George Osborne provided few surprises in his Autumn Statement earlier today. Growth projections for the UK economy were revised down significantly from over-optimistic figures from the March Budget. Tight credit conditions and external dangers will ensure a rocky recovery for the UK economy over the next few years. One notable success though has been the UK labour market, which has showed some strong improvements this year, with 1.2m extra jobs found under the current government.
A key theme to take from the Office of Budget Responsibility is that the UK is in a weaker position in terms of both growth and its finances, when compared to the last update in March. This of course highlights the risks of a cut to the UK's AAA credit rating in the early months in 2013. In terms of sterling's performance in reaction to the day's events, the response has actually been pretty muted, which is a pretty good result in the circumstances.
Below is a summary of the key announcements made by George
Osborne today.
Economy and Government Spending
·
The Office for Budget Responsibility expects GDP
to contract by 0.1% in 2012, significantly down from forecasts of 0.8% growth
in March. The OBR then expects the UK economy to grow by 1.2% next year.
·
The government’s fiscal consolidation programme
is to be extended by another year to 2017/2018.
·
The UK budget deficit is set to fall from 7.9%
last year to 6.9% this year.
·
National debt will not begin falling until
2016-17, a year later than previously expected.
·
UK unemployment is expected to peak at 8.3%,
lower than initially expected, and employment is expected to rise every year
moving forward.
Taxes
·
There is to be no new tax on property (“mansion
tax”).
·
40% tax rate threshold will rise from £41,450 to
£41,865 in 2014 and then £42,285 in 2015.
·
Corporation tax will be cut by another 1% in
2014, taking the rate to 21%.
·
Inheritance tax will rise by 1% in 2013.
·
Tax free allowance raise is to rise by £235 to
£9,440.
·
Planned 3p rise in fuel duty not just postponed
but cancelled.
Benefits and Pensions
·
Most working-age benefits to rise by 1% per year
over next three years.
·
Child benefits are also to rise by 1% per year
over two years from 2014.
·
Tax relief on the largest lifetime pensions
reduced from £1.5m to £1.25m starting in 2014-15, the annual allowance will now
be £40k rather than £50k.
