Key Points from the Autumn Statement
The Chancellor has committed to exempting children from reduced rate APD – from the 1 May 2015 children under 12s will be exempted and from 1 March 2016, under 16s will be too. This is on top of the commitment in the Smith Commission to devolving APD powers to Scotland.
Clearly this will have an impact on the VAT campaign – giving breaks to APD makes a VAT cut seem less likely to happen in the short to medium term, however it also indicates that the Chancellor sees the value in the changes. However, equally, there could well be a boost for tourism stemming from that, so it’s a good news story too.
On a general note, George Osborne used today’s final Autumn Statement before the General Election to try and present a positive economic outlook, and argue the case for five more years to deliver his ‘long term economic plan’. The economic backdrop is, however, a challenging one. While overall growth figures are up to 3% from an estimated 2.7% this year, the deficit is falling but slowly and public finances are very tight, in part due to weak tax receipts.
Yet, despite the limited room for manoeuvre that this offers, the past few days have seen a string of spending announcements including yesterday’s National Infrastructure Plan (with new money for flood defences and house building amongst other areas) and Monday’s roads plan which set out a £15bn roads improvement plan.
Alongside this, there were also a range of further tax and spend giveaways in today’s statement.
The key headlines from today’s statement were:
- The Chancellor set out strong growth figures with a revision up on previous forecasts to 3% this year and from 2.3 to 2.4% next year. The budget deficit is down to £91.3bn this year, falling every year to 2017-18 when it is predicted it will return to a surplus. Yet the reality for the economy is still set to be challenging.
- As trailed over the weekend, there will be an additional £2bn allocated for NHS frontline services and there will be a further £1.2bn for GP surgeries.
- On income tax the tax free personal allowance will rise to £10,600 up from £10,500 next year.
- There is a further freeze on fuel duty which will be a relief to many who fear the reintroduction of the fuel escalator.
- There were also further changes to pensions as the Chancellor announced the abolition of tax on annuity payments that are made to spouses after their partner has died.
- The so called ‘death tax’ on pensions inherited when someone dies will be abolished. There will also be an Inheritance Tax exemption extended to health workers killed in the line of duty.
- The funding for lending scheme will be extended for one more year with a focus on smaller firms.
- Inherited ISAs will keep their tax free status when someone dies.
- The Government has committed to commission and build homes directly for the first time in 45 years and there will also be a support for a garden city at Bicester.
- There will be a ‘diverted profits tax’ of 25% tax on companies that make money in the UK and then move it overseas. The Treasury has today launched proposals to force multinationals to declare how much tax they pay in each country where they operate.
- George Osborne signalled his backing for the devolution of corporation tax to Northern Ireland. This is a politically significant move which would allow the province to compete with the low business taxes in the Republic of Ireland. This could in part lay the ground work for a Conservative electoral pact with unionist MPs in a hung parliament.
- The Chancellor announced a full devolution of business rates to Wales.
- There was a bid to boost growth in the north through the development of the ‘northern powerhouse’ including £250m for the advancement of science in Manchester.
- The Chancellor’s final announcement was the abolition of stamp duty which is said to cut stamp duty for 98% of home owners with no stamp duty paid on the first £125,000. The changes are due to take effect from midnight this evening with legislation due to be introduced tomorrow.