On 5 December Chancellor George Osborne delivered his third – and arguably most significant – Autumn Statement to the House of Commons, against a background of global economic uncertainty.
With the past year bearing witness to ongoing difficulties in the eurozone, and fears of a double-dip recession in the UK being realised, the Chancellor faced something of a balancing act in his bid to encourage growth while sticking to the austerity programme.
As predicted by economists, the Chancellor announced that growth will be slower and borrowing levels higher than previously anticipated. The Office for Budget Responsibility has significantly downgraded its growth forecasts, with the UK economy set to shrink by 0.1% this year, compared with its previous prediction of 0.8% growth. Public borrowing is expected to reach £108 billion.
Although the Government remains ‘on course’ to meet its first fiscal mandate, the Chancellor will miss the target for reducing the national debt, instead being forced to extend austerity measures to 2018.
Despite this, Mr Osborne argued that ‘turning back now would be a disaster’, and was keen to emphasise that high earners would bear their ‘fair share’ of the load. While ruling out the introduction of a so-called ‘mansion tax’ on high value properties, the Chancellor confirmed speculation that the annual cap on tax-free pension contributions will be cut to £40,000 and the lifetime allowance will also be reduced, with effect from April 2014.
Significant announcements on personal taxation included an additional increase in the basic personal income tax allowance from April 2013.
Tax avoidance was another key concern voiced by the Chancellor, with a General Anti-Abuse Rule set to be introduced next year.
In a bid to encourage enterprise and investment, the Chancellor announced some headline measures for businesses, including an additional 1% cut in corporation tax from April 2014, an increase in the Annual Investment Allowance limit from £25,000 to £250,000 for a two year period starting from 1 January 2013, and the creation of a new £1 billion Business Bank.One further measure likely to be welcomed by both individuals and businesses was the cancellation of the 3p per litre rise in fuel duty planned for January 2013.