5 December 2012 Last updated at 10:02 ET
George Osborne: “There will be no fuel tax rise this January”
Chancellor George Osborne has scrapped a planned 3p rise in fuel duty, but benefits face a further squeeze as he admitted the UK economy was struggling.
There will be more money for roads, London’s Underground and schools, but councils were warned of cuts to come.
Austerity measures will be extended to 2018, as debt-cutting targets are missed, his Autumn Statement revealed.
“Turning back now would be a disaster” for the UK, he said. But Labour said his economic plans were “in tatters”.
Mr Osborne had said debt would start falling as a proportion of GDP by 2015/16 – the year of the next general election.
But he has been forced to delay that target by a year because of the worse than expected state of the economy, which is now expected to shrink this year by 0.1%.
The Office for Budgetary Responsibility says the UK has a “better than 50% chance of eliminating the structural current deficit in five years time”, said the chancellor – meaning his other key objective has been pushed back by a year to 2017/18.
This move heralds a fresh benefits squeeze and a raid on the pensions of the wealthy.
‘In this together’
Most working age benefits, such as Jobseekers Allowance and Child Benefit, will be go up by 1%, less than the rate of inflation, for the next three years.
What is the Autumn Statement?
- One of the two major statements the chancellor has to make to Parliament every year
- Since 1997 the main Budget – which contains the bulk of tax, benefit and duty changes – has been in the spring before the start of the tax year in April
- The second statement has tended to focus on updating forecasts for government finances
- Over the past few years this distinction has become blurred, with the Autumn Statement becoming more of a mini Budget
- Under the last Labour government it was called the pre-Budget report
And there will be a further cut in tax relief on large pension pots, saving £1bn a year.
He told MPs: “I know these tax measures will not be welcomed by all; ways to reduce the deficit never are. But we must show we’re all in this together. When you’re looking for savings, I think it’s fair to look at the tax relief we give to the top 2%.”
Income tax personal allowances will go up by £1,335 – £235 more than previously announced – so no tax will be paid on earnings under £9,440.
The threshold for the 40% rate of income tax is to rise by 1% in 2014 and 2015 from £41,450 to £41,865 and then £42,285.
The basic state pension will rise by 2.5% next year to £110.15 a week.
Mr Osborne announced a fresh crackdown on tax avoidance and a squeeze on Whitehall budgets to pay for a new road and school building programme.
He told MPs: “It’s taking time, but the British economy is healing.”
But Shadow Chancellor Ed Balls, for Labour, accused Mr Osborne of breaking his own rules on falling debt on which his credibility depended.
“Today after two and a half years we can see, and people can feel in the country, the true scale of this government’s economic failure,” Mr Balls told MPs,
He said the average family with children on £20,000 a year would be “worse off” – even with the personal allowance changes.
“Start Quote
At a time when his critics – and Ed Balls in particular – are able to say “I told you so”, George Osborne looked and sounded confident whilst the shadow chancellor looked the reverse.”
End Quote
Mr Balls claimed Mr Osborne’s plan to raise £1bn from pension tax relief on the well-off raised less than £1.6bn given away in Mr Osborne’s first Budget on the same reliefs.
CBI director general John Cridland welcomed the promised investment in infrastructure and new tax relief measures for small firms but said businesses now “need to see the chancellor’s words translated into building sites on the ground”.
“It is no surprise that after a difficult year the economic realities dictate that austerity and debt reduction will take longer,” he added.
“The chancellor has stuck to his guns on deficit reduction – avoiding deeper cuts or more borrowing in order to retain international credibility.”
But TUC general secretary Brendan Barber said: “What is missing today is any vision of a future economy that can deliver decent jobs and living standards – it’s pain without purpose.”
He added: “When you are self-harming you should stop, not look for better sticking plasters.”
BBC News – Business
