George Osborne delivered relatively few surprises during the chancellor of the exchequer’s Autumn Statement on Wednesday. Some of the biggest measures, such as a £15bn road-building package and an extra £2bn for the NHS, had already been announced beforehand.
Tax changes include reforms to stamp duty charged on residential property purchases: it will move from a “slab” system, with the whole amount taxed at a single rate, to one where different parts of the price are taxed at a progressive rate.
This will mean an effective tax cut for most homebuyers. The cost of this will be offset by a clampdown on tax avoidance by international firms, and limits on the amount of financial crisis losses that banks can offset against profits. On personal taxation, the personal allowance will only rise to £10,600, not £11,000 as rumoured.
The chancellor also announced that the Office for Budget Responsibility (OBR) has also raised growth projections for this year to 3%, compared to 2.7% in March.
The OBR surprised many economists by predicting that the deficit is expected to be lower in this fiscal year than it was in the last fiscal year, although it will still be higher than forecast at the beginning of this year.
As a result, the budget is still projected to be back in balance by the end of the next parliament in 2018-2019, contrary to expectations that Osborne might be forced to push this forecast back by a further year.
What the commentators said
Most media attention focused on the stamp duty changes, which “combine a reasonable-sized tax cut with a common sense modification”, said The Guardian. But not everybody agreed. “It’s potentially a double-edged sword, as it will benefit buy-to-let investors as much as the first-time buyers it is trying to help,” said Jamie Morrison of accountants HW Fisher & Company.
Meanwhile, the revised latest forecasts got an even more tepid reception. The numbers contain “some questionable assumptions regarding how ‘tax rich’ the economic recovery will be”, said Samuel Tombs of Capital Economics.
And there “was little detail about how [Osborne is] going to generate the income required to achieve his targets”, added the Institute of Chartered Accountants in England Wales. “The hard truth is that the deficit cannot be tackled by further spending cuts alone.”