A Strong Voice for Croydon Central - Gavin Barwell MP
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Reflections on the Autumn Statement
09/12/2013 21:52:00


On Thursday, the Chancellor made his annual Autumn Statement on the state of the economy. Each year, I try to précis the key messages for constituents who didn’t hear it and don’t have time to read a detailed account.

Headline message

The headline message was that the economy is recovering, that those who predicted there would be no growth until we turned the spending taps back on have been proved comprehensively wrong.

But the job is not done. The deficit is down, but it is still far too high; growth is up, but productivity is still too low; unemployment is down, but too many people are still out of work or working part-time when they want a full-time job; businesses are expanding, but exports are too low; and household disposable income is rising, but family budgets are still feeling the squeeze.

We need to secure the recovery for the long term and that means continuing to take tough decisions.

A sobering re-assessment of our recent past...

The Chancellor published revised data from the Office for National Statistics showing that the recession under the last Labour Government was even deeper than suspected. The fall in Gross Domestic Product (the total size of the UK economy) was not 6.3% as previously thought but a staggering 7.2%, one of the sharpest falls of any economy in the world. Our economy shrank by £112 billion - that's about £3,000 for every household in this country. We are still recovering from that disaster.

...but more encouraging figures about the future

At the time of the Budget in March, the independent Office for Budget Responsibility (OBR) was forecasting that the UK economy would grow by 0.6% this year. Its latest forecast is more than double that at 1.4%. Next year, instead of growth of 1.8% it is now forecasting 2.4%. Britain is currently growing faster than any other major advanced economy.

Stronger growth means more jobs. Back in March, the OBR was expecting no increase in jobs this year, but it now expects the total number of jobs to rise by 400,000. Unemployment is forecast to fall further from 7.6% this year to 7% in 2015 and 5.6% by 2018.

Stronger growth also means a lower deficit (the amount of money the government borrows each year). In their last year in office, the previous Government borrowed £158 billion - that's over £4,000 for every household in the country. And they were planning to carry on borrowing at this level. We've taken tough decisions to stop this borrowing not overnight (that would mean savage cuts to public services) but slowly over a number of years. The OBR is now predicting that this year we will borrow £111 billion. This is projected to fall to £96 billion next year, then £79 billion in 2015-16, £51 billion the year after and £23 billion the year after that. Over this period, that’s £73 billion less than was forecast back in March. In 2018-19, the OBR forecasts that the Government will not have to borrow anything at all. Instead, we will run a small cash surplus.

Of course, because we are still borrowing money every year (albeit less than the previous Government was), debt is still increasing. The OBR now expects that this year debt will be 75.5% of our GDP. It is forecast to rise to 78.3% next year before peaking at 80% the year after. In 2016-17, it is forecast to fall to 79.9% then to 78.4% the year after and to 75.9% the year after that. By 2017-18, debt is forecast to be over £80 billion pounds lower than was feared in March.

The big decision

The biggest decision the Chancellor announced was that he would not spend the extra money available because borrowing is lower than expected, but use it to further reduce debt.

Fairer taxes

He made three announcements aimed at creating a fairer tax system:

• First, a £9 billion package of tax avoidance measures (for example, tackling the growth of intermediaries disguising employment as self-employment, thereby depriving employees of basic employment rights such as the minimum wage in a bid to avoid employer national insurance).

• Second, introducing capital gains tax on future gains made by non-residents who sell residential property here in the UK. At the moment, those who live in this country pay capital gains tax when they sell a home that is not their primary residence, while those who do not live here do not - that’s not fair.

• Third, increasing the bank levy. This country stood behind the banks in the crisis - it is right that they now support the country in recovery.

Cost of living

The Chancellor also announced three measures to help hard-working families with the cost of living:

• rolling back some of the environmental levies that have increased fuel bills. This will take £50 off the average family bill;

• cancelling the 2p rise in fuel duty planned by the last Government for next year. This means that, compared with the previous Government’s plans, petrol will be 20p a litre cheaper. That’s £11 less every time you fill up; and

• freeze average train fares in real terms.

Creating more jobs

Finally, he announced two changes to help businesses create more jobs:

• a package of measures to reduce business rate bills - capping increases to 2%, halving rates for new occupants to help bring empty properties back into use and giving every shop, restaurant, cafe and pub in England with a rateable value of up to £50,000 a £1,000 discount off their bills to help local high streets; and

• abolishing the tax employers have to pay when they give someone a job on young people under the age of 21 to try to tackle the problem of youth unemployment.

My assessment

As the Chancellor said, we are not out of the woods yet, but all the key figures - growth, unemployment and the deficit - are now moving in the right direction. Those who said the economy wouldn't grow if we cut spending to try to reduce the deficit - the same people who got us into this mess in the first place - have been proved wrong.

At the moment, many families are still not feeling the recovery, but the key to changing that is to secure the recovery and to do what we can, given there is little money to spare, to cut bills for hard-working families for the long-term. This statement passed that key test.

There were also some sensible changes. I particularly welcome the abolition of the tax on employing people under the age of 21. Youth unemployment in Croydon Central is down over a quarter since this Government came to power, but there are still far too many young people looking for work and the Chancellor is absolutely right to make addressing that one of his top priorities.

Comment on this blog


Readers' Comments

On 16/12/2013 16:33:00 Jim wrote:
Whatever happened to the bonfire of the quangos? The government has done little to roll back the frontiers of the state. My proposals for dealing with public debt would include:

1) abolishing DFID - let people choose themselves how to give with their own money;

2) abolishing the department of culture, media and sport;

3) forgetting HS2 (millions wasted already);

4) getting out out of the EU;

5) offering social housing to childless mothers/couples in preference to "single mums";

6) phasing out the NHS - return money to individuals to obtain their own healthcare;

7) ceasing all "green" subsidies; and

8) halving the benefits cap.

I would also abolish higher rate tax, increasing the the basic rate to compensate. (Why should *anyone* give up 40/45% of their income to the state - and that's before you consider NI/VAT.) Combine NI with Income Tax. It's been talked about for years - just get on with it. Also that's the way to address dodgy intermediaries etc - not introduce yet more red tape. With EU immigration gone, we can have a work permit scheme based on earning potential. Great for tax revenues...

Abolish Inheritance Tax, abolish Stamp Duty (on homes), but also abolish the exemption from Capital Tax when people make a profit selling their home. Better for first-time buyers, better for preventing housing bubbles, better for liquidity, and better for eliminating tax avoidance whereby people effectively make a business of buying/selling houses tax free by simply saying that they live there.

As for abolishing Employer's NI for under 21s, what a nonsense. More irritating Cameroon social engineering. Employers should hire the best person for the job. Can you imagine a private organisation discriminating on the grounds of age ("over 21s need not apply")? NI Employer's contribution is the most ridiculous tax in existence (business rates being the second). But while it exists it should be applied fairly.




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Gavin Barwell, 133 Wickham Road, CR0 8TE, Tel  020 8663 8741      © Gavin Barwell  2019       Promoted by Ian Parker on behalf of Gavin Barwell, both at 36 Brighton Road, Purley, CR8 2LG