Yesterday morning, the Chancellor delivered his Autumn Statement, claiming that it was a plan to deliver a “responsible recovery”. Osborne explained that the economic outlook has improved over the last year but that “difficult decisions” still need to be made.
The main focus of the Autumn Statement was changes to the state pension and easing the cost of living through fuel tax, trains fares and tax changes for small businesses. Some of the measures had already been announced during the March budget and the Conservative Party conference in September.
Osborne announced changes to the state pension which means people in their 20s, 30s and 40s will have to work till 69 or 70 before they get their pension. The state pension age was already going to rise to 66 by 2020 and then rise further by 2046 but that rise has been accelerated, meaning that millions more people will retire later. The exact age and timelines will be decided by an independent panel in the next Parliament.
The Chancellor also confirmed the triple lock system for current pensioners (where the increase is the highest of CPI inflation in September, average wage rises, or 2.5%), meaning that the pension will rise by 2.7% in the state pension in April. We already knew that a number of benefits will only rise by 1% next April, but this was reiterated in his statement.
The chancellor also announced cap on welfare spending to start in 2015 (but this will exclude the state pension and jobseeker’s allowance). He also repeated his plan for a tax break for about 4 million married couples. Around £1000 of the personal allowance could be transferred from one spouse to another, if neither is a higher-rate tax payer and one is earning less than the personal allowance. Osborne also announced £1bn of loans made to “unblock” large housing developments also stating that tenants in social housing will get priority if they are moving for a job.
Osborne announced several measures to ease the pressures of the cost of living. Energy bills are expected to fall by £50 as he reduced the level of green levies and the next fuel duty rise (scheduled for September 2014) has been cancelled. This will save drivers an additional 2p per litre, meaning that drivers will save roughly £11 per tank than if the Government had followed Labour’s fuel duty plans. The chancellor also reduced the amount by which train fares can rise, meaning that regulated fares will go up on average by 3.1% instead of 4.1%.
The Chancellor announced further support for small firms with Business rate relief for them being extended until April 2015. He also announced that business rate rises would be limited to 2% next year instead of being linked to inflation. In further support for businesses, he announced plans to discount business rates for small traders on the High Street.
Osborne sent a clear message that he is also planning to tackle youth unemployment by announcing that employers will get a break from National Insurance contributions when employing workers under 21. This will be one of the more expensive measures for the Treasury, costing £465m in 2015-16 but will hopefully reduce youth unemployment and ensure that skills are not lost for the younger generation.
Overall, the budget signalled that the Government are attempting to ease the cost of living for people, whilst trying to encourage growth through the private sector. If youth unemployment responds, and the economy continues to recover, Osborne will be remembered favourably.
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