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.