Chancellor George Osborne pledged to move from ‘rescue’ to ‘rebuilding’ as he presented his combined Autumn Statement and Spending Review to the House of Commons.
Placing the theme of security – both economic and national – at the heart of his speech, the Chancellor set out his aim of making Britain ‘the most prosperous and secure of all the major nations of the world’, drawing on the latest economic forecasts to suggest that the Government’s spending plans are on target to deliver a £10.1bn budget surplus by 2019/20.
The Office for Budget Responsibility (OBR) has forecast a £27bn improvement in the public finances for the next five years compared to its July predictions, meaning that the Government can borrow £8bn less over the course of this Parliament.
For the current financial year the OBR has predicted economic growth of 2.4%, with borrowing expected to fall from £74.1bn to £73.5bn.
The biggest surprise of the Chancellor’s speech concerned the controversial plans to cut £4.4bn in tax credits in order to achieve the promised savings of £12bn per year in welfare spending. While many experts were predicting some transitional measures to soften the impact of the cuts, Mr Osborne unexpectedly announced a complete U-turn on the plans and revealed that taper and threshold rates for working tax credits and child tax credits would remain the same, until tax credits are phased out with the introduction of Universal Credit.
The costs would be offset in part by higher than expected tax receipts and new restrictions to be introduced on housing benefit and pension credit payments. The Chancellor also announced that overall police spending would be protected in line with inflation.
The statement included a number of headline measures for business, including an extension of the doubling of the Small Business Rate Relief for a further year. The Chancellor confirmed plans to abolish uniform business rates, granting new rate-setting powers to local councils, with further details to be unveiled in the Spring Budget. Meanwhile, the new business apprenticeship levy will be set at a rate of 0.5% of an employer’s wage bill.
Personal tax measures included confirmation that the new single tier State Pension will be set at £155.65 a week from next April. In addition, the Chancellor announced that local councils will be able to increase council tax by up to 2% in order to fund social care.
Other key announcements included a commitment to investing in transport and infrastructure, together with new plans to increase Britain’s housing stock.
For buy-to-let owners, though, the news was perhaps less welcome, with the announcement of a new 3% stamp duty surcharge for buy-to-let properties and second homes, to take effect from next April.