Autumn Statement: Osborne targets tax evaders and school-leavers
HMRC to rake in £9bn from tax evaders, while school leavers won't be able to go on the dole
THE Chancellor delivered an upbeat assessment of Britain's economy in today's Autumn Statement, before preparing the ground for several more years of austerity.
Motorists and rail commuters received a small sweetener, while tax avoiders and school-leavers were given notice of tougher times ahead.
George Osborne’s third Autumn Statement included a raft of changes designed to increase revenue, cut expenditure – or, with one eye on the next election, put a little cash in voters' pockets.
- Unemployment: The number of people out of work is lower than in 2010 and is expected to fall from 7.6 per cent this year to 7 per cent in 2015, before falling even further to 5.6 per cent by 2018, the Chancellor has said. The figure has come under more scrutiny than normal since the Bank of England announced that it would only consider increasing interest rates when unemployment drops below seven per cent.
- Growth: The Chancellor has insisted that Britain's economic plan is working. In the March Budget, the Office for Budget Responsibility (OBR) forecast that growth this year would be 0.6 per cent. "Today, they more than double that forecast - and estimate growth will be 1.4 per cent," said Osborne. "Next year, instead of growth of 1.8 per cent, they are now forecasting 2.4 per cent."
- Tax avoidance: A crackdown on tax avoidance, evasion, fraud and error is predicted to raise more than £9bn over the next five years. Political commentators have already labelled the plan "ambitious".
- School meals: All children in their first three years of schooling will receive free school meals.
- Transport: The petrol tax rise of 2p a litre due next year has been scrapped, while the tax disc will be replaced with an electronic system to confirm that motorists have paid vehicle excise duty. Regulated train fares will rise by RPI inflation rather than RPI plus one per cent.
- Benefits threat: School-leavers will not have the chance to go on the dole, said the Chancellor. Anyone aged 18 to 21 without basic English or Maths qualifications will not be able to claim benefits unless they undertake further training. People unemployed for more than six months will be forced to start a traineeship or undertake work experience or a community work placement or lose their benefits. Meanwhile, apprenticeships will be reformed with employers funded directly through HMRC. An additional 20,000 apprenticeships will be introduced over the next few years.
- Green levies: Some green levies will be adjusted to reduce the impact of energy price rises. This is expected to save householders £50 a year.
- Pensions: Osborne confirmed that state pension age will rise to 68 in mid-2030s and 69 in the mid-2040s. Basic state pension will rise by £2.95 a week from next April. More information is expected to be given later in the announcement.
- Business rates: Businesses moving into vacant properties will have their rates cut by 50 per cent. Business rates in England and Wales will be capped at two per cent rather than linked to RPI inflation.
- Tax: From April 2014, the personal income tax allowance will rise to £10,000. From 2015-16, it will increase by the Consumer Prices Index (CPI) measure of inflation. A married couples and civil partners tax break, set to cost about £700m a year, is due to start in April 2015.
- Deficit and borrowing: Deficit is down to 6.8 per cent of GDP this year, from 11 per cent in 2010. Osborne claims there will not be any deficit at all by 2018/19. The chancellor says borrowing will also fall from £111bn this year to £23bn in 2017/18.
How have people reacted?
Today's statement left no ambiguity about how the Tories will campaign at the next election, says Janan Ganesh in the Financial Times. "A year ago, the country was flirting with a return to recession. It is now growing and, according to today's forecasts, will expand by another 2.5 per cent next year," says Ganesh. "'Britain's moving again; let's keep going' were the closing words of the Autumn Statement. It is no accident that they could fit on a poster."
Shadow chancellor Ed Balls accused Osborne of creating an economic recovery that only benefits millionaires on his "Christmas card list" and claimed that normal hard-working people were £1,600 worse off. But several critics have said Labour failed to convince anyone that he had any bright alternatives.
In the Daily Telegraph, Peter Oborne says neither Balls nor Osborne understands the "deadly seriousness" of the situation faced by the British economy. Today's statement was designed to "win votes" rather than deal with a "national economic emergency", says Oborne. The economy might have emerged from a recession, but the new measures announced today were part of a "foolish attempt" to respond to Labour's attack on living standards and were a "very worrying reminder of Mr Osborne's political immaturity", he added.
Several observers commented on Osborne's inability to contain his delight during his own speech. James Moore in The Independent says the Chancellor has good reason to be smiling, as the numbers are at last moving decisively in his favour – but the problem with all this bravado is that "the public still isn't feeling it".
The Guardian's money editor, Patrick Collinson, agrees. Britain might have the fastest-growing major economy in the Western world, says Collinson. "But never in the history of parliamentary set-pieces have the Chancellor's figures failed to reflect the experience of millions of workers."
