Today’s combined Autumn Statement and Spending Review followed a familiar format. The chancellor began by trumpeting the latest economic stats (or his cherry-picked version of them) before setting out their implications for government taxes and spending.
'We’ve grown almost three times faster than Japan, twice as fast as France, faster than Germany and at the same rate as the United States,' he said. ‘We will borrow £8bn less than we forecast, making faster progress to eliminating the deficit while paying down the debt – fixing the roof while the sun is shining.'
Osborne said the better-than-expected public finances allowed him to abandon his controversial plans to slash tax credits, plough more cash into the NHS and double the housing budget. The police budget will also be protected, and the state pension will be increased by £3.35 to £119.30 per week.
Other measures are a mixed bag for business. Osborne has reached an agreement with business secretary Sajid Javid to cut that department’s spending by 17%, confirming previous rumours. That’s likely to result in decreased funding for businesses and the replacement of some grants with government loans. Large employers are also set to be hit by the Apprenticeship Levy, which will be set at 0.5% of their pay bill. Osborne says that wil raise £3bn per year.
He also confirmed previous plans to hand councils more control over the level of business rates, and to let them keep all of the money they raise. That’s good news for companies in areas with enterprise-friendly local councils, but could also lead to higher rates for some. For the time being, small businesses will benefit from another year of rates relief.
The nation’s creaking transport infrastructure needs serious investment. While Osborne is slashing the department for transport’s operations budget by 37%, but increasing its capital spending budget by 50% - helping it fund electrification of more rail lines, the roll-out of HS2 and road building.
House prices are booming already, but the chancellor is pouring more fuel on the fire. He's introducing a 'London Help to Buy' loan worth 40% of a property's value for first time buyers and a similar scheme for those seeking shared ownership homes. A 3% increase in stamp duty for those buying second homes might calm things down a bit though.
Overall, Osborne's cuts are less severe than many predicted and he seems to have found plenty of cash for several key areas - yet he still expects to run a budget surplus by 2020. We'll have to wait and see whether the numbers really add up.
