Ambitious new measures will raise £9bn over five years, said chancellor George Osborne this morning. Promising a wide-ranging anti-avoidance package, he said the government would make sure tax advantages of partnerships aren’t being abused, introduce new penalties for users of certain tax schemes, and expand Whitehall’s ability to tackle tax abuse.
Delivering his Autumn Statement, he said growth forecasts for this year had more than doubled from 0.6% to 1.4%.
The OBR is now predicting growth of 2.4% for next year (previous forecasts were 1.8%), followed by 2.2%, 2.6%. 2.7% for the next three years to 2017.
Next April, the state pension will rise by a further £2.95 per week. However, as was widely trailed in advance of today’s Statement, it was confirmed that the age of qualifying for the state pension will rise to 68 in the mid-2013s, and 69 in the late 2040s.
“This is one of those difficult decisions governments have to make,” he said.
This is one of those difficult decisions governments have to make
In another change to the employment system, HMRC will now fund employers directly for taking on apprentices, with Osborne calling for an extra 20,000 to be appointed over the next two years.
As expected, employer National Insurance contributions for those aged under 21 scrapped, which Osborne said would save up to £1,000 a year and affect a million and a half young people. It will require legislation, and so the chancellor said it should come into force in April 2015.
He said most government departments were already underspending and so he was “confident” in announcing £3bn in future departmental savings. HMRC will be exempt from more cuts from Whitehall spending to allow it to "continue to focus on tackling tax avoidance and evasion", as will local government departments.
Non-residents will now have to pay capital gains tax on UK property sales from 2015, said Osborne, who also confirmed the introduction of a new transferable tax rate for married couples, which he said will save four million people up to £200 a year.
Under the government's plans, £1,000 of personal allowance could be transferred from one spouse to another, assuming neither is a higher-rate taxpayer and one is earning less than the personal allowance.
There was good news for small businesses, with business rate relief for small firms extended until April 2015, and caps on further increases to business rates set at 2% a year from April 2014.
“Business rates impose a heavy burden on businesses of all sizes,” said Osborne. “The best way to help businesses is by lowering the burden of tax.
“Business taxes are still too high and exports are too low, and we must address that.”
A new tax relief for investment in social enterprise will be introduced from April, and a new occupation relief will halve rates for new occupants of retail premises. A big expansions in start-up loan funding will help an additional 50,000 business, he said.
For the next two year, every retail premise with a rateable value of up to £50,000 will get a discount of £1,000 to “help those who have struggled hard on our High Streets.”
More tax breaks were also been announced for the shale gas industry.
Banks, however, will be hit with further charges as the bank levy will continue at a rate of 0.156% from Jan 2014. Osborne also said that £100m of libor fines will be passed on to military charities and those supporting the police, fire and ambulance services.
Osborne said the government would invest in infrastructure, providing £1bn in loans to unblock large housing schemes, and announcing that Aldermore and Virgin are set to join the Help to Buy scheme this month too, which he said was helping thousands of people to buy their homes.
The chancellor also announced a cap on overall welfare spending, excluding the state pension and job seeker benefits. At the beginning of each Parliament, he said future chancellors would set the cap, and have to explain why if it is breached.
Roll back on green levies will result in a £50 reduction on average energy bills. Next year’s fuel duty rise will be cancelled.
Osborne said the Office for Budgetary Responsibility (OBR) has revised its assessment of the recession to show the depths of economic contraction were greater than thought with a “staggering” peak to trough fall of 7.2%.
Business taxes are still too high and exports too low
Osborne said that today’s announcement was proof that the government’s economic strategy was working, saying, “We have held our nerve while those who predicted there would be no growth until we turned the spending taps back on have been proved wrong.”
Employment is predicted to rise by 400,000 jobs this year, ahead of previous forecasts of flat jobs growth. The number of people claiming unemployment benefit fell by 200,000 in the last six months. It is predicted to reach 7% in 2015, then down to 5.6% in 2018. This would be the trigger point where the Bank of England would consider raising interest rates.
According to Osborne, businesses have created three jobs for every one lost in the public sector, with 3.1m new jobs being created in the private sector by 2019.
Borrowing is predicted to be £111bn in 2013/14, and £96bn in 2014/15. The OBR expects debt to peak at 80% of GDP in 2015/16 and start falling in 2016/17. Osborne said Britain is expected to run a small budget surplus in 2018-19.
Elsewhere, the chancellor said a further £1m of Libor fine money was being made available to military charities, and confirmed that free school meals for infants would be introduced from September next year.
Ed Balls, the shadow chancellor, said after “three damaging years of flatlining”, the government had failed to balance the books by 2015, and had failed to get the banks lending.
Working people are £1,600 a year worse off than in 2010 at the start of the coalition, he said, and net lending to business is down £100bn compared with May 2010.