Coffee House

Autumn Statement: What Osborne will say

4 December 2012

Lower growth, bigger deficits, targets missed — that’ll be the backdrop to George Osborne’s Autumn Statement tomorrow. So what medicine will he prescribe to make it all better? As usual, many of the policies have been leaked already:

More capital spending, paid for by extra cuts elsewhere

This was announced by Number 10 this morning: £5 billion extra spending on schools, science and transport over the next three years. That’ll include an extra £1 billion for Michael Gove’s academies and free schools programmes, to provide 50,000 new school places. It’ll all be paid for by extra cuts in departments’ resource budgets: 1 per cent more than planned next year and 2 per cent the year after (though Health, Education and International Development will be protected).

Tax relief on pension contributions

This is a move that Danny Alexander has been calling for all year — tax relief on pension contributions disproportionately benefit the wealthy, so reducing them is an austerity measure that doesn’t hurt the poor. In its first year, the coalition limited the amount you can pay into your pension pot tax-free from £255,000 a year to £50,000 a year. In February, Alexander called for higher-rate tax relief to be axed, saving £7 billion a year. It seems likely that if Osborne does restrict tax relief further it’ll be through a further reduction in the tax-free limit: cutting it to £40,000 would save the government £600 million a year.

Cutting welfare 

In his March Budget, Osborne said we’d need to reduce the annual welfare bill by £10 billion by 2016. But in September, Nick Clegg vetoed a freeze in working-age benefits. Instead, a compromise might be to have them rise by 1 per cent, rather than the planned 2.2 per cent (in line with September’s CPI inflation rate). The FT’s Westminster Blog says this should save £1 billion in the first year.

Another fuel duty freeze

Claim your gift

Osborne has already postponed the 3.02p per litre fuel duty rise twice: he pushed it back from January to August and then again from August to January 2013. But last month he faced the prospect of a backbench rebellion on a Labour vote to delay it again. The rebellion didn’t come about, probably because Osborne promised the potential rebels that they’d get what they wanted in the Autumn Statement. So we can expect yet another fuel duty freeze tomorrow. (Read our Coffee House briefing on this here.)

Goodbye PFI, hello PF2

Osborne will replace the Private Finance Initiative with a new scheme: Private Finance 2. The aim is to make projects faster, cheaper and more transparent, and to ensure that the government gets a share of the profits. The Treasury has also renegotiated existing PFI contracts, saving £2.5 billion.

Investing in shale gas

As Isabel reported earlier, Osborne will announce a new ‘gas strategy’, including up to 30 new gas-fired power stations, an Office for Unconventional Gas to make shale exploration easier, and a consultation on tax breaks to incentivise it.

Clamping down on tax dodgers

Yesterday, Osborne and Alexander announced an extra £77 million for HMRC to spend on combating tax avoidance and evasion, which they expect to bring in £2 billion a year. In total, this government will have spent about £1 billion on tax evasion, and expects that by 2014-15 it will allow them to collect £22 billion in taxes that would otherwise have been avoided.

No mansion tax

David Cameron and George Osborne have blocked the Liberal Democrats’ calls for a mansion tax of 1 per cent on properties worth more than £2 million. And they seem to have ruled out doing it through extra council tax bands or an increase in stamp duty too. Expect it to be a key part of the Lib Dem manifesto in 2015.

U-turn on removing under-25s’ housing benefits

James reported on Sunday that Clegg and Alexander have rejected Cameron’s plans to axe housing benefits for under-25s. Expect the Lib Dems to use this as an example of their preventing the ‘nastiest’ Tory policies, and expect it to feature in the 2015 Tory manifesto.

Give the perfect gift this Christmas. Buy a subscription for a friend for just £75 and you’ll receive a free gift too. Buy now.

Show comments
  • John Smith

    A mansion tax would have been a winner
    It would have nailed some of these nom doms money
    House price rise is a complete windfall and doing little if anything for the economy

    Use it to cut income tax at the lower end

    • Daniel Maris

      I agree, we need a mansions tax now – as a precursor to a properly thought through property tax.

  • dalai guevara

    What George will say: our cuts to HMRC have cost us £6bn, so I propose to double the big business division by increasing the posts to…14.

    Only joking.

  • david

    Cutting down on tax evasion and avoidance should be the number one aim of this government. According to the tax justice network, it costs the UK £69.9 billion pa. According to other sources (of which I can’t specifically recall, but I believe it’s official) it costs around £32 billion. Wherever the true figure lies, it is one of the biggest issues our country is facing. And instead of doing anything meaningful to stop it (2 billion? is that it?), Giddeon instead decides to take even more from the increasingly victimised disabled for are dying as a result of this government’s atrocities and reduce benefits by a further £10 billion. This government is morally repugnant.

    • HooksLaw

      I can agree with the principle of the first part of your rant – I don’t know what the figures are but since the demise of the labour govt its clear there has been massive unfair tax evasion going on and we must surmise it has been going on for a long time.

      However your figures seem to conflate annual figures for tax dodging with accumulated figure for benefits over a period (5 years according to the BBC).

  • Daniel Maris

    What Osborne will really be saying:

    “Holy cr*p I really fouled up didn’t I? I am going to try and move to Plan B quietly and without fanfare. I realise now I will have to raise taxes on the rich. It was stupid what I tried to do – scaring everyone witless. Really I am in a right mess. I’ve got no clear plan of my own, so I have to try and appease all these competing interest groups. I just don’t know what to do – I’m pressing all the buttons in hope something works.”

  • Archimedes

    Stick to your strengths, Jonathan, and draw a pretty little chart with lots of pretty little colours.

Can't find your Web ID? Click here