Wednesday 5 December is D Day for Chancellor George Osborne. On Wednesday afternoon at 12.30 pm he will present his second Autumn Statement and set out the government’s economic policy for the next 12 months and outline its longer term plans and aspirations. The Autumn Statement will also provide an update on the government’s record and its plans for the economy based on the latest forecasts from the Office for Budget Responsibility (OBR). The OBR will also publish its latest report on the UK’s economic and fiscal outlook on the same day and include its latest revised estimates for UK economic growth.
Unfortunately, the general consensus amongst economists and accountants seems to be that although the double-dip recession may have technically ended, the apparent recovery owed more to the buoyancy and good will created by the Olympics. Most economists are predicting a bleak future for the economy with the structural continuing to grow for the foreseeable future. Some are even predicting a likely return to recession for the UK.
What actions will the Chancellor take in his Autumn Statement?
- A large thrust of last year’s Autumn Statement was to continue to build on the government momentum to support small business owners, by encouraging Investment in small businesses via the National Loan Guarantee Scheme and the Seed Enterprise Investment Scheme. It is believed the government will try to build on that and encourage further investment.
- A large number of self- employed people operate below the VAT registration threshold and therefore are not VAT registered. With the current rate of standard VAT of 20% this is consequently pushing up their expenses and putting increasing pressure on their cash flow. It is believed that the Chancellor may take some action to relive this particular problem for small businesses, but it seems unlikely that there will be any reduction to the standard rate of VAT from its current 20 percent.
- There should be more information made available about the so-called ‘business bank’ which was designed to lend more money to smaller and medium sized businesses.
- Speculation continues that there will be a further fuel duty freeze again, which will be especially helpful to families and small businesses running vehicles should the rumours be true.
- There have been many rumours that the council tax system may be revamped, including the introduction of the unfortunately-named “mansion tax”. However this now appears to have been kicked into the long grass as the Prime Minister and his advisers feel it would alienate the Tory voters and harm the party.
- There are also calls from the Construction and Leisure and Tourism industries for the government to do more to rejuvenate these sectors that have particularly suffered during the recession.
- In his 2010 emergency Budget, George Osborne cut the maximum annual pension contribution exempt from tax from £255,000 to £50,000. In this year’s Autumn Statement he is expected to make a further reduction. Accountants and economists are predicting that the maximum contribution could be dropped to somewhere between £30,000 and £40,000, which would generate anything between about £600 million and £1 billion for the Exchequer.
At this stage we can only speculate about what will be said in this week’s statement. We’ll know for sure on Wednesday, and will pass on that information to our readers next week. In the meantime it’s the fervent hope of every accountant that the Chancellor will announce some growth strategies to help UK businesses flourish once more.