COMMUNICATIONS

Autumn Statement 2014

Overview
Chancellor George Osborne began his Autumn Statement by saying, “Today, against a difficult
global backdrop, I can report higher growth, lower unemployment, falling inflation, and a falling
deficit”. At the beginning of this Parliament in 2010, Mr Osborne set out plans to “stabilise”
the UK economy and to deal with the deficit and the national debt. Those plans haven’t quite
worked out as he thought, with tax receipts in particular not growing according to
projections. The Office of Budget Responsibility confirmed that borrowing will increase by
£12.5bn more than forecast in the Budget, just 9 months ago.
As the Parliament draws to a close, the Chancellor would have wanted his message to be, “we’ve turned
things around, reward us at the ballot box”. Instead, Mr Osborne has had to roll out a new message today,
alluding to things not under his control: ‘the warning lights are flashing over the global economy…
geopolitical risks are rising’, he said.
That isn’t to say that Mr Osborne cannot find compelling numbers to explain his “gradual recovery” pitch –
“A year ago, we expected GDP to grow by 2.4%. In March we expected 2.7%. Today, the British economy is
forecast to grow by 3%”, he said. The Chancellor forecast inflation to be 1.5% this year, 1.2% next year and 1.7%
the year after.
But opinion polls say that many voters do not feel better off or more secure. So, rather than “reward us”, his
message today was, “we’re heading the right way, and we’ll get there, vote for us - not the other lot”.
Instead of a compellingly positive message, he has fallen back on a compare-and-contrast narrative: it’s too
risky to change Government.
And he’s thrown in a few headline-catching announcements to help his cause:

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Autumn Statement 2014

The big surprise was an overhaul of the stamp duty system effective from midnight, attempting to neutralise
Mansion Tax proposals. Full details of the changes are available here.
In an attempt to tackle corporate tax avoidance, a new business tax was announced to ensure that
multinational companies pay tax. The 25% "Google" tax on profits for multinationals that shift profits offshore is
called the Diverted Profit Tax.
A review of business rates was announced, reporting in 2016. Small businesses with a rateable value of £12k to
£50k will get a bigger rates rebate: up from £1000 to £1500. Employer National Insurance contributions for
young apprentices have been abolished.
As expected the Chancellor announced that he plans to devolve corporation tax power to the Northern Ireland
Executive in this Parliament. He also said he’d reached agreement to devolve business rates to the Welsh
Assembly Government. Legislation is expected to be introduced in this Parliament and powers should be
transferred in March 2015. No plans were announced to devolve the same control to the Scotland. However,
Government-backed proposals by Lord Smith’s Commission will lead to the Scottish devolution of income tax
rates.
There is very little political scope to have a “giveaway” pre-election Coalition Budget next Spring, so the
Chancellor has used this Autumn Statement to show a direction of travel, designed to display a Government
prepared to invest – and perhaps cut taxes – because the UK is getting richer. The next five months will
show whether that message hits home.

Key announcements
State of the economy

The UK fastest growing economy in the G7

3% growth forecast in 2014, up from 2.7% predicted in March

2.4% growth forecast in 2015, followed by 2.2%, 2.4%, 2.3% and 2.3% in the following four years

500,000 new jobs created this year. 85% of new jobs full-time

Unemployment set to fall to 5.4% in 2015

Inflation predicted to be 1.5% in 2014, falling to 1.2% in 2015

Borrowing and deficit reduction

Deficit 'cut by half' since 2010

Borrowing set to fall from £97.5bn 2013-14 to £91.3bn in 2014-15.

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Autumn Statement 2014

Deficit projected to fall to £75.9bn in 2015, £40.9bn in 2016, £14.5bn in 2017 before reaching a £4bn
surplus in 2018

By 2019-20 Britain will have a surplus of £23bn

Debt as a share of GDP falling in every year until forecast to be 72.8% in 2019-20

Tax receipts forecast to be £23bn lower in 2014-5 than predicted

World War One debt to be repaid

Business announcements

Business rates to be reviewed and the 2% cap extended

National Insurance on young apprentices abolished

Theatre tax break extended to orchestras

Research and development tax credit increased for small and medium-sized firms

£45m package of support for exporters

Expand tax relief on business investment in flood defences

Personal and business taxation

Personal income tax allowance to increase to £10,600 next April

Introduce 25% tax on profits generated by multi-nationals that are shifted out of the UK, set to raise £1bn
over five years

Bank profits which can be offset by losses for tax purposes to be limited to 50%

Air Passenger Duty to be scrapped for under-12s from 1 May next year and for under-16s the following
year

New £90,000 charge for non-doms resident in the UK for 17 of the past 20 years.

Abolishes 55% 'death tax' on unused pension pots

VAT paid by hospices and search and rescue organisations to be refunded

Housing and infrastructure

Reform of residential property stamp duty so that rates fall only to that part of the property price that
falls within each band
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Autumn Statement 2014

0% in first £125,000 then 2% on the portion up to £250,000

5% up to £925,000, then 10% up to £1.5m; 12% on anything above that, saving £4,500 on average priced
home

£1.5bn for 84 roads projects in England

£2bn for flood defence schemes

Sovereign wealth fund for north of England to keep benefits of shale gas exploration

Fuel duty

Fuel duty to be frozen

Health and education

£2bn extra every year until 2020 for the NHS

GP services to get £1.2bn in extra funds from bank foreign exchange manipulation fines

Employment Allowance extended to carers

£10,000 loans for postgraduate students studying for masters degrees

Welfare

State Welfare spending to be £1bn lower than forecast in March

Two year freeze in working-age benefits (first announced in October)

Migrants to lose unemployment benefits if they have "no prospect" of work after six weeks

Savings

ISAs to be transferrable to partners tax free

ISA threshold increases from £15,000 to £15,240 next April

Mind the gap
Autumn Statements are famous for “gaps” – the hidden detail and stealth consultation that eventually emerge
from the mass of paperwork released on the day. Over the next week, think tanks, MPs, academics, tax and
economic experts will pick the Autumn Statement apart word by word and graph by graph. PSA will keep you on
track over the coming days and weeks.
Full Autumn Statement 2014 documents can be downloaded here.

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