After each Budget and Autumn Statement, I do a short blog summarising the key announcements and what it all means for Croydon.
The Chancellor always starts by setting out how the economy is performing. It is noticeable how these forecasts have improved over the last four and a half years. This was the most optimistic yet, though we’re still not out of the woods:
The UK is currently the fastest-growing major economy in the world. Back in March when the Chancellor gave his Budget statement, the independent Office for Budget Responsibility was predicting that our economy would grow by 2.7% this year. They are now predicting it will grow by 3%. That’s two and a half times faster than Germany and seven times faster than France.
As the economy recovers, unemployment is falling fast. Back in March, the Office for Budget Responsibility was predicting that the number of people claiming JobSeekers Allowance would fall by 7% in the first three quarters of this year. It actually fell by 23%. 1,000 new jobs are being created every single day. That’s 1,000 more people every day able to provide for themselves and their families. And 85% of those jobs are full-time.
There was also good news re inflation with the Office for Budget Responsibility significantly revising down their forecasts. It is expected to be 1.5% this year, 1.2% next year and 1.7% the year after.
And we’ve achieved all this at the same time as reducing the deficit. It is now half the level we inherited and it is predicted to fall each year until we finally achieve a surplus in 2018/19. It is taking longer than we hoped but we are going to get this country back in the black.
Most of my constituents recognise that the economy is doing much better, but they tell me they don’t yet feel it themselves. That’s hardly surprising - the last recession made this country much poorer and that inevitably had an effect on earnings over the last few years. But earnings are now beginning to rise by more than the rate of inflation. And the independent Office for Budget Responsibility is predicting that they will do so each of the next five years. As this happens, everyone will share in the recovery we’ve all worked so hard to build.
So with the economy growing faster than predicted, unemployment falling faster, inflation low, the deficit falling and earnings beginning to rise, the outlook is good.
But we’re not out of the woods yet. The deficit may have been halved, but it has not been eliminated; unemployment may be falling fast, but there are still too many out of work or working part-time when they want a full-time job. And if we are going to compete in the global race, we need to improve our productivity. So the Chancellor announced a number of measures to address these problems.
The most eye-catching measure was a radical reform of stamp duty, the tax people pay when they buy a home. I’ve blogged about that separately here, but it is very, very good news for the vast majority of Croydon homebuyers particularly those trying to get on the housing ladder for the first time (it is only those buying the most expensive homes worth more than £937,000 who will pay more). Someone buying a £275,000 home will pay a massive £4,500 less in tax.
The Chancellor also cut Air Passenger Duty (APD) for children to try to reduce the cost of a family holiday. From May, APD will be abolished for under 12s and from 2016 it will be abolished for under 16s.
He continued his policy of raising the personal allowance - the amount of money we can earn before we have to start paying income tax - so that everyone pays less tax but those on low incomes seeing the biggest proportionate gains. It will increase to £10,600 in April and this will be passed on in full to higher rate taxpayers - the first increase in the higher threshold in line with inflation for five years. If the Conservative Party wins the next Election, we are committed to increasing the personal allowance to £12,500 and the higher rate threshold - the amount over which you start paying the 40p rate - to £50,000.
He built on his recent announcement that people will be able to pass their pension pots on to their loved ones tax-free when they die by announcing that husbands and wives will be able to inherit their partner’s ISA and keep its tax free status.
He has already abolished employer National Insurance contributions (NICs) for people under the age of 21. Yesterday he announced that he will abolish employer NICs for apprentices under the age of 25 to make it cheaper for employers to take them on.
He announced an extra £2 billion a year for our precious NHS to help it cope with the significant pressures it faces - including money to pay for the extra GP surgeries we are going to need as our population grows.
He also announced the biggest road-building programme for a generation. You can read more about what that means for Croydon here.
He set out plans to expand the British Business Bank and extend the Funding for Lending scheme by a further year and focus it exclusively on smaller forms to ensure small businesses have access to credit.
He also outlined plans to help small businesses with the cost of business rates, extending the doubling of Small Business Rate Relief, continuing to cap the inflation-linked increase in business rates at 2 per cent and increasing the discount for high-street shops, restaurants and cafes to £1,500.
He increased the R&D tax credit to encourage firms to invest more - vital if we are to improve our productivity.
And he announced the biggest ever sustained programme of investment in scientific research as well as offering student loans of £10,000 for young people undertaking post-graduate degrees (up until now, students have had to fund these courses themselves, making it harder for people from less well-off backgrounds to get these qualifications).
Normally at this point in the political cycle, we would have a give-away Autumn Statement with the Government of the day trying to boost its chances of re-election by cutting taxes and increasing spending. But doing that would have damaged the credibility that we’ve worked so hard to build. So although this Autumn Statement contained all the good news listed above, it also included plans to raise more money than the Chancellor gave away.
In particular, he took action to ensure that big business pay their fair share when it comes to tax. He is introducing a Diverted Profits Tax on multinational companies that artificially divert profits overseas to avoid tax. And he’s limiting how much banks can offset losses from the financial crisis against tax on future profits. The arrangements we inherited would have meant some banks not paying tax for 15 or 20 years. That’s simply not acceptable and the changes the Chancellor has made will raise an extra £4 billion over the next five years.
Finally, in all the small print there was some very good local news. I have been lobbying the Chancellor to devolve certain tax revenues to Croydon Council to fund the infrastructure we need to drive the regeneration of our town centre. I am therefore delighted that he announced he wants to proceed with a Croydon Growth Zone and will be discussing with the Council how to take this forward. You can read more about it here.
The Autumn Statement shows our long-term economic plan is working. The economy is growing, unemployment is falling and the deficit is coming down with the rich rightly making the biggest contribution (the richest 20% are paying more to deal with the deficit than the remaining 80%).
You now face a choice. Next May, you can elect a Government that will continue with the policies that are working. Or you can go back to the people who got us into this mess in the first place.