On Wednesday 3rd December, UK Chancellor George Osborne delivered his final Autumn Statement before the May 2015 General Election. I briefly outline some of my thoughts here.
1.) Cuts to come, or will they?
According to Treasury data, we’re in for a pretty tough fiscal environment post 2015. As IFS head Paul Johnson said, if the predicted cuts and deficit reduction plans come to pass, they will not only be colossal, but will fundamentally redefine what the State does and how it does it in a way not seen in many of our lifetimes. In other words, what we’ve seen in this Parliament pales in comparison to what is to come.
What is more interesting still is that Labour have pretty much confirmed they’ll also be cutting public spending, albeit in not quite as severe a way as Osborne and Co suggest above. Thus, as things currently stand, all three major parties have committed to curbs. If you want a party that hasn’t signed up to this narrative, you’ll need to look to the Green Party. On the other hand, if you want an outfit that’ll hold its nerve in demanding deep reductions in public spending more than any other, Matthew Parris’ favourite outfit UKIP are your best bet.
Remember when the Coalition said that they’d eradicate the deficit by 2015, they haven’t even come close to doing that! Commentators have opined that in actual fact these cuts might never come into effect, or at least in not quite as severe fashion as implied above. Time will tell on this, but I wouldn’t be surprised (for political reasons if nothing else) if whoever party/parties in Government post 2015 get cold feet at the above prospect. After all, however necessary one might feel cutting the deficit is, its never tended to be all that popular with the electorate. We shall see. Moreover, are the cuts even necessary? We’ll leave that one for another day!
2. The irrepresible rise of the Income Tax threshold
Continuing on from previous Autumn Statement’s and Budget’s, the Chancellor announced the first £10,600 you earn will becod Income Tax free. ‘That’s nice’, you might think. Except that it isn’t really, it’s a regressive measure that’ll benefit those in the upper half of the income distribution more than those in the lower. In fact, this regressive nature is something we see when all the combined tax and welfare changes are taken into account.
3. A pre-election sweetener
One thing which the Government did which even the opposition agreed with was to introduce new stamp duty measures. Out with the sudden leaps as a property reaches a certain price, in with a more graduated system, meaning a cut in tax for 98% of homebuyers, although some have predicted that they’ll lose out in the long run due to property price increases outweighing tax savings. Again, we’ll leave that one for another day.
Overall – Tough times ahead if the Government sticks to its planned course
For me, the overriding headline of this year’s Autumn Statement was the severe nature of the planned deficit reduction in coming years. For those who lament the current Government’s austerity measures, the worst may still be to come, whichever Party/Parties are in power.