Predictions for this year’s Autumn Statement, set to take place on Wednesday (3 December), have been coming in thick and fast from commentators and industry experts.
Some commentators predict changes to pensions tax relief following the Budget announcement earlier this year, whilst others expect there to be a large infrastructure spending plan and more money to be allocated for the health service.
However, predictations that Office for Budget Responsibility projections will have deteriorated and paint a worrying picture of the amount the government is expected to borrow over the coming years, could put a dampener on pre-election spending.
Pensions purgatory
Pensions expert and consultant Ros Altmann has made a number of predictions for Wednesday’s Autumn Statement, including that the brand name for the ‘guidance guarantee’ will be announced.
She said: “The name is likely to be announced this week and there is likely to be a marketing programme financed by the Treasury to promote it and explain its value to pension savers. Establishing a strong, trusted brand is essential to ensuring the guidance is taken up.”
Ms Altmann has also predicted that the FCA may announce the results of its thematic review of annuities to coincide with the Autumn Statement. Some have suggested in the wake of payouts by Aviva to a small number of clients that broader compensation to ‘mis-sold’ annuitants could be on the cards.
Ms Altmann also referred to a leak, previously reported by the FTAdviser sister publication the Financial Times, suggesting changes will be made to joint life annuities, with tax abolished on annuity payments to spouses after a partner has died in line with other ‘death tax’ changes.
The BBC has said that tax relief for wealthier retirees is another area that could be affected on Wednesday, as the government follows up on its freedoms and seeks to balance the tax books.
Ms Altmann said: “There has been some speculation about changes to pension tax relief, perhaps removing higher rate relief, but I do not expect any decisions to be made.
“At some point in the next Parliament, this issue is likely to be reviewed, but I would not expect anything to happen imminently.”
NHS lift
The Sunday Times, Sunday Telegraph and Financial Times have all suggested George Osborne will announce an extra £2bn to fund the NHS this week, in an attempt to neutralise Labour’s attacks on the coalition’s handling of the health service.
The FT reported that Mr Osborne will say the injection of funds to the health service will be an annual increase, and would go some way towards meeting the £8bn NHS cash shortfall identified by Simon Stevens, its chief executive.
Infrastructure gains
The Sunday Times also predicted a large infrastructure spending plan with many road building schemes, including a £1.1bn tunnel under Stonehenge in the West Country to alleviate congestion.
Ms Altmann also predicts more spending on infrastructure, adding that it would be great if this could include new incentives for pension funds to invest in. She said pension funds may need a government pledge that returns will at least equal gilt yields if they commit money to projects that do not perform well.
Osborne’s borrowing habits
Statistics from the Office of Budget Responsibility show borrowing is expected to rise upwards, according to the Independent, with the cumulative deficit expected to reach nearly £280bn by the end of the decade, £75bn more than expected.
According to the Guardian, six words have shaped George Osborne’s stewardship of the economy for the past five years and they will continue to shape it: “I’m afraid there is no money”.
The paper added that when Labour left office in 2012 with Britain facing astronomical debts has proved to be both a boon and a curse for the chancellor: the coalition could blame Gordon Brown for this but repairing public finances has proved more difficult than Mr Osborne predicted.
Of course, Mr Osborne will point to successes in getting the Budget deficit down and improving British budgetory credibility in the eyes of creditors. Indeed, he is relying on positive ratings on economic management to give him cover for above-mentioned spending pledges - and £7bn of tax cuts promised but currently unfunded over the next parliament.
The question is where cuts will have to be made to balance the books, especially if a plan to enshrine in law a commitment to eradicating the Budget deficit by 2017/2018 is confirmed on Wednesday.
ruth.gillbe@ft.com
