Chancellor George Osborne has delivered his last Autumn Statement before the general election. Some of the main points covered by the Statement are as follows:
State of the economy
The UK has the fastest growing economy in the G7. 3% growth is forecast in 2014, up from 2.7% predicted in March. 2.4% growth forecast in 2015, followed by 2.2%, 2.4%, 2.3% and 2.3% in the following four years. 500,000 new jobs were created this year, 85% of which were full-time. Unemployment is set to fall to 5.4% in 2015. Inflation predicted to be 1.5% in 2014, falling to 1.2% in 2015.
There will be a reform of residential property stamp duty so that rates apply only to that part of the property price that falls within each band. 0% will be paid for the first £125,000 then 2% on the portion up to £250,000. 5% up to £925,000, then 10% up to £1.5m, then 12% on anything above that, saving £4500 on average priced home. These changes will come into effect at midnight on Thursday.
The deficit has been halved since 2010. Borrowing is set to fall from £97.5b in 2013-14 to £91.3b in 2014-15. The deficit is projected to fall to £75.9b in 2015, £40.9b in 2016, £14.5b in 2017 before reaching a £4b surplus in 2018. By 2019-20 Britain will have a surplus of £23b. Debt as a share of GDP to rise from 80.4% this year to 81.1% next year before falling in every year, reaching 72.8% in 2019-20. Tax receipts up to 2017-18 forecast to be £23bn lower than predicted.
Energy and fuel
Fuel duty is to be frozen.
Savings and pensions
There will be a commitment to complete public service pension reforms, saving £1.3b a year.
Personal and business taxation
Personal tax allowance is to increase to £10,600 next April. Higher rate income tax threshold is to rise to £42,385 next year. 25% tax on profits generated by multi-nationals that are shifted out of the UK will be introduced, set to raise £1bn over five years. There will be an inflation-linked increase in business rates capped at 2%.
Welfare spending is to be £1bn lower than forecast in March. There will be a two-year freeze in working-age benefits (first announced in October). Migrants are to lose unemployment benefits if they have 'no prospect' of work after six weeks.
Business rates are to be reviewed. Research and development tax credit will be increased for small and medium-sized firms. Support will be extended to small businesses, with £500m of bank lending, plus £400m government-backed venture capital funds which invest in SMEs. There will be a £45m package of support for exporters. National Insurance on young apprentices is abolished.
The British Retail Consortium welcomes the fact that Chancellor has announced a full review of the structure of the business rates system alongside the extension of the 2% cap on business rate increases for next year. Further help on rates announced today included the extension of small business rates relief for another year and the roll over for another year of the discount for retailers with properties of less than £50,000 rateable value. This will rise to £1500 next year.
The BRC and its members have been leading the cross-industry debate about the future scope of change for business rates and there is a strong consensus from retail and property to manufacturing that more fundamental reform is needed because the existing system is no longer fit for purpose.
Helen Dickinson, British Retail Consortium director general, says: “We very much welcome the commitment to undertake a comprehensive review of the business rates system. We want a system that brings investment and jobs to the high street without punishing retailers who trade online. The retail industry is the largest rates payer, contributing over a quarter of the total rates tax take. Today’s short term support package will be of enormous help to those struggling to keep their businesses open on the high street."
Meanwhile, Phil Orford MBE, chief executive at the Forum of Private Business, says: “The Chancellor was keen to provide a much needed boost for Britain’s small businesses and there were some positive measures in today’s speech which will go a long way to helping reduce costs and improving business confidence. Whether this will be enough as we enter a period of uncertainty at the start of next year remains to be seen.
“Business rates have been an ongoing concern for a large number of our members, with 55% in a recent poll seeing this significant barrier to business growth. It is good to see that the Chancellor has agreed with our suggestions of short term measures to reduce the pain of excessive property taxation with continued a continued cap of 2%, a £1500 discount for retail properties and an extension on Small Business Rates Relief. While we also welcome the Chancellor’s decision to answer our repeated calls for a proper review of the system and the way in which it is calculated, the devil will definitely be in the detail. With the review scheduled for after the General Election, we are keen to see all parties commit to making concrete moves to tackle an issue that many businesses feel has needed addressing for some time.
“Announcements of additional British Business Bank and the extension of the Funding for Lending scheme are also welcome measures to address ongoing small business confidence issues around the ability to obtain the finance they need to grow.
"On the announcements of further scoping and development of a Northern Powerhouse incorporating several major cities, and increased tax raising powers to Wales, Northern Ireland and Scotland, our members see this as a very positive further step in re-balancing our economy, not only in terms of financial services and manufacturing, but also in a commitment to support major regional and local development plans outside of London and the south-east.
"While we applaud the increase in R&D tax credits - a successful driver for innovation – we would have preferred the relief to have been focussed on the formulation of a new Export Tax Credit to incentivise and support new exporters in riskier overseas markets."