Autumn Statement 2013: background briefing
What is the significance of the Autumn Statement? And will it include any "sweeteners" to help voters digest several more years of austerity?
Why is it called the Autumn Statement when it's December?
During the 80s and 90s, the statement was actually delivered in Autumn but, since 2003, they have "more often than not" come in December, the BBC says.
What purpose does it serve?
Apart from the budget, it's the most important economic update of the year. It's the chancellor's opportunity to update MPs on the government's taxation and spending plans. Those plans are based on the economic projections provided by the Office for Budget Responsibility (OBR) - the body set up in 2010 to provide independent economic forecasts. As soon as the chancellor finishes his speech the OBR publishes its estimates for the UK's economic growth and the government's finances.
What do we know already?
- Some of the plans will be a recap of measures that have already been announced.
- Whitehall budgets will be reduced by a total of £1bn for each of the next three years. However, health, education, international aid, local government, HMRC and the security services are expected to be exempt from the cuts.
- The personal income tax threshold will rise to £10,000 from April 2014.
- From April 2015, married couples (and civil partners) will be able to share £1,000 of their allowance, saving them up to £200 per year - if Parliament approves.
- A one per cent cap on rises in most benefits comes into force in April 2014.
- All children in their first three years of schooling will receive free school meals from September 2014 and an extra £150m will be invested in updating and building kitchens and dining rooms in English primary schools.
- Some green levies will be adjusted to reduce the impact of energy price rises.
What’s happening with pensions?
A new formula looks set to increase the state pension age to reflect increasing life expectancy. The government wants people to spend no more than one-third of their adult lives in retirement, which observers say would mean people now in their 20s would have to work until they are 70. Originally the government said that from 2046 people must be 68 to draw a state pension but this is likely to be brought forward to the mid-2030s. This mean the age could rise again to 69 by the late 2040s.
What else is Osborne likely to announce on Thursday?
The chancellor has a choice to make ahead of the Statement, writes Szu Ping Chan in the Daily Telegraph. Given that the UK economy is showing tentative signs of recovery (and growth forecasts are looking positively bullish) does he go for "discipline or a few giveaways". The giveaways might include modest tax cuts or an increase in government spending. Chan says it won't be an easy choice because Osborne will be presenting his forecast "against the best economic backdrop since the Coalition came to power in 2010". Osborne has already revealed that he will tell MPs on Thursday that "the job is not done yet". He intends to argue that more curbs on the housing market and the City may be required to ensure the recovery is "sustainable". And he will warn that despite the recent upturn in the economy, several more years of spending cuts and tax rises will be needed to balance the Government's budget. That makes sense, says Philip Rush, chief UK economist at Nomura. He explains: "The Government has declared itself the victor in the austerity debate, so it would not make sense to deviate from such a supposedly successful path." But politics and economics often make very different demands, writes the Telegraph's Chan. With a general election on the horizon it would be "quite an easy sell to loosen the purse-strings a bit and make it look responsible at the same time," she says.
What sweeteners might the Chancellor offer voters?
The Guardian says Osborne will focus on fuel bills and the NHS. David Cameron and Nick Clegg have already foreshadowed a plan to cut energy bills by an average of about £50 a year, and that will be formally announced in the Autumn Statement. There's also likely to be more cash for the embattled NHS to help avoid a "winter healthcare crisis", the Guardian says.
Nick Clegg is keen to increase the personal allowance for income tax payers to £10,500 from 2015, says the Telegraph. It "would be a crowd-pleaser", the paper says, but would also cost about £2.5bn. Meanwhile, the business community has been lobbying hard for the chancellor to freeze business rates (the taxes paid on most non-domestic properties). The British Chambers of Commerce says such a move would "immediately unlock investment and begin to build confidence in the sector". Unfortunately, a two-year freeze on business rates would also punch a £1.7bn hole in the government's tax take. The helping hand the chancellor is most likely to extend to business is further National Insurance reductions and rebates, the Telegraph says.
When does this year's statement start?
The chancellor begins speaking at 11.15am; when he'll finish is anyone's guess. Last year's statement lasted 47 minutes, but "digesting the contents will take days if not weeks", says the BBC.
How does the Autumn Statement differ from the Budget?
In the past, the Budget "largely dealt with taxation plans", while the Autumn Statement "outlined economic projections and broad departmental spending allocations", explains the BBC. That line has been "increasingly blurred", however, and taxation plans are now also announced in the Autumn Statement. But one big difference concerns alcohol. Parliamentary tradition dictates that chancellors – and only chancellors - can refresh themselves with an alcoholic beverage during a Budget speech (Clarke was a whisky man, apparently). Sadly for Osborne, there is no such tradition associated with the Autumn Statement. ·