Autumn Statement - follow it live with Which?Chancellor George Osborne to target growth
28 November 2011
The Chancellor, George Osborne, will tomorrow announce government spending plans for 2012 and launch a stimulus package designed to 'get the British economy moving'.
New investment will come from pension funds but £5bn could be paid for by further cuts in public spending, and speculation is mounting that fuel duty and train ticket prices will be frozen to ease the squeeze on hard-up consumers.
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National Infrastructure Plan
Announcing several initiatives ahead of his official Autumn Statement, due to be made at 12.30pm on 29 November, Mr Osborne appeared on the BBC's Andrew Marr Show yesterday (27 November). He said that it was 'an exceptionally difficult time', with a 'slowing world economy' and a 'financial crisis brewing in Europe'.
The Chancellor announced a £20bn National Loan Guarantee Scheme to make money available to small businesses and an agreement with big pension funds to invest in new infrastructure projects. The National Infrastructure Plan was confirmed by the National Association of Pension Funds (NAPF) and the Pension Protection Fund (PPF).
In a statement, Joanne Segaers, Chief Executive of the NAPF said: 'We’re excited by the Government’s commitment to try to make it easier for pension funds to back major infrastructural projects, and we look forward to working on the details with them. This could be a real win-win.'
Segaers added that the UK desperately needs to update its infrastructure, and that 'pension funds are looking for inflation-linked, long-term investments. Pension funds hold over a trillion pounds in assets, but only around 2% of that is invested in infrastructure. There’s the potential for that to be much higher.'
Consumer measures expected
Although the Autumn Statement is mainly about the government's overall spending plans, several measures to help consumers have been flagged in advance. These include a reduction in the maximum permitted increase in rail fares for 2012, from an 8% cap to 6%. It has also been widely reported that the government intends to postpone or abolish a scheduled rise in fuel duty that would put up the price of petrol for motorists.
Some commentators have suggested that the government might consider a temporary cut in VAT to stimulate retail spending, similar to the one announced by the previous Chancellor Alistair Darling in 2009, but this has not been confirmed. Mr Osborne increased VAT from 17.5% to 20% in his 2010 Emergency Budget.
Public spending may be reduced
Although the National Infrastructure Plan will be financed mainly from pension fund investors, who are expected to provide £20bn, it has been suggested that around £5bn will be funded by reductions in planned public spending. Some of this could come from frozen tax credits and lower than expected increases in benefits.
The inflation figure normally used to set benefit rates is that from the preceding September, which was higher than expected at 5.2% (CPI). In October 2011, inflation fell back to 5% and has been forecast to decrease significantly over 2012 by the Bank of England. It is in this context that a lower index-linked rise may be considered.
Tax changes unlikely
The government seems unlikely to change income tax rates for 2012-13, although HMRC are expected to act on schemes to avoid stamp duty land tax on house purchases and continue its crack down on tax evasion generally.