Today, the Chancellor of the Exchequer delivered his 2011 Autumn Statement to Parliament.
Responding to the Office of Budget Responsibility's updated Economic and Fiscal Outlook, the Chancellor has set out details of further action the Government will take to protect the UK from global instability and the euro area crisis and build a stronger, more balanced economy for the future.
The Chancellor announced permanent reductions in spending to ensure that the UK meets its fiscal targets, using some of those savings in the short term to fund infrastructure investment to generate long-term growth.
Alongside this, he announced measures to help households and businesses cope with higher inflation and to ensure that deficit reduction is implemented fairly.
The Chancellor of the Exchequer, George Osborne, said:
"We are committed to making Britain the best place to start, finance and grow a business.
"The measures I am announcing today will help us to achieve this by creating an environment in which businesses are easy to set up, have access to credit when they need it and are able to grow without being held back by red tape.
"This action supports our deficit reduction plan and the Government's monetary activism as we build a balanced economy."
To give more support to the economy and help businesses, families and individuals through this difficult time, the government:
* will set out a new strategy for coordinating public and private investment in UK infrastructure. The Government will use the savings from current spending generated over the Spending Review 2010 period to fund £6.3 billion of additional infrastructure spending, of which £1.3 billion was announced earlier in the autumn. Alongside this, around £1 billion of new private sector investment in regulated industries will be supported by government guarantee. The Government is also announcing commitments to £5 billion of capital projects in the next Spending Review period, as part of the National Infrastructure Plan;
* has signed a Memorandum of Understanding with two groups of UK pension funds to support additional investment in UK infrastructure. The Government is also working with the Association of British Insurers to set up an Insurers’ Infrastructure Investment Forum, and will target up to £20 billion of investment from these initiatives. In total the Autumn Statement supports around £30 billion of new capital investment;
* will increase the Regional Growth Fund for England by £1 billion, plus Barnett consequentials for the devolved administrations, and extend it into 2014–15, to provide ongoing support to grow the private sector in areas currently dependent on the public sector.
The Government will:
* allow a more active monetary policy by the Bank of England to stimulate demand while controlling inflation. To complement this, the Government will launch a package of up to £21 billion of credit easing measures to support smaller and midsized businesses that do not have ready access to capital markets. This will comprise
* a new National Loan Guarantee Scheme. Up to £20 billion of guarantees for bank funding will be made available over two years. This will allow banks to offer lower cost lending to smaller businesses, subject to state aid approval
* an initial £1 billion through a Business Finance Partnership, which will invest in smaller and mid-sized businesses in the UK through non‑bank channels.
The Government will:
* look for ways to provide a quicker and cheaper alternative to a tribunal hearing in simple cases — a ‘Rapid Resolution’ scheme;
* complete a call for evidence on the impact of reducing the collective redundancy process for redundancies of 100 or more staff from the current 90 days to 60, 45 or 30 days;
* begin a call for evidence on two proposals for radical reform of UK employment law. First, the Government will seek views on the introduction of compensated no-fault dismissal for micro-businesses with fewer than 10 employees. Second, the government will look at how it could move to a simpler, quicker and clearer dismissal process, potentially including working with ACAS to make changes to their code or by introducing supplementary guidance for small businesses;
* ask independent Pay Review Bodies to consider how public sector pay can be made more responsive to local labour markets, to report by July 2012;
* launch a new Seed Enterprise Investment Scheme (SEIS) from April 2012, offering 50 per cent income tax relief on investments, and will offer a capital gains tax exemption on gains realised in 2012–13 and then invested through SEIS in the same year;
* introduce an ‘above the line’ tax credit in 2013 to encourage research and
development activity by larger companies.
The Government will:
* invest an extra £600 million to fund 100 additional Free Schools by the end of this Parliament. This will include new specialist maths Free Schools for 16-18 year olds, supported by strong university maths departments and academics; and
* invest an additional £600 million to support those local authorities with the
greatest demographic pressures. This funding is enough to deliver an additional 40,000 school places.
The Government will:
* introduce a new build indemnity scheme to increase the supply of affordable mortgage finance for new build homes; and
* reinvigorate the Right to Buy to support social tenants who aspire to own their own home.
Balancing the books
To address the gaping hole in the public finances which the previous Labour government left behind, government measures will have to include
* setting plans for public spending in 2015–16 and 2016–17 in line with the spending reductions over the Spending Review 2010 period;
* raising the State Pension age to 67 between April 2026 and April 2028 in response to changes in demography.
* setting public sector pay awards at an average of one per cent for each of the two years after the current pay freeze comes to an end. Departmental budgets will be adjusted in line with this policy, with the exception of the health and schools budgets, where the money saved will to back into the NHS and schools respectively;
* uprating the child element of the Child Tax Credit and disability elements of tax credits in line with the Consumer Prices Index in 2012–13.
* adjust the allocation of Official Development Assistance in line with the OBR’s revised growth forecast, so that the UK spends 0.56 per cent of Gross National Income on Official Development Assistance in 2012, and 0.7 per cent in 2013 and thereafter.