Osborne underlines Northern commitment in Autumn Statement
CHANCELLOR George Osborne used the Autumn Statement to reiterate his central message that a rebalanced UK economy will thrive through a commitment to business support, and investment in science and infrastructure.
He drew attention to the UK economy’s 3% growth this year, ahead of many other leading economies, but repeated an earlier warning from David Cameron that “the warning lights are flashing” with recession in Japan and stagnation in the eurozone.
However, he gave the notion of a “Northern Powerhouse” a boost with the announcement of a £235m Sir Henry Royce Institute for Advanced Materials Science in Manchester with branches in Leeds, Liverpool and Sheffield.
There was also the promise of £78m for a major theatre complex in Manchester called The Factory, which will occupy part of the former Granada TV site.
The Chancellor referred to the recent devolution deal with Manchester and did not suggest any other deals were in the pipeline but said, “the door is open to other cities”.
There was also a tax crackdown on multi-nationals, reform of the stamp duty system, more cash for companies exporting to emerging economies and a sovereign wealth fund for the North to invest income from fracking. But many small businesses will be frustrated that the Chancellor did not go further on business rates, just promising a review at this stage.
Mr Osborne danced through the national debt and deficit figures, which were better than expected, partly due to a new accounting treatment. But fundamentally he has missed his target of eliminating the deficit by the final year of this parliament, mainly due to lower tax revenues.
He said the growth forecast for this year was now 3%, up from 2.7% in March and 2.4% last year. Growth is forecast to be 2.4% next year, 2.2% in 2016, 2.4% in 2017, and 2.3% in 2018 and 2019. Inflation is forecast to be 1.5% this year, 1.2% next year and 1.7% the year after.
Borrowing is expected to be £91.3bn this year, down from £97.5bn forecast. Then it will be £75bn, then £40.9bn, then £14.5bn, then a surplus of £4bn in 2018-19. In 2019-20 there will be a surplus of £23bn, said the Chancellor.
The deficit as a percentage of gross domestic product (GDP) stands at 5% this year. The Coalition hopes to reduce this to 4% next year, then 2.1%, then 0.7% before surpluses of 0.2% and 1%.
National debt will be 80.4% of GDP this year, said Mr Osborne. It will peak at 81.1% next year, then go down to 80.7% in 2016, then 78.%, then 76.2%, and 72.8% in 2019.
He said: “Today against a difficult global backdrop I can report higher growth, lower unemployment, low inflation and a deficit that is half what we inherited.
“Now Britain faces a choice, do we squander the economic security we have gained and go back to the disastrous decisions on spending and welfare that got us into this mess, or do we finish the job.”
Karen Campbell, head of tax at Grant Thornton in the North West, said: “Six 
months out from the election it’s no surprise that the Chancellor has worked hard to come up with some eye-catching measures whilst still keeping a tight rein on public finances.
“The overarching message that the economy is doing comparatively well is encouraging and good for confidence. The Northern Powerhouse was one of the main areas of focus, and having previously outlined support for the concept of HS3, along with a package of investment in roads, the announcement that the Government is to today tendering for new franchises for Northern Rail and Trans Pennine Express is a significant milestone.
“The £250m for science in the form of the Sir Henry Royce Institute and £78m for a major new theatre space is obviously a fantastic win for Manchester. It’s also very interesting that apart of the government’s grand plan to establish a Northern Powerhouse, a so-called Sovereign Wealth Fund for the North of England will be set up, obtaining its funds from shale gas revenues.
“The full review of the structure of business rates is overdue and has been lobbied for by the CBI and many others. The Stamp Duty reforms are fairly radical and will make a real difference in the regional property market and help stimulate the house building industry.”
Key points:
* A 25% tax on multi-national tech companies shifting profits out of the UK.
* Restriction on the way banks offset losses against profits.
* £45m to support businesses to trade with emerging economies as a counterweight to European stagnation.
* Expand Funding for Lending for a year.
* Expand British Business Bank.
* Boost for children’s TV with new credit alongside existing animation credit
* Increasing R&D tax credit for SMEs to 230% and credit for larger firms to 11%.
* Double the small business rate relief for another year which should benefit half a million firms
* A full review of the structure of business rates.
* The basic rate income tax allowance will rise to £10,600 next year, not £10,500 as originally planned.
* Abolition of Air Passenger Duty for under 12s from May, and for under 16s in 2016.
* A new Sovereign Wealth Fund for the North “so that the shale gas resources of the North are used to invest in the future of the North”.
* Stamp duty to be reformed. The “single-slab” rate will go, and instead it will be levied at a more gradual rate. This will mean nothing on the first £125,000, 2% on the share above that up to £250,000; then 5% on the next slice up to £925,000; then 10% on the next slice up to £1.5m; then 12% on everything above that.
