Autumn Statement 2014 – what can we expect?
George Osborne will use his Autumn Statement to announce a number of new spending commitments ahead of next year’s election. However, with reports suggesting that Government borrowing between April and October increased by £3.7 billion compared to last year, on the back of lower than expected tax returns, the Chancellor’s room for manoeuvre is limited.
The Chancellor will therefore be under pressure to ensure he delivers an Autumn Statement that woos voters ahead of next year’s election without breaking the bank. So what can we expect?
Devolution will be the jewel in the crown of this year’s Autumn Statement with George Osborne taking the opportunity to bring his ‘Northern Powerhouse’ – unleashing the full potential of the North and rebalancing economic growth across the country – a step closer to reality.
He is expected to set out detailed plans for devolution, and of course funding, to Leeds, Sheffield and Manchester. He’s under pressure to offer enough to keep local councils quiet after 119 local councils wrote to the Observer this weekend arguing that they cannot afford any more spending cuts and demanding that taxation and spending is spread out across the UK on a fair basis.
It has been widely reported that there will be measures to help combat tax avoidance by technology companies who base their headquarters offshore. There should also be more details on plans to extend capital gains tax to non-UK residents, so those who buy and sell UK properties from abroad cannot avoid tax. The Government has come under fire for being perceived to focus spending cuts on the poor whilst allowing the rich to avoid paying tax, with Margaret Hodge MP, the outspoken Chair of the Public Accounts Committee, being one of their fiercest critics. They will be hoping these commitments bring them some reprieve in the run up to the election.
However the Treasury has ruled out a cut to tourism VAT despite The Cut Tourism VAT campaign, which argues that the UK’s high VAT rate is hindering the tourism industry to the detriment of the economy, receiving cross-party backing from MPs.
With falling oil prices threatening jobs in the North Sea the Chancellor could also be under pressure to introduce tax breaks for oil and gas operators.
George Osborne announced on the Andrew Marr Show this weekend that the Autumn Statement will include £2 billion of additional funding for the NHS. This is up from the £1.5 billion that Deputy Prime Minister, Nick Clegg said he expected to be included, and which had been widely reported last week.
The Chancellor described the extra funding as a “downpayment” on future injections into the NHS over the next five years, but it is yet to be seen how the Chancellor plans to tackle the £8 billion ‘black hole’ in the NHS budget by 2020 predicted by NHS England Chief Executive Simon Stevens last month.
However, the Chancellor has already come in for criticism today after it emerged that almost a third of the £2 billion is money that has already been allocated to the Department of Health by the Treasury.
Labour is likely to use this revelation to criticise the new funding, and will also contrast it with their own commitment to invest an additional £2.5 billion a year in the health service during the next Parliament.
Ahead of the Autumn Statement the Government has already announced £15 billion for long-term road and rail infrastructure across the country. The funding will be spent on a variety of schemes, including 18 new road schemes worth £2.3 billion for Yorkshire and the north east of England and £800 million for 9 new road schemes in the north west of England. Much of this is further detail on already announced schemes, although it is thought that the exact figures are new information. What we know is that many of the schemes fall within marginal Conservative and Lib Dem constituencies, something which the Opposition will highlight in their response.
Meanwhile in London it is expected that the Chancellor will confirm that funding will be given to extend the Gospel Oak to Barking Line to Barking Riverside, unlocking London’s largest housing development with planning permission for more than 10,000 homes. Connect are particularly delighted by this as we have been working with Barking Riverside for some time to raise its profile and secure this funding.
TfL officials have said they are hoping for a commitment to Crossrail 2 in the Autumn Statement, and George Osborne’s recent comments that “we should look at the case for Crossrail 2” suggests that there may well be some announcement, though probably not funding commitments, on Wednesday.
There will be good news for pensioners as George Osborne is set to unveil his plan to end the 55% tax on inherited pensions when someone dies before the age of 75.
David Cameron pledged to increase the inheritance tax threshold to £1 million during the 2010 General Election campaign and this could be an opportunity for him to make good on that pledge. However, given the OBR announcement on borrowing figures, it’s unlikely he can afford to lose any more tax revenue and so this may be avoided.