The state of the economy and the government’s future plans

On 29 November 2011, the Chancellor of the Exchequer, George Osborne, announced the Autumn Statement, which provided an update on the government’s plans for the economy based on the latest forecasts from the Office for Budget Responsibility. These are the key announcements from his speech.

 

Pay, taxes and allowances

Public sector pay awards will be frozen at 1 per cent at the end of the two-year pay freeze. Most working age and disability benefits will be uprated by the September inflation figure of 5.2 per cent and the child element in the child tax credit will be increased in line with inflation, rising by £135 a year in 2012/13. But the £110 above-inflation increase that was planned for 2012/13 will not go ahead.

The state pension age is set to rise from 66 to 67 from 2026. Mr Osborne said that it will save £59bn and will not affect anyone within 14 years of receiving their state pension today.

The state pension will rise by £5.30 to £107.45, in a move which Mr Osborne said was the largest ever cash rise. Pensioners receiving pension credit will also benefit from an increase worth £5.35.

January’s planned 3p rise in fuel duty was cancelled and August’s increase will be limited to 2p.

Housing

The Right to Buy scheme for council house tenants is back, offering a 50 per cent discount and the money going to build new homes to stimulate the construction industry.
A £400m scheme will jump-start stalled construction projects in England. The government will underwrite mortgages for 100,000 young families trying to get on the property ladder.

Transport and infrastructure

The government is publishing a National Infrastructure Plan, identifying over 500 projects for the next decade.

Budget savings will enable the government to put £5bn into these projects along with a further £5bn it is committing over the next spending period. It has also struck an agreement with two groups of British pension funds to unlock an additional £20bn of private investment. Infrastructure measures to be funded by a new £30bn include electrifying the TransPennine Leeds-to-Manchester rail route, building a new railway link between Oxford, Milton Keynes and Bedford, and extending the Northern Line of the London underground to Battersea, which will create 25,000 jobs.

Mr Osborne confirmed that rail fare increases would be limited to the Retail Price Index (RPI) plus 1 per cent, rather than RPI plus 3 per cent.

Families, education and employment and skills

Families in the south-west of England will have their water bills cut by £50.

A further £380m will be invested by 2014/15 to extend the government’s offer of 15 hours of free education and care a week for disadvantaged two-year-olds, covering an extra 130,000 children.

The government will provide an additional £1.2bn for capital investment in schools in England, including an extra £600m to fund 100 additional Free Schools by the end of this Parliament.
A £1bn youth contract will fund measures including wage incentives for 160,000 young people to make it easier for private sector employers to take them on and at least 40,000 incentive payments for small businesses to take on young apprentices.