The Chancellor's Autumn Statement
George Osborne’s Autumn Statement realised the nightmare scenario that most economists and pundits alike had predicted.
A chilling tale to tell
With the Office of Budget Responsibility (OBR) now being the sole arbiter of official statistics, the Coalition was unable to finesse the terrible figures that represent the true state of our economy.
The Chancellor offered a whole tranche of gloomy forecasts including, once again, reduced GDP figures for the next five years. This year’s GDP was downgraded to only 0.9% and 2012’s likewise down to only 0.7%.
What this means is the Coalition’s borrowings will have to rise by an additional £127bn this year and overall an increase of £111bn over the next four years.
This increased borrowing requirement will bring the national debt to an eye-watering 78% of GDP, itself an increase from the peak of 70.3% previously predicted.
Other painful predictions included the likelihood of an additional 710,000 public sector job losses; confirmation that the pensionable age will rise from 66 to 67 by 2026 (bad news for anyone under the age of 52 today) and the long suffering public sector workers, who are already suffering an enforced pay freeze, seeing any likely future pay increase limited to 1% over the ensuing two years. This act alone will save the government £1.8bn.
Whilst state benefits for the unemployed will still rise by the RPI of 5.2% from 2012, those in employment but receiving tax credits will see those frozen. It is estimated that this freeze would push 100,000 children into official ‘poverty’.
The Chancellor’s solid and unbending commitment to reducing the strategic deficit (Plan A), ensures that we are to endure governmental spending cuts through to at least 2017, if not beyond.
A nightmare scenario indeed with very little light at the end of the seemingly ever-lengthening tunnel.
On the plus side, because of his commitment to austerity and debt reduction, the UK still enjoys its AAA credit rating, allowing the Government to raise new 10 year debt at about 2.2%, so its £180bn raised so far this fiscal year, compares extremely well with (say) Italy’s short term borrowing costs of over 7%.
Other crumbs of comfort come from the Government’s efforts to drive the supply side of the economy by encouraging £31bn of private sector investment into getting Britain moving again through infrastructure projects, in particular, road, rail, housing and internet expansion. However, only £5bn of government cash will be made available and none of this will be ‘new’ money, rather sums garnered from savings elsewhere.
A final sop to the motorist is the relief that the planned 3p rise in fuel tax has been postponed, but only until August next year, so fill up your tanks now.
It is important to take professional advice before making any decision relating to your personal finances.
NOTHING CONTAINED IN THE ARTICLE SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE. THE VALUE OF INVESTMENTS IS NOT GUARANTEED AND WILL FLUCTUATE. YOU MAY GET BACK LESS THAN YOU INVEST. PLEASE NOTE THAT THERE MAY BE VARIATIONS FOR THOSE LIVING IN SCOTLAND AND NORTHERN IRELAND.
