Borrowing is up by £112 billion and there is a blizzard of measures to help UK businesses
Speaking with rasping voice the chancellor produced a stupdendously long list of measures to help stimulate the economy, build infrastructure and to make life easier for small firms.
His two headline facts were:
Borrowing forecast to be £127bn in 2011/12, falling to £120bn, £100bn, £79bn and £53bn. This is £112 billion more over the next four years than previously forecast. On the upside, debt interest payments are £22 billion less than expected.
Growth will be slower than forecast. The OBR now projects the trend rate of growth to average 1.1 per cent a year in 2011 and 1.24 2012, rising to 2.0 per cent in 2013 and 2.3 per cent thereafter. That compares with 2.35 per cent a year over that period projected at Budget 2011.
To remedy this he promised the government will:
Protect the economy
Raise the State Pension age to 67 between April 2026 and April 2028 in response to changes in demography. This measure is expected to save around £60 billion in today’s prices between 2026–27 and 2035–36;
Set public sector pay awards at an average of one per cent for each of the two years after the current pay freeze comes to an end. Departmental budgets will be adjusted in line with this policy, with the exception of the health and schools budgets, where the money saved will be recycled;
Uprate the child element of the Child Tax Credit and disability elements of tax credits in line with the Consumer Prices Index in 2012–13. The Government will not go ahead with the planned £110 above inflation increase to the child element of the Child Tax Credit and will not uprate the couple and lone parent elements of the Working Tax Credit in 2012–13, to ensure the welfare system remains affordable;
Adjust the allocation of Official Development Assistance in line with the OBR’s revised growth forecast, so that the UK spends 0.56 per cent of Gross National Income on Official Development Assistance in 2012, and 0.7 per cent in 2013 and thereafter.
To complement this, the Government will launch a package of up to £21 billion of credit easing measures to support smaller and mid-sized businesses that do not have ready access to capital markets.
The Government will use the savings from current spending generated over the Spending Review 2010 period to fund £6.3 billion of additional infrastructure spending, of which £1.3 billion was announced earlier in the autumn.
Alongside this, around £1 billion of new private sector investment in regulated industries will be supported by government guarantee.
The Government is also announcing commitments to £5 billion of capital projects in the next Spending Review period, as part of the National Infrastructure Plan
Has signed a Memorandum of Understanding with two groups of UK pension funds to support additional investment in UK infrastructure.
The Government is also working with the Association of British Insurers to set up an Insurers’ Infrastructure Investment Forum, and will target up to £20 billion of investment from these initiatives. In total the Autumn Statement supports around £30 billion of new capital investment;
Will increase the Regional Growth Fund for England by £1 billion, plus Barnett consequentials for the devolved administrations, and extend it into 2014–15, to provide ongoing support to grow the private sector in areas currently dependent on the public sector
Introduce a National Loan Guarantee Scheme. Up to £20 billion of guarantees for bank funding will be made available over two years. This will allow banks to offer lower cost lending to smaller businesses, subject to state aid approval;
Make available an initial £1 billion through a Business Finance Partnership, which will invest in smaller and mid-sized businesses in the UK through non-bank channels.
Look for ways to provide a quicker and cheaper alternative to a tribunal hearing in simple cases — a ‘Rapid Resolution’ scheme;
Complete a call for evidence on the impact of reducing the collective redundancy process for redundancies of 100 or more staff from the current 90 days to 60, 45 or 30 days;
Begin a call for evidence on two proposals for radical reform of UK employment law. First, the Government will seek views on the introduction of compensated no-fault dismissal for micro-businesses with fewer than 10 employees. Second, the Government will look at how it could move to a simpler, quicker and clearer dismissal process, potentially including working with ACAS to make changes to their code or by introducing supplementary guidance for small businesses;
Ask independent Pay Review Bodies to consider how public sector pay can be made more responsive to local labour markets, to report by July 2012;
Launch a new Seed Enterprise Investment Scheme (SEIS) from April 2012, offering 50 per cent income tax relief on investments, and will offer a capital gains tax exemption on gains realised in 2012–13 and then invested through SEIS in the same year;
Make 100 per cent capital allowances available in the Black Country, Humber, Liverpool, North Eastern, Sheffield, and Tees Valley Enterprise Zones;
Introduce an ‘above the line’ tax credit in 2013 to encourage research and development activity by larger companies.
Invest an extra £600 million to fund 100 additional Free Schools by the end of this Parliament. This will include new specialist maths Free Schools for 16-18 year olds, supported by strong university maths departments and academics;
Invest an additional £600 million to support those local authorities with the greatest demographic pressures. This funding is enough to deliver an additional 40,000 school places
Introduce a new build indemnity scheme to increase the supply of affordable mortgage finance for new build homes;
Reinvigorate the Right to Buy to support social tenants who aspire to own their own home.
Defer the 3.02 pence per litre (ppl) fuel duty increase that was due to take effect on 1 January 2012 to 1 August 2012, and will cancel the inflation increase that was planned for 1 August 2012, currently expected to be worth 1.92ppl;
Limit the increase to Transport for London fares and regulated rail fares to the Retail Prices Index (RPI) plus one per cent for one year from 2012;
Increase the rate of the Bank Levy to 0.088 per cent from 1 January 2012, to offset the forecast shortfall in receipts for 2011 and future years. This is consistent with the Government’s intention, set out in Budget 2011, that the Bank Levy should raise at least £2½ billion each year;
Proceed with the extension of Air Passenger Duty to flights taken aboard business jets, effective from 1 April 2013;
Ensure the amount of tax relief given to employers making asset-backed pension contributions to registered pension schemes accurately reflects the amount of payments made, and does not give rise to unintended excess relief;
Introduce a Youth Contract worth a total of £940 million over the Spending Review 2010 period. The Government will fund wage incentives for 160,000 young people to make it easier for private sector employers to take them on, at least 40,000 incentive payments for small firms to take on young apprentices, extra s
upport from Jobcentre Plus for unemployed 18–24 year olds, an offer of a work experience or a Sector Based Work Academy place for every unemployed 18–24 year old who wants one after three months on Jobseeker’s Allowance, and a new £50 million a year programme to support some of the most disadvantaged 16–17 year olds into education, an apprenticeship or a job with training.
The Government will invest a further £380 million a year by 2014–15 to extend its new offer of 15 hours free education and care a week for disadvantaged two year olds to cover an extra 130,000 children.
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