Obviously the major news that came out of yesterday’s Autumn Statement was the long-awaited stamp duty reform as well as the abolition of Isa death taxes.
1. Government acknowledges scale of future cuts needed.
One of the key points that came out of yesterday’s Autumn Statement was the scale of cuts that Britain is facing in the future: the last five years of austerity are as nothing compared to what we might face in the next parliament.
FTAdviser’s sister publication the Financial Times did some major number crunching in November on the previous Office for Budget Responsibility forecasts and found that, due to changes in the accounting period, annual savings needed to meet austerity targets were set almost to double to £48bn.
Despite finding an extra £18bn - some economists are still checking this - in debt repayment savings yesterday, the government acknowledged the scale of the problem with announcements of more spending cuts, continued caps on public sector pay and other savings.
Welfare and departmental costs are all subject to slashes under the new regime announced yesterday, with the scythe being taken to £1bn in current welfare spending, £10bn a year in ‘managed expenditure’ and an unknown amount of departmental spending.
As the FT said last month, with some departments protected, the axe could fall very heavily in some areas.
2. Osborne denies self-employment skew.
Much ado was made about the employment figures which show that the OBR has revised down is forecast for unemployment in all years to 2018 and expects a rate of 6.2 per cent in 2014, with employment set to reach a record high of 30.8m, up 1.7m since the government came into office.
George Osborne also sought to counter criticisms that new employment is actually just self-employment: according tot he data 85 per cent of the increase over the last year has been in full-time work and 75 per cent since Q1 2010.
Office of National Statistics data also showed that those in continuous employment for the past year saw wage growth of 4.1 per cent, in another stat adduced to counter Labour attacks. Of course, this is much higher than the overall wage growth rate, so draw your own conclusions.
3. State pension uprated.
Changes were made to the basic state pension, which will see a rise in April 2015 of 2.5 per cent under the ‘triple lock’, a cash increase of £2.85 per week for the full basic state pension.
Someone on a full basic state pension can expect to receive around £560 more in 2015/16 than if it had been uprated by average earnings since the start of this parliament.
Additionally, as a consequence of an increase in the pension credit standard minimum income guarantee, which means that the savings credit threshold will increase by 5.1 per cent, the full new state pension will rise to at least £151.25 per week, with the actual amount to be set in autumn 2015.
This will be welcomed by the ‘grey vote’, but will fuel arguements that we’re looking after our older folk at the expense of others.
4. Private equity and hedge funds hammered.
From 6 April 2015, the government will introduce legislation to ensure that sums which arise to investment fund managers for their services are charged to income tax. We wondered if this was a general measure, but it seems more targeted.
The statement said it was focusing on particular instances with private equity and hedge funds that lump in some performance fees with management fees, but will not hit sums banked under ‘carried interest’ arrangements. It’s raise around £360m.
5. Tax avoidance clampdown.
Following consultation, the government said it will update and further clarify the legislation covering ‘high risk’ promoters of tax avoidance schemes, ensuring that the 2014 Disclosure of Tax Avoidance Schemes legislation functions as intended.
The government will consult on whether and how to introduce penalties for tax compliance cases where the General Anti-Abuse Rule applies amongst other features outlined.
6. Bank account switches to get faster.
From March 2015, an upgrade to the seven-day ‘current account switch service’ to include 99 per cent of all small and medium enterprises and an extension of the redirection service to 36 months, is designed to give customers more reassurance over direct debit or standing order.
Additionally, the chancellor has asked the FCA as part of their review of the switching service to examine whether a five-day switching period would deliver benefit to consumers before Budget 2015.
7. Infrastructure.
As part of a number of rail projects, the government has outlined plans for Northern and TransPennine Express rail franchises. It will publish the invitations to tender in early 2015.
Elsewhere, the government showed support for ultra-low emission vehicles announcing three funds totalling £85m and ultra-low emission vehicle research and development offering them up to £50m between 2017/18 and 2019/20.
8. Pollution a political vote-winner.
So we’re not worried about poluting as much anymore: yesterday’s announcement also saw the news that the government will exempt children under 12 from Air Passenger Duty on economy tickets with effect from 1 May 2015.
It will extend this exemption to include children under 16 from 1 March 2016, reducing the cost of holidays for families by up to £71 per child.
For a list of the 10 major announcements affecting advisers from yesterday’s announcements, click here.
To view out dedicated In Focus page, containing all of the latest news, views and analysis, click here.
ruth.gillbe@ft.com
