Chancellor George Osborne presented his Autumn Statement today, with a gloomy message of a shrinking economy, missed targets, and the need for austerity measures to continue to 2018.
The chancellor was forced to admit that he would miss his own targets on reducing the national debt due to a worse than expected economy which is predicted to have shrunk 0.1% this year. He also pushed back the date by which the government should have eliminated the “structural current deficit” another two years to 2017/18.
The failure of the government to get a handle on the state finances to date, means that more will be squeezed from working age benefits such as Jobseekers Allowance and Child Benefits, which will go up by 1% for the next three years, less than the rate of inflation and a real-world reduction. There will also be a cut in tax relief on large pension pots, saving the government £1bn a year.
On the changes, the chancellor repeated the Tory slogan of “we’re all in this together” which was met with jeers from the opposition benches, but her continued, telling MPs
“I know these tax measures will not be welcomed by all; ways to reduce the deficit never are. But we must show we’re all in this together. When you’re looking for savings, I think it’s fair to look at the tax relief we give to the top 2%.”
The income tax personal allowances will rise by £1,335, £235 more than previously announced, so no income tax will be paid on earnings under £9,440. The 40% tax rate threshold will also rise by 1% a year to 2015 where it will be £42,285. In other good news for low earners and drivers, the 4p fuel duty rise was scrapped.
The basic state pension will rise by 2.5% next year to £110.15 a week, which is about in line with inflation.
Mr Osborne also announced a renewed crackdown on tax avoidance and a squeeze on Whitehall budgets to pay for a new road and school building programme.
As an apparent incentive for large corporations such as Starbucks and Amazon to stop using loopholes to avoid paying taxes in the UK, and in response to the lacklustre corporation tax receipts in October, Osborne cut the corporation tax rate by 1% to 21%, making it notably lower than the 40% levied in the US and the 33% collected in France.