Posted: 03.12.14

Autumn Statement

Only secondary to the Budget, the Autumn Statement is the fiscal update of the Coalition Government’s taxation and spending plans. The Chancellor of the Exchequer, George Osborne (Con, Tatton) has provided an update this afternoon to the Government’s

george-osborne

Only secondary to the Budget, the Autumn Statement is the fiscal update of the Coalition Government’s taxation and spending plans. The Chancellor of the Exchequer, George Osborne (Con, Tatton) has provided an update this afternoon to the Government’s economic plans further to the Office for Budget Responsibility’s forecasts in relation to the period 2018-19.

From a political perspective, the Autumn Statement of 2014 can be seen as a predicate for a re-electoral mandate for the 7 May 2015, it will be the last statement of its kind in this 2010-2015 Parliament, before the ultimate economic denouement of this Government via the Budget in March 2015. The key message is that projects are underway and recovery is steady, so allow the Conservatives, note not the Coalition, to keep the ship steady rather than rocked by a new government. Danny Alexander (Lib Dem, Inverness, Nairn, Badenoch and Strathspey), the Chief Secretary to the Treasury announced the National Infrastructure Plan yesterday which is the indicative report to the Autumn Statement.

MPs were fired up further to a lively exchange between David Cameron and Ed Miliband at Prime Minister’s Questions. An array of rhetorical terms like “promise” and “delivery” were demonstrated by an impassioned Cameron perhaps pre-empting the semantics of the Chancellor’s speech. Miliband bellowing repeatedly, “When he said it? Did he mean it?” again indicating the jabbing to be potentially undertaken by the Shadow Chancellor’s analysis of the Autumn Statement.

Delivered with very little pomp, compared to the display of the Red Book at Budget time and the regal nature of the Queen’s Speech, there were elements of pomposity when the Chancellor celebrated growth being revised up to 3% in 2014 up to 2.4%, the forecasted figures from the Office of Budget Responsibility.

The Autumn Statement delivered in less than 55 minutes had one mention of London and housing was left to last with the major announcement of changes to Stamp Duty, and the immediate action of a parliamentary motion.

The Chancellor reflected on his first Autumn Statement in October 2010 and the economic crisis which surrounded it. He said that the UK is currently one of the fastest growing economies in the world. He utilised this reflection as a springboard to state that the Coalition Government’s long-term economic plan is working. He implored to the public to not squander the gains made and allow them to complete the course – with the colourful mantra, “We stay the course, and stay on course for prosperity”.

The Chancellor managed expectations by stating early on that the deficit is falling but is still high, the Autumn Statement is not net giveaways but instead the tightening of the public finances. He continued that business investment is rising; however, productivity still has a way to go. He ear-marked the sectors of science, skills and infrastructure as areas to be boosted.

The Chancellor’s preamble was stating he wants full employment for apprentices, to build a northern power house and reward the aspirations of people who save and want home-ownership. He mentioned that there is a slowdown in the export market in Europe, there will be an encouragement of British firms connecting to emerging economies in Africa, Asia and South America.

The Chancellor then went through the topics of employment and earnings, investment, education, small- to medium- businesses, devolution, savings and lastly, housing.

The significance of the Autumn Statement for London is the revision of Stamp Duty which under the new parliamentary motion being moved, as I write, will be effective from midnight tonight and a debate will take place within Parliament tomorrow (Thursday 4 December). The new reforms will see the abolishment of the residential slab system; therefore, no tax will be paid on the first £125k, 2% will be paid on the portion up to £250k and will increase to 5% on properties up to £925k, and then 10% up to £1.5m.  In general, for Londoners housing to buy is in reach without having to finding deposits, as well as stamp duty payments of great additional expense. The Chancellor said these reforms would benefit 98%, which leaves the question what about the other  2% most of these will be in the London property market.

The Chancellor commented, “A £5m house will see its stamp duty rise from £350k to £514k, but of course, this is a charge that is only paid once, when the property is bought”.

Devolution was discussed with particular reference at a regional level to the northern power house and he credited Greater Manchester for facilitating the collaboration of ten local authorities to work with the Government to agree a major devolution of power to the city. Significantly, London was not mentioned but the Chancellor explicitly stated “a door open” policy to discuss devolution for other areas was available. Interestingly, the word “London” only appeared once during the Autumn Statement.

The Opposition’s response to the Autumn Statement was led by the Shadow Chancellor of the Exchequer, Ed Balls (Lab/Co-op, Morley and Outwood) who criticised the Chancellor for failing to cut down the deficit as originally planned.

Balls commented on Stamp Duty that the Chancellor was accepting that Stamp Duty reforms for high-value homes are under-taxed in the UK. He cited, “the average person pays £390 more in annual council tax as a percentage of their property than the billionaire buyer of a penthouse in Hyde Park”.

He continued in relation to Mansion Tax, “Why won’t he match that commitment? Our NHS deserves a proper, funded long-term plan, not just a short-term sticking plaster”.

Osborne rebuked Balls on Labour’s housing policy particularly, the lexis “Mansion Tax” as these are people’s homes. He cited David Lammy MP (Lab, Tottenham) who has been in vocal opposition to the measure.

Interestingly, the word “London” only appeared once during the Autumn Statement. However, hopefully London will have the last word as the National Infrastructure Plan indicated the unlocking of delivery of homes in the East and North West of London, as well as the regeneration of areas in the capital to be supported by over ground extensions.