Wednesday, 3 December 2014

Autumn Statement - 2014

The Chancellor, George Osborne, has this afternoon graced us with his autumnal statement in which he glossed over the not-so-good state of the economy and then showered us with goodies so we vote Tory in May next year.

First he announced that UK GDP this year would grow at 3% - at rate higher than any other G7 or Western country, but then he admitted that this was a one-off aberration as the rate would fall in future years.

He told the House that the deficit was falling and would only be £91.3bn this year - somehow not finding time in his packed fifty minutes to mention that back in his March budget he predicted borrowing of about £7bn less than that. Unfortunately tax receipts are down and the sums do not add up anymore.

Despite breaking not only his 2010 borrowing promise, and this year's promise, he none-the-less intends to legislate a "Charter on Budget Responsibility" so that future governments cannot push the country even further into the red. Pot, kettle, black much?

For the record the Chancellor intends to borrow  heavy in 15/16 and 16/17 but then run a surplus of £4bn in 2018/19 and a whacking surplus of £23bn in 2018/19! So a balanced budget is in the cards; it's just that it is always five years in the future.

Then, despite the dodgy fiscal situation, Georgie launched into his raft of give-aways: more money for GPs; pay off World War I loans; fuel duty frozen; air passenger duty cancelled for children; pension death tax (currently 55%) abolished; ISA death tax abolished; tax allowances at the basic and higher rates increased (a tiny bit) from next year, and ...drum roll... the big one coming up... stamp duty on houses (SDLT) massively reformed.

From tomorrow, yes cuts in at midnight - he's keen on this one, SDLT will only be charged on the tranche the rate applies to. Previously the rate applied to the entire purchase price of the house. This will be a big saving to anyone buying a house  for £900K or less (ish) and should put an end to stupid prices. (The slight downside is that there is probably a bulge of houses priced at £249,999 because to go over the quarter mil would tip the house into the next band. Likely these houses will be re-priced higher to "share" the gains between buyer and seller.)

The Chancellor did wield a little fiscal stick, but not in the direction of anyone likely to vote. As a little "mansion tax" of his own, Osborne is introducing a couple of higher SDLT bands: 10% up to £1.5m and 12% on everything above that. Non-doms will have to pay more for their status, previously it was £30K a year, now £60K or even £90K depending on how long they have been in the UK.

Also multinational corporations which move their profits to tax havens will be taxed 25% on those profits as they leave the country. (This sounds like a scheme extra-ordinarily difficult to legislate. Define tax haven? When is money profit rather than a necessary business expense?) This will be known as the "Diverted Profits Tax" - should be popular with the people even if difficult to enforce.

Osborne also made a few random references to policies he obviously likes but are nothing to do with the Treasury as such: English votes for English laws got a mention. It seems he is taking a position on the whole devolution debate.

Shadow Chancellor Ed Balls rose to respond. He started off floundering, not really knowing what to say, and mainly asking Osborne for clarifications on what he had announced, but then someone handed him a copy of the Office for Budget Responsibility's report; he had a quick ferret through it and realised how much Georgie Boy had left out and gave him a few broadsides.

It has to be said George Osborne is not looking a well man. He has developed mad staring eyes and a rabbit-in-the-headlights look about him. He has also adopted Gordon Brown's habit of gabbling at breakneck speed through speeches in the hope no-one will notice what is he not saying. If he had good news he would slow down and give it time to sink in. These are not good signs for UK Plc. Perhaps tellingly, France's biggest bank has advised its clients to pull out of the UK while they can.

No comments: