AUTUMN STATEMENT 2014 OVERVIEW All eyes were today fixed on the Chancellor and his announcements from the despatch box. With only 154 days left until the next General Election, politicians of all political persuasions continue to face pressure to announce measures that are of interest to the electorate. The challenge however is the same today as it was at the beginning of this Parliament: how to appeal to the electorate during a time of austerity. Whilst a broad range of commentators, including both politicians and economists, will continue to disagree on the figures set out today, the Chancellor today placed his focus on one single clear message: “stay the course” with this Government and give us another five years. Restating his concerns about the challenges facing the international economy, the Chancellor aimed to demonstrate that this Government is on the side of voters. Reissuing his commitment to a Northern Powerhouse was combined with
POLITICAL REACTION Ed Balls
Shadow Chancellor “Tory borrowing plans are in tatters… Every target missed, every test failed, every promise broken.”
Douglas Carswell
UKIP MP “Tinker, tweaks and complicated tax relief rules. Just like Gordon Brown.”
Gaby Hinsliff
Guardian Columnist “That #as2014 in brief: everything is awesome, except where it isn’t, which must be Abroad’s fault. Buy a house. Please please buy a house.”
Faisal Islam
Political Editor, Sky News “So @KlassMyleene what do you think about 12% stamp duty on £2m garages?”
The Sun “Great news for White Van Man as Osborne says: “We have cut fuel duty and we will keep it frozen.” Tom Whipple
voter friendly announcements around stamp duty and fuel duty. These were balanced with new taxes on both banks and tech companies. He also took the opportunity to remind us of stories that have dominated this week’s press including announcements on housing, flood defences, roads and NHS investment. Despite the many announcements stretching across a broad range of departments, the message was simple. The UK economy is growing faster than most developed economies. This Government has delivered higher growth, a fall in unemployment and a decline in inflation, it would now be unwise to change course when the job is only half completed.
Gurpreet Brar
THE HEADLINES ECONOMIC GROWTH The UK’s economic growth will be the strongest in the G7 this year, with the forecast for 2015 revised up from 2.7% to 3% by the independent Office of Budgetary Responsibility (OBR).
THE DEFICIT Defying predictions, the deficit is projected to fall to £75.9bn in 2015, £40.9bn in 2016, £14.5bn in 2017 before reaching a £4bn surplus in 2018.
NHS FUNDING Widely trailed earlier this week, the Chancellor has announced that the NHS will benefit from £2bn of extra funding every year until 2020, with an additional £1.2bn in funding for GP Services from foreign exchange manipulation fines imposed on banks.
ROADS INVESTMENT The Treasury has announced details of how more than £15bn is to be spent on revitalising the UK road network. The plans include 84 new schemes, creating 1,300 “additional lane miles”, upgrading five airport links and creating 12 new expressways.
NORTHERN POWERHOUSE
Times Science Correspondent “We are moving home next week. Osborne just saved us £400. I’m calling our new fridge freezer George.”
In his statement the Chancellor championed his plans to “build a northern powerhouse” and confirmed that a new Sovereign Wealth Fund for the North will be created from the proceeds of shale gas exploration.
Edelman | Southside | 105 Victoria Street | SW1E 6QT London | www.edelman.co.uk | 0203 047 2000 | @edelmanUK
AUTUMN STATEMENT 2014 AT A GLANCE Stamp Duty
Stamp duty is to be reformed, by scrapping the “single-slab” rate and replacing it with a rate levied more gradually according to house price.
Road
The center piece of this week’s announcements, £15bn to upgrade the UK road network with 1,300 miles of new lanes for motorways and trunk roads.
Regional Investment
Investment in science and research centers in the North of England, with the creation of a Sovereign wealth fund for North of England to keep
benefits of shale gas exploration.
Business Rates
A review into business rates to be launched, with a view to reform. Meanwhile, business rates relief doubled for a further year, and inflation-linked increase in business rates capped at 2%.
Devolution
Pledge to devolve more powers to the Scottish Parliament will be honoured, with the Northern Irish and Welsh Assemblies also gaining additional powers on tax.
Business Tax
A 25% tax “Google tax” on profits introduced for multinationals who shift profits out of the UK, with the expectation that this will raise £1bn
over five years.
NHS £2bn of extra funding for the NHS every year until 2020, with a further £1.2bn in funding for GP Services over the next four years.
NHS
£2bn of extra funding for the NHS every year until 2020, with a further £1.2bn in funding for GP Services over the next four years.
Growth/ Inflation
OBR’s forecast for economic growth for this year raised from 2.7% to 3%, while next year’s forecast changed from 2.3% to 2.4%. Meanwhile inflation is forecast to be 1.5% this year, 1.2% next year and 1.7% in 2016.
Borrowing
Borrowing forecast to be £91.3bn this year. This is expected to decrease to £75bn in 2015-16, reaching a surplus of £4bn by 2018-19. By 2019-20 it is the Chancellor’s expectation there will be a surplus of £23bn.
INFRASTRUCTURE ANALYSIS As has become the tradition, the announcements of interest to the infrastructure sector came yesterday at the Institute of Civil Engineers with the publication of the 5th iteration of the National Infrastructure Plan by Danny Alexander and Lord Deighton. The message was clear from both sides of the Coalition: the Government’s commitment to its long-term economic plan has allowed it to invest in the nation’s critical infrastructure. However, despite greater clarity on funding and timings, as well as a raft of new project announcements; the reaction from industry has been slightly more muted than the Government will have hoped. The announcements of the 84 new road schemes and investment in 1400 flood defence projects have been welcomed but are also rightly seen through the prism of party politics and marginal seats. The details of the specific roads supported is new, but the £15 billion for the Roads Investment Strategy is a spending commitment which has been announced a number of times before. Nevertheless, the transformation of
the Highways Agency into a Government owned company is a significant reform which should lead to greater levels of funding certainty. The pressure on Government departments and Infrastructure UK is now to move into delivery mode. Industry continues to be attracted by the proposals from John Armitt for an independent Infrastructure Commission. Whether the momentum behind this proposal continues to build depends, in part, on evidence of progress on the ground over the months ahead. Industry is also now concerned by the risk of hiatus with the General Election and impact of the subsequent spending review early in the new Parliament.
David Robertson Jonathan Mitchell
FOR MORE INFORMATION, PLEASE CONTACT: Gurpreet Brar
0203 047 2466 gurpreet.brar@edelman.com
Edelman | Southside | 105 Victoria Street | SW1E 6QT London | www.edelman.co.uk | 0203 047 2000 | @edelmanUK