This was never going to be an easy statement for the Chancellor to deliver. The day before, the OECD had predicted the UK was heading for another recession. The day after the statement, the UK was going to experience a national strike, the size of which has not been seen for over thirty years.
It would have been nice if he had been able to deliver some “feel good” news, particularly with Christmas coming up. Unfortunately, that wasn’t the case and the early Christmas presents were in very short supply.
The Office for Budget Responsibility (OBR) gave their prediction for the UK’s growth. Current year, the forecast has been reduced from the original 2.3%, to 0.9%. Next year, the forecast is even gloomier at 0.7%, down from the originally predicted 2.9%.
Those in the public sector were left angry that, on top of the pensions issue that has led to the strike action, it was announced that when their pay freeze comes to an end in 2012, any pay increases will be capped at 1% per annum for the following two years. Add to that the increase in retirement age to 67 from 2026 and it all made for pretty miserable reading.
With the Eurozone in such a mess, it was perhaps unsurprising that the Chancellor could not produce better news, but it remains the job of this government to increase UK growth and restore the confidence that has taken such a significant knock over the last few years. So what are they going to do?
There is a plan to invest an extra £5bn on the country’s infrastructure. In addition, small and medium businesses will benefit from £40bn set aside for a National Loan Guarantee Scheme. This aims to increase lending to businesses with turnover under £50m at lower interest rates than would normally be the case.
Increased tax relief of 50% will become available under the Seed Enterprise Investment Scheme where individuals provide investment to new, start up companies, together with a waiving of capital gains tax, if gains are reinvested in such companies.
Corporation tax is confirmed as reducing from 26% to 25% from 1 April 2012.
Car owners were left relieved that the proposed 3p rise in January has now been scrapped, with it effectively being deferred until August 2012.
Perhaps the biggest positive is the interest rate that the UK is paying on its borrowing at the moment. With Italy straining under 7.2%, the UK has managed to keep the interest rate down to less than 2.5%, which is lower than Germany. So, although the growth forecasts are not good, and the prediction is for more pain, maybe we can take some comfort from the fact people see us a safer place to put their money. On the other hand, maybe we’re just the least rotten of a pretty putrid bunch!!