With a general election looming in the not too distant future and the UK economy bursting into life over the past year, the 2014 Autumn Statement is a hot topic that affects all of us!
Rhys and I are heading down to the Euston office to provide you with minute by minute updates of the key points in George Osborne’s speech and the Grant Thornton reaction tomorrow, but what are those key points likely to be? Does it really matter?
If you, like myself, have been reading up on the answers to those questions (possibly ahead of interviews and assessment centres) then you may well also be wondering how it’s different from the Budget given back in March?
Traditionally the Autumn Statement outlined the economic projections and addressed government spending and the budget dealt with taxation issues. Unlike the rules which allow the Chancellor to quench his thirst with alcoholic beverages during the Budget but not the Autumn Statement, this division has become increasingly blurred over the years. The Statement has been likened to a mini-budget as increasing amounts of tax changes are announced within it.
The Autumn statement will be supported by a stronger economic backdrop than at the time of Budget 2014. The UK economy has been a powerhouse in terms of economic growth; GDP grew at 3% for the third quarter, putting the UK growth in first place within the G7 club. For the first time since before the financial crisis, the unemployment rate, which peaked at 8.5% in 2011, has fallen down to 6% (August 2014). However there is still work to be done – wage growth has failed to catch up with inflation and the government are set to miss its borrowing target by almost £10bn!
So what should you be looking out for tomorrow? Will it matter to you?
Road improvements are on the agenda as the Chancellor has earmarked £15billion to be put towards 80 schemes, including tunnelling under Stonehenge. Whilst there is no doubting the need for improvement in infrastructure and the positive impact it would have on businesses throughout the UK and our own everyday lives, the announcement has been met with some scepticism given that over two thirds of these improvements will be in Coalition constituencies, including some of their parties’ most marginal seats!
The National Health Service is set to receive down-payment to the tune of £2billion in order to secure its future, help treat an ageing population and modernise services, from which, we all benefit when required. This represents an above inflation increase of the NHS budget of 1.5%, but unsurprisingly this hasn’t resulted in an outbreak of celebrations. The organisation incurred expenditure of £109.7billion in 2013/14 and the NHS has to contend with an increasingly ageing population. Last week a record 108,301 patients were admitted for emergency treatment, and some see this as a move to provide political cover where the Conservatives are at their weakest.
Tax free personal allowances have undergone radical changes under the Coalition Government with the tax-free personal allowance currently having risen to £10,000. With the Prime Minister promising a further increase to £12,500 (welcome news for all trainees and applicants!) it is set to take 1 million of the lowest paid workers out of income tax and give a tax cut to 30 million more. However, the impact of these reductions and the rise in the 40% tax band has resulted in the deficit reduction targets proving troublesome.
Pensions were the subject of much discussion during and after Budget 2014 and that looks set to continue in the Statement. These are not at the forefront of trainees’ minds, but remain a vital tool in efficient financial planning for people of all ages . We already know that the 55% tax on inherited pensions left by persons under the age of 75 is to be abolished and there is much speculation that there will be alterations to the pension tax relief system, with specific changes to contribution limits. This is contrasted by plans to announce a tax-free childcare scheme set to take effect from next Autumn.
One thing that remains clear is the fiscal straitjacket worn by Mr Osborne will continue to constrain his ability to deliver any large and inventive measures. This could prove to be particularly poignant given the potential introduction of a law promising to eliminate the budget deficit by 2017-2018 under a new Charter for Budget Responsibility.
Whether we are about to embark on the first pantomime of the festive period, with George Osborne taking centre stage playing the role of both the villain and the hero, I leave it to you to decide. But tomorrow morning Rhys and I will be making our way to the Euston office to give an insight into what some of Grant Thornton’s finest minds make of the Chancellors offerings.
Be sure to follow @GT_Edward, @GT_Rhys and @GrantThorntonUK on twitter and gt_trainees on Instagram for all the action throughout the day. Also look out for the Grant Thornton specific #AS2014, the general #Autumnstatement and #MSB across all your social media platforms.