those on benefits had seen their income increase 20% since 2007 - while those in work saw it increase 10%. He said that while public sector pay increases were set at 1% it was fair to increase benefits annually along the same lines.

There will be exceptions for those on disability benefits (who will see increases in line with inflation). However, working age benefits such as jobseekers' allowance, tax credits, housing benefit and child benefit would all increase 1% a year for the next three years (excluding those things where freezes have already been announced for future years - so for example child benefit and housing benefit will be frozen for a year before rising 1% for the following two years).

He announced that those on housing benefit in areas where rental costs cause real problems for those trying to find rental property within the cap imposed by new legislation will be exempt from it.

Income tax

Osborne plans to drag more people into the higher rate band. He is increasing the threshold at which point you pay more tax, but just by 1% a year, so not as fast as inflation. It means that every year more people will find themselves subject to the higher rate. Early estimates are that this could increase the tax paid in this band by £1 billion.

However, he also announced a major giveaway, with another rise in the threshold for personal taxation. Already he had pledged a rise to £9,205 next April. Now he says the threshold will rise again the following April to £9,440. He said that this would mean that since the changes began a person working full time on the minimum wage would see their tax bill cut in half.

And this change will now be extended to higher rate taxpayers, which should soften the blow of dragging more people into the regime. He argued that the typical higher rate taxpayer will pay no more than they currently do after the changes.

Capital Gains Tax

The threshold will be increased 1% a year - which will mean after inflation it is essentially being cut - drawing more people into paying more CGT.

Inheritance tax

The good news is that the nil rate threshold (after which tax becomes due), which is currently frozen, will start to increase. The bad news is that it will go up just 1% - and not keep pace with inflation.

Investment

Osborne pledged more money for Local Enterprise Partnerships, and to change the way it is funded so that small pots for various things will all be brought together. The funding for UKTI will increase by 25%, there will be a £1.5 billion export facility to assist companies wanting to build exports and £1 billion more for the business bank.

Business taxes

The small business rate relief scheme - which has already been extended for two years will be extended again to 2014. There will also be a massive increase in the threshold of the annual investment allowance - so that the first £250,000 invested can be done so tax-free. Osborne said this would cover the investments of 99% of small British businesses.

But the big news was yet another cut in corporation tax. This is already set to fall to 22% in 2013, and he announced it would fall to 21% in 2014. Banks will meanwhile see their levy increase to 0.130% next year

Fuel

The 3p fuel tax rise scheduled for January has been cancelled. Osborne highlighted that this means there had been no rise in fuel duty for two and a half years - and in fact there had been a cut.

Employee shareholder schemes

He announced further tax relief, although he didn't give details.

Gas strategy

He said there would be consultations on how to make better use of lower cost gas.

Empty Property Relief

This will be extended to help the construction industry, although there are few details as yet.

Council tax

The freeze will continue for another year.

Energy

Companies will be forced to move customers onto the lowest tariff for them.

Rail Fares

There will be a cap on rail fare rises for the next two years.



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