Autumn Statement: what to expect as squeeze continues
Tax rises for the rich, benefits squeeze for the poor: George Osborne spreads the pain of austerity
CHANCELLOR George Osborne will lay out further austerity measures, benefit squeezes and tax rises when he gives his Autumn Statement at 12.30pm today, in an attempt to show that everyone is sharing the pain of Britain’s spending cuts.
The Chancellor will say: "In this Autumn Statement, we show that this coalition government is confronting the country's problems, instead of ducking them.
"The public know that there are no miracle cures. Just the hard work of dealing with our deficit and ensuring Britain wins the global race."
Here’s what to expect:
UK GROWTH CUT
The Office for Budget Responsibility is likely to cut UK growth from the 0.8 per cent predicted in March to 0 per cent or worse, The Daily Telegraph predicts. The growth forcast for 2013 will be slashed from 2 per cent to about 1.2 per cent.
Weak growth has led to a fall in tax receipts, forcing the Government to borrow more. The OBR is expected to announce that the Chancellor will have to borrow £10bn more than planned in 2012 – and it’s going to get worse. Investec says that by 2015/2016, the UK will have borrowed an extra £81bn, while the British Chambers of Commerce puts the real figure at £100bn.
MISSED DEFICIT TARGETS
The previous two items - weak growth and increased borrowing - mean that the coalition’s promises on taking office to eliminate the UK’s structural deficit within five years and ensure debt as a proportion of GDP begins to fall by 2015-16 will likely have to be modified.
All government departments, except health, education, international development, HM Revenue and Customs and nuclear decommissioning, will be told to save a further 1 per cent next year and 2 per cent the year after that. The £5bn saved will be spent on capital projects such as building new schools.
Conservatives want to freeze unemployment benefits, but the Lib Dems are thought to have vetoed that. Instead, welfare benefits are likely to increase by a less-than-inflation one per cent.
Osborne is expected to flesh out his General Anti Abuse Rule, which is being introduced to stamp out aggressive avoidance schemes that breach the spirit - if not the letter - of the law. The rule will be applied retrospectively, allowing past abuses to be punished. The Chancellor has already announced a £150m to pay for tax inspectors to track down wealthy individuals and multinational companies who avoid tax.
A mansion tax is unlikely, but there could be changes to stamp duty on properties worth £1m and £2m, which currently attract levies of 5 per cent and 7 per cent respectively. The Lib Dems have also been pushing for an increase in council tax on expensive homes.
BANK TAX HIKE
The Times reports that the Chancellor plans his fifth increase in the bank levy in an attempt to show voters he is sharing the pain of austerity.
FUEL DUTY FREEZE
A 3p per litre rise in fuel duty that was due to come in this January has been postponed.
PENSION RELIEF CUT
The annual tax-free allowance on pension contributions is likely to be cut from £50,000 to £40,000 or £30,000.
INTERNATIONAL AID CUT
Handing money to developing countries is unpopular with many Conservatives. The budget will be reduced, but will still meet the commitment to spend 0.7 per cent of GDP.
SHARES FOR RIGHTS
The Chancellor could well push ahead with his plans to give employees tax-free shares in the companies they work for in return for surrendering some workplace rights, the BBC reports. However, this was unpopular with business leaders when it was announced at the Conservative party conference.