With the latest report from the Office for Budget Responsibility painting a gloomy picture for the UK economy, Chancellor George Osborne vowed that the Government would stick to its austerity programme to protect against 'the sovereign debt storm'.
In line with predictions, the Chancellor announced a reduction in the UK's economic growth forecasts, with the 2011 figure revised downwards from 1.7% to 0.9%. This was accompanied by an increase in Government borrowing, with the forecast for 2011/12 rising to £127bn, and total additional borrowing amounting to £112bn over the next four years. However, the Chancellor rebuffed recent reports that the UK is set to slip back into recession in the coming months.
Key announcements for business include the introduction of further credit easing, with up to £20bn being made available to small and medium-sized businesses through the National Loan Guarantee Scheme. The business rate relief 'holiday' for small firms will be extended to April 2013, and a new Seed Enterprise Investment Scheme for small businesses will offer 50% income tax relief for those investing up to £100,000 in new start-ups, together with a one year freeze on capital gains tax. A £940m 'Youth Contract' will also aim to boost employment by means of subsidised work placements for young workers.
Also central to the announcements was confirmation of a National Infrastructure Plan to boost the UK's road, rail and broadband facilities, to be funded by £5bn of Government spending, with a further £20bn investment expected from British pension funds.
Meanwhile, public sector workers will experience a further squeeze, with a 1% cap on pay rises, and while some benefits will rise in line with inflation, other tax credits will see below-inflation increases.
Other significant announcements include a mortgage indemnity scheme aimed at helping 100,000 people to buy homes, a doubling of the number of childcare places for two year olds in England, a new cap on regulated rail fare increases, a cancellation of the rise in fuel duty scheduled for January, and a further increase in the bank levy.