We've outlined some key details and summarised yesterday's Autumn Statement, to help you separate the wheat from the chaff.
- In the summer, the Office for Budget Responsibility (OBR) increased its estimate of government borrowing costs because of market expectations of faster interest rate increases. However, over the past four months the markets have become more cautious on UK interest rate rises, allowing the OBR to reduce its borrowing cost assumptions, freeing up £4bn for Mr Osborne in 2017/18 and over £5bn by 2020/21.
- Inflation has virtually disappeared: the annual Consumer Prices Index (CPI) measure has not been above 0.1% since February. However, the index may pick up in coming months, as the effect of last autumn’s drop in oil prices falls out of the yearly comparison.
- Earnings have been growing strongly, with the latest reading showing 3% annual increases (including bonuses). This is good news for the Chancellor in terms of income tax receipts, but is partially countered by the cost of the 2.9% ‘triple lock’ increase to basic state pensions. Other state pensions, most benefits and some tax allowances will remain unchanged, thanks to the absence of inflation.
- The unemployment rate has fallen from 6.0% to 5.3% over the past year to September, according to the Office for National Statistics. The reading is the lowest since spring 2008.
- Economic growth has slowed during 2015, with the third quarter first estimate coming in at 0.5%. The clouds gathering over China and still anaemic Eurozone economies (third quarter growth just 0.3%) suggest there will be little pick up in the near term. Even so, the OBR did marginally increase its UK growth estimates for the next two years.
- In the first seven months of the year net government borrowing was £54.3bn, down 10.9% on 2014/15. However, the OBR’s July Budget forecast for the whole of 2015/16 was £69.5bn, a 22.9% drop on last year. It now projects a further small fall for the current year, although the OBR’s calculations were made before the latest disappointing borrowing figures.
The 2015 Autumn Statement Round Up was produced by Technical Connection if you require personal advice on how the budget effects you we strongly recommend you seek Independent Financial or Tax Advice.
To read our 2015 Autumn Statement Round Up in full open the attached document
The views and opinions contained herein are third party and may not necessarily represent views expressed or reflected by Willis Owen.