Any Good News ? Autumn Statement
If there is any good news in the Chancellor’s Autumn Statement please forward it to me marked urgent.
A useful summary is below:
ECONOMY
2011 growth forecast revised down to 0.9% from 1.7%
2012 forecast revised down to 0.7% from 2.5%
In 2013, 2014 and 2015, forecast growth will be 2.1%, 2.7% and 3%
GOVERNMENT BORROWING
Extra £100bn in borrowing over four years
Borrowing forecast to be £127bn in 2011-2, falling to £120bn, £100bn, £79bn and £53bn in following years
Debt to GDP ratio to peak at 78% in 2014-5, falling afterwards
PUBLIC SECTOR PAY AND PENSIONS
1% cap on public sector pay rises for two years after the end of current freeze next year
Review into regional pay adjustments
Rise in state pension to 67 to be brought forward to 2026 from 2034
TRANSPORT COSTS
Rise in regulated rail fares to be capped at 6.2% - 1% above inflation - in January, down from 8.2%
Planned 3p fuel duty rise in January to be scrapped. August 2012 duty rise reduced from 5p to 3p
BENEFITS
Benefit payments uprated by 5.2% next year, in line with inflation
Basic state pension and pension credit to both rise by £5.35
Below-inflation increase in some tax credits
Additional £110 rise in the child element of the child tax credit scrapped
BUSINESS AND JOBS
OBR forecast of total public sector job losses up from 400,000 to 710,000
Credit easing programme to underwrite up to £40bn in low-interest loans to small and medium-sized firms
£1bn business finance partnership to help raise money for medium-sized firms
Regional Growth regeneration fund to get £1bn in extra funding
£250m support package for energy-intensive firms, £500m for science
Business rate holiday relief for small firms extended to April 2013
New time limits for planning applications
£1bn "youth contract" to subsidise six-month work placements for 410,000 young people
Bank levy to be increased in January
EDUCATION AND FAMILIES
£1.2bn extra spending on schools in England
Half to go to councils for more school places and half for 100 additional free schools
£50 cut in water bills for families in the south-west of England
Childcare places for most deprived two-year-olds in England doubled to 260,000
HOUSING
Mortgage indemnity scheme to help up to 100,000 people buy homes with 5% deposit
£400m scheme to kick-start stalled construction projects in England
50% discount for social tenants wanting to buy their own homes in England
INFRASTRUCTURE SPENDING
£5bn new spending over three years, including £1bn for the rail network
Go-ahead for 35 road and rail projects across England
Aim to unlock a further £20bn in investment from pension funds.
OVERSEAS AID
Funding will not exceed 0.7% of total GDP
2011 BUDGET PREDICTIONS
In March, the OBR predicted the economy would grow 1.7% in 2011 and 2.5% in 2012
It forecast government borrowing of £146bn in 2010-11, falling to £122bn in 2011-12, £101bn in 2012-3, £70bn in 2013-4, £46bn in 2014-5 and £29bn by 2015-16.
Source: BBC
Commentary:
It is fair to say that we are living in unprecedented times with arguably the worst economic crisis since the Wall St crash of 1929. It is four years since Northern Rock asked the Bank of England for liquidity support following the spread of the mortgage and banking crisis from the US and 3 years since Lehman Brothers went bust. To all intents and purposes, what was a crisis in the credit markets brought on by the higher US interest rates and defaults on sub-prime mortgages is now a full-blown Western debt crisis.
How many times did I use the word ‘crisis?’
Uncertainty in the Eurozone; will the Euro survive in its present form? The answer is clearly no. What will replace it and how will debt ridden countries such as Greece and Italy cope? What would be the effect of a devaluation of a new (old) currency such as the Drachma or Lire?
How will the EU operate going forward? Northern Zone, Southern Zone, Non Eurozone, Ex Eurozone? Who knows?
An indication of the sense of uncertainty is that the UK government can borrow from the markets at a cheaper rate than Germany.
The present situation can be summarised in one word: uncertainty. Uncertainty spooks not just markets, but people, businesses and governments. Uncertainty leads to delayed investment decisions, unemployment, reluctant consumers and, combined with cuts in government expenditure, ironically leads to greater borrowing as tax receipts fall and benefits rise.
Until the Eurozone crisis (yes that word again) is resolved decisively, which is a challenge for Europe, then we will continue to bounce from bad news to bad news.
There is some good news: the market for distressed or repossessed properties has never been better. One of our clients completes this week on a property which is presently insured for £2.5 million and he’s paying about a third of that. In all economic scenarios, there are winners and losers, although I do appreciate, the difference can be a whisker.
Article Courtesy of Dominic Farrell @ Bold Spirit
