Autumn Statement 2014

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Autumn Statement 2014

At 12:30 on Tuesday afternoon, George Osborne formally announced his Autumn Statement. It is a statement which is the next step in this government’s long term economic plan, in a bid to give the British economy stability and promote growth. By the Chancellor’s own admission difficult decisions were needed by taken in order to secure an economic recovery and to stave off low productivity rates, a high deficit and wider economic threats.

The British Economy is set to experience a period of growth, and in order to boost this growth the Autumn Statement brings with it outlined investment opportunities. These include investment in flood defences, improving the roads infrastructure, rail and the science sector. In terms of employment and education, the government is to abolish National Insurance contributions for apprentices within the workplace, and offering new loans for postgraduate students at University. Devolution also features within this year’s Autumn Statement: the devolution of income tax powers to the Scottish Government, as outlined by the Smith Commission, is followed by devolution of powers to areas outside London through the means of city and local growth deals. This is in accordance to the Government’s bid to build a ‘Northern Powerhouse’.

As for the country’s finances, the recovery is now ‘well established’. The deficit is expected to fall by half by the end of 2014-2015 and to reach a surplus by early 2017-2018. However, the Autumn Statement gives further details needed to reduce the deficit and debt after the term of this government.

The Statement reports that employment figures have returned to their pre-recession level, with 30.8 million in work, and improvement of 1.7 million since the current government came to power. This is due to increases in self-employment and the number of employees. The Office for National Statistics assessed that fewer people are leaving self-employment, with an increase in those who have been so for more than 20 years. This suggests a structural change in employment.

Within this year’s Autumn Statement comes a reformed Stamp Duty Tax, aimed at reducing distortions in the housing market and improve fairness within the tax system. The personal tax allowance has been uprated by £100 to £10,600. This will come into effect next year. Within the Statement, the government outlined its intent to crack down on tax avoidance, which encompasses both businesses and individuals.

Since this government came to power the Funding for Lending Scheme has played an important role in reducing bank funding costs and to incentive lending, leading to easier credit conditions for business. The Treasury and the Bank of England have agreed upon an extension for the FLS until 29th January 2016.

In carrying a commitment to returning public finances to a sustainable level and in implanting a responsible fiscal policy, the government is delivering a ‘fiscal tightening.’ In order to do this they plan to commit to a further £10 billion of efficiency savings, further investment in the NHS of £3.1 billion UK-wide, ensuring that the full cost of the provision of pensions is met by public sector employers.

The Statement reports that employment figures have returned to their pre-recession level, with 30.8 million in work, and improvement of 1.7 million since the current government came to power. This is due to increases in self-employment and the number of employees. The ONS show that fewer people are leaving self-employment, with an increase in those who have been so for more than 20 years. This suggests a structural change in employment.

Here are the Government’s plans outlined in the Statement in more detail:

Growth

  • Investment in both the public and private sector. £15 billion earmarked for the road network and for 1,400 new flood defences.
  • Investment in science sector of Britain, this includes establishing a £2.9 billion fund to enable firms and the Government to invest in new research facilities.
  • A commitment to building a  northern powerhouse. This involves investment in the road network of northern England, rail franchises and investment in the Sir Henry Royce Institute for research and innovation. City and local growth deals will be aided by the Regional Growth Fund.
  • Abolishing National Insurance contributions on the earnings of apprentices aged under 25. Such an abolishment is in existence till the upper earnings limit.
  • Offering loans to prospective undergraduate students, to coincide with the government’s previous lifting of the cap on the numbers of undergraduate students.

Finances:

  • A further £100 increase to the personal Income Tax allowance next year, with full gains passed on to higher rate tax payers so that the top rate threshold for next year will be line with inflation.
  • Allowing the tax advantages of married ISA savers to be passed on to a surviving spouse or civil partner in the event of the individual’s death.
  • Cutting income taxes and freezing fuel duty.
  • Reducing travel costs on  families by excluding Air Passenger Duty being charged on children flying economy next year.
  • Tackling tax avoidance by companies and individuals, by ensuring that they pay their fair share and by restricting the amount of banks’ profits that can be offset by carried-forward losses.
  • Reforming the Stamp Duty Tax. The Stamp Duty Tax will be reformed to be applied to the part of the property price which falls within each band, similar to the system for Income Tax. The rate of tax steadily increases as the value of the property increases, which is different to the current ‘stepped system.’ For example: properties up to the value of £125,000 will have no additional tax. Properties from £125,000 to £250,000 will have a tax of 2% of the value of the property. This has taken place with immediate effect.

Health:

  • Additional funding from Central Government to help the NHS realise it’s ‘Five Year Forward View’, this funding amounts to £2 billion for frontline services in England next year. This is part of a multi-year £3.1 billion UK wide investment plan.
  • £200 million transformation fund next year to assist the NHS in the implementation of the Forward View in the first year. To improve hospital/community services/GP integration.
  • £237 million available to devolved administrations next year to spend on their own health services.
  • £150 million over five years to develop services in England to tackle adolescent eating disorders. This is a part of a wider investment into mental health care.

Welfare:

  • The Office for Budget Responsibility has assessed that the government is meeting its welfare cap targets every year. In 2015-16 and 2016-17, spending will be within the margin set in the budget of 2014.
  • The welfare cap for 2019-20 is set at £129.8 billion, which is in line with the OBR forecast for governmental spending that year.

Forecast for the Future:

The overall fiscal position of Britain in 2018-2019 is forecast to be largely unchanged from the Budget of 2014 on a comparable basis, this is despite the slower growth in receipts. Spending in 2014/2015 is to be lower than in 2014, due to lower spending on central government debt interest and social security payments. Inflation is to be lower than 2014.

The full Autumn Statement can be viewed here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/382327/44695_Accessible.pdf

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