Autumn Statement - Reaction from Managing Partner

Albert Einstein said: "It's not that I'm so smart, it's just that I stay with problems longer." Our politicians would do well to listen to such sage advice as today's figures and forecasts from the Office for Budget Responsibility (OBR) are, even to a Whitehall insider, 'shocking'. The Organisation for Economic Co-operation and Development (OECD) does not offer much succour either with predictions of the UK heading back into recession in the early part of 2012.

So it was against such a backdrop that the Chancellor rose in the Commons to deliver his autumn statement. We have a long term problem with the UK economy and it matters not whether we have George Osborne's Plan A, or indeed Alex Salmond's much trumpeted Plan McB, as long as whatever solutions our politicians come up with, it is a strategy that addresses the long term ailments of the country.

As for the statement itself, it was a mixed bag with little in the way of new ideas and tax breaks for hard pressed businesses. Perhaps more detail will come out in due course to give us something to cheer about.

The key points included revised economic growth forecasts, which for 2011 have fallen from 1.7% to 0.9%. Next year is also down with a drop from 2.5% to 0.7% but there is some encouragement for the following three years with forecast growth at 2.1%, 2.7% and finally 3%.

Mr Osborne said that the Government borrowing was falling and debt was coming down, but not at the pace he would like. In 2011-12 it is now forecast at £127bn - up £5bn - and in the subsequent years it would fall to £120bn, £100bn and then £79bn in 2014 -15. Debt interest payments are down and he forecast that the Government would spend £22bn less over the term of this Parliament than predicted.

Public sector workers have little to cheer about as they embark on a day of strike action tomorrow (30 Nov) as the Chancellor put a 1% cap on pay rises in the public sector for two years after the end of the current freeze. In a move that might also cause concern he announced a review into regional pay adjustments. People of a certain age might also wonder when they can retire, with the announcement of a rise in the state pension age to 67, now brought forward by ten years to 2026. 

The planned 3p rise in fuel duty has now been scrapped and the increase set for August has been reduced to 3p from 5p. There will be a £5.30 increase in the basic state pension to £107.45, in line with the 5.2% inflation rise in September.

Pensioners receiving pension credit will also benefit from an increase worth £5.35 and working age benefits would also go up in line with the higher inflation figure, contrary to earlier reports, which he described as a significant boost to the poorest. 

As for the business community he did caution against promises of quick fixes and said that was equivalent to quack doctors offering miracle cures. His announcement included a £20bn national loan guarantee scheme for small businesses and a £40bn "credit easing" scheme to underwrite bank loans to small businesses. 

He highlighted plans for £5bn spending on infrastructure projects over three years, a £1bn regional growth fund for England, £250m support package for energy intensive firms to offset the cost of EU carbon trading, reduced corporate tax rate and an extended business rate holiday for small businesses until April 2013.

The Chancellor's aim is to 'see Britain through the debt storm' and he has called for leadership in tough times - time will tell if today is a step in the right direction. 

Graeme Finnie

Managing Partner  

Tel: 0141 221 2984