With the latest report from the Office for
Budget Responsibility painting a gloomy picture for the UK
economy, Chancellor George
Osborne vowed that the Government would stick to its austerity
programme to protect against ‘the sovereign debt storm’.
In line with predictions, the Chancellor announced a reduction
in the UK’s economic growth forecasts, with the 2011
figure revised downwards from 1.7% to 0.9%. This was accompanied
by an increase in Government borrowing, with the forecast for
2011/12 rising to £127bn, and total additional borrowing
amounting to £112bn over the next four years. However,
the Chancellor rebuffed recent reports that the UK is set to
slip back into recession in the coming months.
Key announcements for business include the introduction of
further credit easing, with up to £20bn being made available
to small and medium-sized businesses through the National Loan
Guarantee Scheme. The business rate relief ‘holiday’ for
small firms will be extended to April 2013, and a new Seed
Enterprise Investment Scheme for small businesses will offer
50% income tax relief for those investing up to £100,000
in new start-ups, together with a one year freeze on capital
gains tax. A £940m ‘Youth Contract’ will
also aim to boost employment by means of subsidised work placements
for young workers.
Also central to the announcements was confirmation of a National
Infrastructure Plan to boost the UK’s road, rail and
broadband facilities, to be funded by £5bn of Government
spending, with a further £20bn investment expected from
British pension funds.
Meanwhile, public sector workers will experience a further
squeeze, with a 1% cap on pay rises, and while some benefits
will rise in line with inflation, other tax credits will see
below-inflation increases.
Other significant announcements include a mortgage indemnity
scheme aimed at helping 100,000 people to buy homes, a doubling
of the number of childcare places for two year olds in England,
a new cap on regulated rail fare increases, a cancellation
of the rise in fuel duty scheduled for January, and a further
increase in the bank levy.
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