George Osborne responded to the Office for Budget Responsibility’s bleak economic forecasts by introducing a range of belt-tightening measures. The OBR’s economic forecast was revised downward, from 1.7% to 0.9% for 2011 and from 2.5% to 0.7% for 2012.
The Chancellor responded to the OBR forecasts by introducing a range of prudent measures designed to ensure that Britain doesn’t follow much of the rest of Europe into a new recession. Mr Osborne told the House of Commons: ‘We will do whatever it takes to protect Britain from this debt storm, while doing all we can to build the foundations of future growth.’
Key points of the Autumn Statement
National Infrastructure Plan
A key part of the government’s £30 billion package to help support the UK’s infrastructure, the National Infrastructure Plan (NIP) will include leveraging £20bn of private investment from pension funds, supporting local authorities’ plans to invest in transport links, including loans to fund the Northern Line extension to Battersea and encouraging options to introduce tolling on the A14.
Significant investment will be ploughed into the road infrastructure, with more than £1bn being earmarked for motorway improvements, notably at the M3 and M6. The NIP also sees £100m invested in high-speed mobile coverage and broadband with the intention of creating up to 10 ‘super-connected cities’.
Business loans and initiatives
Around £20bn will be put aside to lower the cost of loans to small businesses, through the National Loan Guarantee Scheme. Small and medium-sized businesses will also benefit from a £1 billion Business Finance Partnership, which will lend to companies through non-bank channels.
Support for firms wishing to grow their export business will also be provided, with £45m being made available. It is expected that the number of companies to benefit from this scheme will double from 25,000 to 50,000.
Osborne also announced an increase in the tax relief available through investment into small and medium-sized businesses. Enterprise investment scheme investors now qualify for 50% tax relief on investments up to £100,000.
George Osborne announced that a new build mortgage indemnity scheme will be introduced, with the intention of helping 100,000 families to buy their own home with a 5% deposit. Additionally, £400m will be devoted to the Get Britain Building investment fund, to encourage contractors to persevere with new and stalled housing developments.
Osborne also announced the reinvigoration of the Right to Buy scheme, popular under the last Conservative government.
Jobs and training
The government has put aside £1bn to subsidise six-month work placements for more than 200,000 young people. Private sector work experience will be made available to every young person who is unemployed for three months.
Rail fare increases frozen
From January 2012, regulated rail fares will be capped at 6.2%, which is 1% above inflation. This represents a fall in the existing cap of 8.2%. In addition, the government has pledged to increase its support for investment in the national rail network by £1bn.
Fuel price relief
The Chancellor did a u-turn on fuel prices, with the proposed January 3p rise in costs and the further 5p increase in August being shelved. In its place, a one-off increase of 3p will come into force in August. According to George Osborne: ‘families will save £144 on filling up the average family car by the end of next year.’
Public sector pay caps
The Government is to introduce a 1% cap on public sector pay for two years. The cap will be introduced when the current two-year pay freeze ends in 2013.
Changes to the state pension
The state pension age will rise from 66 to 67 in 2026, ten years ahead of the existing schedule. George Osborne expects this will deliver £59bn in savings over the long term.