Autumn? You could have fooled most of us. With winter’s icy storm force winds causing havoc throughout Scotland and the north east, the mood in softy southern Westminster seemed almost benign by comparison as George Osborne got up at 11.15 am to deliver the annual autumn statement. Only the Thames barrier, closed against a possible storm surge, seriously suggested that anything threatening was afoot.
Not that threatening us with anything was what the Chancellor had in mind, actually. Having finally, finally, had the satisfaction of seeing the British economy coming round, Mr Osborne was focusing more on the 2015 election, and how to annoy the minimum number of people while still keeping the budget tight.
And what’s more, he had the joy of knowing that Britain’s current growth rate (upgraded by the OBR to 1.4% and 2.4% next year instead of 1.8%) easily outstrips the rest of Europe, Japan and even (by some arguments) the United States. Why, the budget might even be in surplus by 2018/19, a year early. Households have fewer unemployed members than at any time in the last 17 years. Borrowing is down to £111 billion, or 4.4% of GDP, and will drop further to £79 billion in 2015/16, and £23 billion in 2017/2018. "From the 11% back in 2010, the underlying deficit now falls to 6.8% this year," he said.
No Tax Cuts
But, as even he had to concede, households are still feeling the pinch. And he didn’t duck the fact that Britain’s recession had been significantly worse than in other countries. And that exports are still weak. And that accelerating the rate of shrinkage in the budget deficit will be a tougher call. And that, if budgetary restraint fails, we’ll still have the biggest debt in Europe.
Which is why, he said, it must stay intact. And why there was no scope for cuts, apart from a few concessions to retail businesses (see below).
Pleasing the People
All of which explains which is why the Chancellor didn’t have much room for manoeuvre. ‘Fiscally neutral’ was the watchword. The trick, then, was to make as little as possible sound as good as possible.
It’s also why most of the main issues had been carefully trailed in advance. A rise in the personal allowance to £10,000 with effect from next April – actually announce in the spring budget – and £1 billion of new cuts to central government spending, a guaranteed vote winner. As long as they exclude education and the NHS, which they do of course.
A cap on total welfare spending from next year looks like another guaranteed election boost – excluding pensions of course. Free school meals for all the youngest school pupils. Help for school-leavers which will extend to compulsion measures for NEETs. £2.90 extra per week for pensioners.
All good. But it won’t cost a lot.
• Tax breaks for marrieds and civil partners? A bit of a no-brainer, on the face of it – but only actually useful in those 4 million households where one partner is earning less than the £10,000 personal allowance (as it will be after next April). And only worth £200 per household even then.
• And the largest crackdown on tax evasion of this parliament, which the Chancellor says will raise £9 billion over five years. Watch out, small companies where the line between salary and dividends is blurred.
• A new CGT charge on non-resident house owners when they sell their properties. An extra billion pounds in householder guarantees for housebuilding. And an instruction to councils to extend the right to buy – as well as selling off their most cost-intensive housing properties.
• £120 million of Libor fines to support military charities and to support “those who care for the work of our police, fire and ambulance services."
Anything more? Yes indeed. Cancelling next year’s scheduled fuel duty rise will please everybody. Oh, and the abolition of the hated tax disc for motorists, which will be replaced by a new electronic VED system. (You mean we haven’t got that already?) All at practically zero cost to the government. And capping rail fare increases to the rate of inflation.
Good stuff. We’ve been waiting a long time for all this.
Capping the rise in business rates in England and Wales to 2% next year, instead of following the rate of inflation? A pretty modest real cost, at a time when small companies and high streets are struggling. And anyway, it’ll be the local councils that will carry half of the cost burden. New measures to get shops let by a re-occupation rate relief that will halve the business rate. And a uniform £1,000 off the business rate bill for small retail premises.
Other cheapies? A doubling of the UK export assistance to £50 million. £50 million on a revamped station for Gatwick. And a £1 billion government guarantee for a Northern Line link to Battersea, which ought to cost nothing in practice.
A big new round of infrastructure spending? That’s a zero-cost option, actually, since the private sector will be paying for it. Although we’ll have to see just how achievable that £375 billion actually turns out to be. (Ballpark-wise, it’s around £10,000 per taxpayer. Or about three times the £125 billion that the government has spent to date on the 2008 bank bail-out programme. Hmmmm.)
Selling off the state’s 40% stake in Eurostar will raise a few hundred million pounds, which will also come in handy. But maybe not so great for Danny Alexander, the chief secretary to the Treasury, who had announced a doubling of the coalition's targets for selling off government assets to a rather substantial £20 billion over the next six years.
Mr Alexander’s problem is that his own Liberal Democrats already hate the recent Royal Mail privatisation, and they’re not going to love him for this. Whereas it looks like a guaranteed vote-winner for the Tories, who will.
Stamp duty is to be abolished for shares bought in Exchange Traded Funds. Yes, that looks like an oddity for many of us, since most ETFs are already exempt. Presumably the devil will be in the details. We’ll keep you posted.
EIS incentives, including the film incentives, are to be extended.
Thorny Issues Remain
Tax allowances for shale gas development? Support for offshore wind projects? A new nuke in North Wales? All on the agenda now.
Yes, the raising of the state retirement age to 68 could have been a tricky one, but since he’d moved it from 33 years away (2046) to the mid-2030s (still 20-odd years), that wasn’t doing to make much impact on anybody.
It’s an odd thought that by the time of next year’s autumn statement Scotland might well have decided to go it alone. Any bets on what the Chancellor will be saying then?