2016 Autumn Statement round up

Posted by Liz Rees in Taxation category on 24 Nov 16


Autumn Statement

We've outlined some key details and summarised yesterday's Autumn Statement, to help you separate the wheat from the chaff.

The last Budget on 16 March now seems a distant memory from a past era. The economics have changed more than a little, too, confounding a wide variety of expert forecasts:

  • Whereas in March the Office for Budget Responsibility (OBR) was projecting that government borrowing would be £55.5bn in 2016/17, it is now forecasting £68.2bn. The leap is hardly surprising: seven months into the fiscal year the government had already borrowed £48.6bn.
  • The aim of achieving a Budget surplus in 2019/20, which had required considerable fiscal gymnastics on Mr Osborne’s part in the Spring Budget, has been thoroughly abandoned. The goal remains to eliminate the deficit, but the timing – “as soon as practicable” – is now uncertain. There is no surplus in sight in the OBR’s projections, which run to 2021/22.
  • Economic growth has been much better than most Brexit-based projections and superior even to some earlier forecasts based on a remain vote. Year-on-year growth to the end of the third quarter was 2.3%, of which 1.6% has been in 2016. The OBR’s Budget 2016 estimate of 2.0% for the current year (assuming no Brexit) has now been increased to 2.1%, but for next year the OBR has moved down its estimate from 2.1% to 1.4%. Overall the OBR believes that Brexit will cost the UK 2.4% in GDP growth by 2021.
  • Inflation has reappeared. At the time of the March Budget the annual inflation on the Consumer Prices Index (CPI) measure was running at 0.3%, the highest level since January 2015.  In March the OBR forecast for inflation in 2016 was 0.7%, whereas the October 2016 CPI came in at 0.9%. The consensus forecast is that the Bank of England’s 2% target will be breached next year, with some pundits suggesting a peak around 4%.  The OBR sees inflation reaching 2.5% in 2018.
  • Sterling has weakened considerably in the wake of the Brexit vote. At the time of the Budget a pound would buy $1.43 and €1.27, the corresponding rates are now $1.24 and €1.18.
 

The 2016 Autumn Statement Round Up was produced by Technical Connection if you require personal advice on how the budget affects you we strongly recommend you seek Independent Financial or Tax Advice.

To read our 2016 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.

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