On the 3rd December we saw the announcement of George Osbourne’s Autumn Statement in the House of Commons. The significance of this statement is that it announced the Coalition’s final set of economic policies before the general election next May.
As well as introducing new policies, the Chancellor also used the opportunity to give an update on the state of Britain’s economy. He outlined that our economy is set to grow 3% in 2014, 0.3% higher than forecasted in the budget this year, with a further 2.4% estimated in 2015. These figures would make Britain the fastest growing economy within the G7. 2014 has seen 500,000 jobs created, 85% of which were full-time positions, and inflation is set to fall by 0.3% to 1.2% next year. But the update that has attracted the most attention is the revelation that the UK deficit has been halved since 2010. This is significant because the Conservative’s set a 2015 target to see the deficit eliminated. They now predict that the deficit will be gone by 2020.
So according to the Chancellor we can look at Britain’s economy optimistically; growth is returning at a fast pace and unemployment is steadily falling.
Looking to the future, an extra £2billion of funds will be pumped into the NHS, particularly on frontline services, every year until 2020, which amounts to £10billion extra funding, money that is desperately needed by our struggling national health service. However, it was not good news for Britain’s welfare state in general, for welfare spending is set to be £1billion lower than it was expected to be last March. With public services already stretched, the social cost to get Britain from the red into the black will be high!
The statement also announced some major constitutional changed for the UK’s devolved states. For Wales, business rates will be fully devolved to the Welsh Assembly. For Northern Ireland, corporation tax will be devolved if their executive can manage the implications of such powers. Scotland will be given the power to set their own income tax rates, a power that the Scottish Parliament has long sought.
With the recent tax evasion controversies involving Amazon and Starbucks, the Chancellor also announced a new tax that will levy a 25% charge on profits generated by multi-national corporations that are moved out of the UK, which is estimated to earn £1billion over the next 5 years. This measure has been criticised however for not tackling the problem strongly enough; tax avoidance by multi-nationals is reported to cost the UK well over £12billion annually. Furthermore, restrictions on banks that limit the amount of profits that can be offset by losses to 50% was also announced and is set to earn an extra £4billion over the next five years.
Another major announcement was the changes to Stamp Duty. 0% duty will be paid for the first £125,000 then 2% on the portion up to £250,000, 5% up to £925,000, then 10% up to £1.5m; 12% will be paid on anything above that. These changes are reported to save buyers £4,500 on the average price of a house, and came into effect at midnight on 4th December. Fuel duty will also be frozen and Air Passenger Duty to be scrapped for under-12s from 1st May next year and for under-16s in 2016.
So the state of Britain’s economy could be seen in two ways: we’re on the right track and find ourselves in a much stronger position than we were in 2010, or such growth has come at the cost of Britain’s welfare state, and the British public are in for a lot more pain over the next 5 years. The Conservative Party and Liberal Democrats will certainly be hoping the majority of the public believes the former when casting their vote next May.