This morning the Chancellor George Osborne presented his Autumn statement and emphasised that the “economic plan is working but the job is not done”. The chancellor highlighted the impressive improvements in growth, unemployment, inflation pressures and forecasts which suggest these developments will continue. The key points are below:
UK Growth
- The Office of Budget Responsibility (OBR) now project growth this year will be 1.4%, raised from an expected 0.6% in March.
- Next year’s forecast has also been revised upwards to 2.4% from 1.8%, with the following four years growth expected to be 2.2%, 2.6% 2.7% and 2.7%.
- The OBR have shed light on the risks to growth, claiming the eurozone will shrink 0.4% this year.
- Unemployment is expected to fall to 7% in 2015 and 5.6% by 2018, with an expected 400k additional jobs.
- Private sector job creation will reach 3.1m by 2019 according to estimates.
Public Finances
- OBR have revised underlying public sector net borrowing down to 6.8% down from 7.5%, dropping to 5.6% next year, and predicts a small budget surplus by 2018.
- The Borrowing forecast is down by £73bn in the next few years, with an estimated £111bn being borrowed this year and £96bn next year.
- The chancellor has introduced a cap on welfare spending, however this excludes pensions.
- There will be an updated charter of budget responsibility to be presented to the parliament next year.
- Pensions will rise by £2.95 a week from next April, and the state pension age will rise to 68 in the mid-2030s, up to 69 in the mid-2040s.
Taxes
- From 2015 capital gains tax on home purchases/sales from non-residence will be introduced.
- The Bank Levy will increase to 0.156%, raising an additional £2.7bn next year and £2.9bn a year for 2015-16.
- There will be further tax breaks for shale gas, with the tax rate being halved on early profits.
- Up to £1000 tax allowance will be transferable between married couples.
- Jobs tax to be abolished for people aged under 21.
Businesses
- Rate relief scheme for small business will be extended for another year.
- There will be a cap increase on business rates at 2% from next year.
Living standards
- The freeze on fuel duty will continue, meaning next year’s planned rise will be cancelled.
- Green levies on energy bills will be rolled back, therefore cutting £50 from bill increases.
- Average rail prices will be kept constant in real terms.
Sasha Nugent
Currency Analyst
