This was the final Autumn Statement of the current Parliament ahead of the election in May 2015. Delivered with passion, George Osborne hailed the UK as having “the fastest growing major advanced economy in the world”. He announced that the “long-term economic plan was working” because “against a difficult global background, I can announce a deficit that is half of what we inherited.”
The Chancellor did state that the “warning lights are flashing on global economy” and declared that “Britain cannot be immune to the risks of the global economy” but also revealed that “over the last year, the economy of Britain has grown two and a half times faster than Germany” and that a year ago, the country’s GDP was expected to grow by 2.7%, but had actually increased by 3.0%.
Britain’s economic health was claimed to be promising as borrowing is falling to £93.1bn this year and there will be a surplus of £4bn in 2018/19, rising to £23bn in 2019/20. “Four and a half years ago, our economy was in crisis. Through the storm we have stayed the course and now we are on course for a national recovery, prosperity and a surplus.” However, the Chancellor warned that “savings need to be made in public spending and £13.6bn is to be saved in 2015/16 because to get to a projected surplus and maintain it, cuts will have to be made.”
- Key proposals
- Fuel duty
- Stamp duty
- Personal tax
- Business, enterprise and employment
- Pensions, savings and benefits
- Entrepreneurs’ relief
The outstanding headlines of this Autumn Statement are that £2bn per year has been allocated to the NHS and that a £2,000 National Insurance (NIC) employment allowance has been extended to careworkers. Furthermore, the ‘death tax’ on some inherited pension funds is to be abolished from midnight tonight and so is a tax on ISAs that are inherited. As well as this, stamp duty land tax is being overhauled, the current £10,000 tax-free personal allowance will rise to £10,600 and the higher rate of tax will be paid by those earning £42,385, instead of the current level of £41,865.
George Osborne confirmed that fuel duty has been frozen and that other fuel price surcharges will also come down. As such, air passenger duty will be reduced on flight tickets and will be abolished for under 12s from 1 May 2015, whilst a reduction for under 16s will follow.
On the subject of stamp duty land tax, the Chancellor declared that it “is a badly designed tax system” and had to be changed. From midnight tonight (3 December), no duty is to be paid on a sale price up to £125,000. It’s then 2% on the next £125,000, 5% on the next £675,000, 10% on the next £575,000 and 12% on the remainder of the purchase price. As a result, stamp taxes “will be reduced for 98% of people buying homes,” according to George Osborne, who points out that “on an average home sale price of £275,000, a buyer would pay £4,500 less tax than current levels.” This, he stated, shows the Government’s backing for individuals that want to “work, save and own your own home.”
The current £10,000 tax-free personal allowance will rise to £10,600 and bring three million people out of tax. This is the first step towards a goal of a £12,500 tax-free personal allowance. Additionally, the highest rate of tax will apply from £42,385 and ultimately £50,000 by the end of the decade.
Businesses received a lot of attention in George Osborne’s Autumn Statement and a proposal that was well-received in the House of Commons was the announcement that big multinational companies will be forced to pay more tax and that this ‘diverted profits’ tax will raise £5bn.
As a result, there will be help for high street retailers with a business rate discount rising from £1,000 to £1,500. Also, a £45m package will be made available for first time exporters and there will be tax relief available for businesses in flooded areas.
Furthermore, tax breaks will “usher in a new era and help British businesses with research.” Consequently, there will be a 230% tax relief for SMEs and an 11% relief for large companies.
Announcing that “employment has risen by half a million over the last year,” George Osborne revealed that “on average, for every day this party has been in government, 1,000 jobs have been created and 85% of those jobs are full-time positions.”
Adding that the government’s goal was to “abolish youth unemployment”, the Chancellor introduced a policy that will see a “job tax” on young people taking up an apprentice being abolished.
Total welfare spending is set to be £1bn lower and the 55% ‘death tax’ on certain pension funds is to be abolished so that people can pass on their pension pots tax-free. In addition, in a further measure that is deemed by the Chancellor to be “fairness for savers” the £15,000 ISA allowance will rise to £15,240 and will also be tax-free if it is inherited.
As a result of spending £10bn less than in the original spending plan, the Chancellor has allocated £2bn per year for the NHS. This is in addition to a £1.2bn investment that will be made for GPs. “We cannot have a strong NHS without a strong economy,” announced George Osborne, who went on to extend a £2,000 NIC employment allowance to careworkers and offer VAT refunds for hospice charities.
Postgraduate degree students will benefit from today’s announcement of a Government backed student loan up to the value of £10,000. Focusing specifically upon science, the Chancellor commented that he sees this subject as being crucial to the future of Britain, especially the north of the country, and announced his commitment by opening the Sir Henry Royce engineering institute in Manchester at a cost of £0.25bn.
This will be removed for individuals in respect of the transfer of goodwill to their own company and corporation tax reliefs will be restricted for payments of intangible assets.
The Chancellor was optimistic that Britain’s economic health is improving and we are only a few years away from seeing a surplus instead of a deficit. Confirming that the country’s “economy is growing faster than almost any other”, George Osborne commented that “we are all in this together” and confirmed that “future living standards depend upon productivity.” He added that in the coming years there is a need to invest in infrastructure and expand the British Business Bank as well as strengthen entrepreneur relief.
Official documents from George Osborne’s 2014 Autumn Statement