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Autumn Statement 2012: what to expect

by Daniel Grote on Dec 05, 2012 at 08:37

Autumn Statement 2012: what to expect

Chancellor George Osborne will admit in today’s Autumn Statement that his austerity drive is likely to continue until 2018, as his hopes of ending public spending cuts by the 2015 election are dashed, according to reports.

Osborne is expected to concede that he will fail to meet his target of the national debt falling as a percentage of national income by 2015/16.

The Office for Budget Responsibility (OBR) will add to the bleakness of the economic picture surrounding the Autumn Statement by revising down the growth forecast for 2012 down from the 0.8% figure quoted in the Budget to close to zero. Expectations for 2013 growth will also be revised down, from 2% to closer to 1%. The OBR is also expected to push up its inflation forecast for 2013 to 2.5%, although in a rare bit of positive economic news, will lower its forecasts for unemployment next year from a peak of 8.6% to 8.4%, according to The Times.

Faced with that backdrop, Osborne will unveil a fresh round of cuts that, according to the Financial Times, he hopes will position him as the friend of Middle Britain, by targeting the jobless and the rich.

The Times has reported that another raid on banks will feature. Had the banking tax, which stands at 0.105% of bank balance sheets, stayed the same, revenues to the Treasury would have fallen.

Osborne will also seek to portray a widely-trailed cut in the pensions annual allowance, from £50,000 to £40,000 or even £30,000, in the same light, according to the FT. It said his team are arguing pensions tax relief is heavily skewed towards the richest.

Liberal Democrat plans for a mansion tax are unlikely to feature, having met with resistance from prime minister David Cameron, although an increase in stamp duty on high value properties may.

The squeeze on the rich will also be reflected in the statement’s expected focus on countering tax avoidance.

More details on the general anti abuse rule are likely, and the chancellor will announce a £10 billion drive against tax avoidance, focused largely on multinational companies, according to The Times. The FT said this crackdown could focus on public contractors.

The Times is also predicting Osborne will also try to close a loophole allowing people holding expensive properties in offshore companies to avoid stamp duty, inheritance tax and capital against tax. On inheritance tax, simplification of the payment on discretionary trusts could also feature.

Osborne is also expected to cut working-age benefits in real terms, breaking the traditional link with inflation. Of the few tipped announcements that buck the trend of clampdowns and cuts, the chancellor is anticipated to freeze the 3p-a-litre increase in fuel duty planned for January.

7 comments so far. Why not have your say?

levelplayingfield?

Dec 05, 2012 at 08:56

"Osborne will also seek to portray a widely-trailed cut in the pensions annual allowance, from £50,000 to £40,000 or even £30,000, in the same light, according to the FT. It said his team are arguing pensions tax relief is heavily skewed towards the richest."

Such a reduction will potentially catch those in final salary schemes who benefit from a jump in pay too? Many of these are not the richest in my experience. Cynics may assume that MP's pension relief will no doubt be left untouched.

Yet more fiddling with pensions & tax to produce yet more confusion and uncertainty, which further discourages people from providing this way for their future retirement and old age?

Perhaps a better course would be to abolish the carry forward allowance from the previous 3 years, an additional allowance which could now be interpreted as a transitional measure?

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Anitaki

Dec 05, 2012 at 09:03

What l expect is:

A) When Labour are in power, people will blame the government

B) When Labour are not in power, people will blame the previous government

Until we stop blaming other people, this whirligig will continue to run

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Man of Kent

Dec 05, 2012 at 09:35

@ Anitaki - exactly. Regrettably, whoever you vote for the Government gets in. Also, what exactly is the point of an article speculating about what's going to be announced in a speech beginning in 4 hours? Surely not, "as foretold in New Model Adviser..."?

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Bob Donaldson

Dec 05, 2012 at 09:36

If tax relief is reduced to basic rate for all then you can argue a strong case for first using your ISA allowances rather than pensions. Forgo the tax relief now for a tax free income/lump sum when you retire.

With the constant change in the rules and no straight path to run on, clients are becoming particularly frustrated at pension planning hence the rise in the buy to let sector.

30 Years ago you could rely on your pension as a sensible planning tool for retirement. Not any more, and neither colour of goverment has done anything to instill any faith in pensions as both have tinkered with the legislation at will.

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Laurence Monaghan

Dec 05, 2012 at 09:46

I don't get this 'targeting the jobless and the rich' bit? Half way through his tenure, George Osborne, who you may remember is ‘all in it together’ with the rest of us, has managed to increase the jobless total, thereby reducing taxation income, lowering output and increasing the overall burden of benefit payments. At the same time, targeting the rich seems set to return us to the days when only the very wealthy were be able to afford to drive a car, send their children to university and own their own home. Today he will almost certainly announce that debt reduction has been an absolute failure, thus far, and that yet another target will be set to achieve this. Well done George!

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Anitaki

Dec 05, 2012 at 10:27

All my working life, (nearly 50 years), it has always been "It will be better in 5 years time"

It never has come true.

So l expect more promises of jam & apple pie tomorrow (5 years time meaning "After you have re-elected us")

Ted Heath (Con) has a lot to answer for.

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Jonathan Kirby

Dec 05, 2012 at 11:48

@ Anitaki,

Totally agree although not sure Ted should carry the can for everything!

You can only do what you can for yourself and your clients hoping for the best but expecting the worst.

You know the quotation though, 'Life's what happens to you while your busy making other plans'.

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