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Autumn statement at-a-glance

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29th Nov 2011
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George Osborne’s autumn statement was a balancing act in more ways than one.

Kicking off the speech with a review of revised Office of Budget Responsibility forecasts that showed growth dropping to below 1% in 2011 (0.9%) and 2012 (0.7%), he looked towards a recovery to 2.7-3% in 2014-16 that would allow the government to achieve its long-term goal of balancing the budget by the end of this Parliament.

It was difficult to present the OBR figures as anything other than bad news, but once he had blamed Labour for the precariousness of the situation, Osborne devoted much of his attention to setting out a basket of business-friendly measures that included:

  • A £21bn credit easing initiative based around a National Loan Guarantee Scheme to lower the cost of bank loans for businesses with turnovers up to £50m. Participating banks will be able to raise up to £20bn over the next two years under the guarantee sheme, provided they pass through this lower cost of funding to smaller businesses in lower interest rates on new loans and overdraft - subject to State Aid approval from Europe, small firms should be able to apply for these funds through participating banks in the normal way.
  • A £1bn Business Finance Partnership scheme to raise non-bank finance for small and medium-sized Businesses. The government will begin the process of allocating funds early in 2012.
  • Enterprise Finance Guarantee (EFG) will be extended from January 2012 to include businesses with up to £44m annual turnover.
  • New Seed Enterprise Investment Scheme (SEIS) to be launched in April 2012, offering 50% income tax relief on investments, along with a Capital Gains Tax exemption on gains realised in 2012-13 and then invested through SEIS in the same year. In addition, the government will simplify and refocus the Enterprise Investment Scheme and Venture Capital Trusts. 
  • Small business rate relief holiday extended for a further six months from 1 October 2012. The Government will also give businesses the opportunity to defer 60 per cent of the increase in their 2012-13 business ratebills as a result of the RPI uprating, to be repaid equally across the following two years.
  • Extend the R&D tax credit scheme to larger companies in 2013, subject to detailed consultation at Budget time next year. The existing SME R&D incentives will not be affected.
  • An extra £1bn for the Regional Growth Fund for England between now and 2014-15, along with a range of infrastructure projects that will be devoted to improving transport and broadband internet services in the regions.
  • Make 100% capital allowances available in the Black Country; Humber; Liverpool; North Eastern; Sheffield; and Tees Valley enterprise zones. Further extensions are planned to zones in the North East and a potential new zone around the Battersea power station in London.
  • Bring forward employment law and health and safety reforms under consideration part of the Red Tape Challenge.
  • More than £5bn additional spending promised for investments set out in the National Infrastructure Plan, backed by £20bn from UK pension funds.

As is often the case with spending announcements, the autumn statement jumbled up a raft of multi-billion pound commitments that have already been made with new announcements, along with sums like the infrastructure and bank guarantee commitments that will not involve direct government spending. The Chancellor vowed in his speech that all the extra spending can be funded through central government savings and a 1% cap on some public sector pay increases for the two years after the current freeze ends in 2013.

One unexpected savings measure that may affect some businesses and tax advisers was a draft regulation restricting tax relief on asset-backed pension contributions that will take effect immediately, in spite of being presented as a Finance Bill 2012 consultation. “This will save the Exchequer almost half a billion pounds a year,” the Chancellor said.

The measures set out today, he continued, “require no extra borrowing and provide no extra savings across the whole Spending Review period”.

“Over the next three years we will use these savings to fund capital investments in infrastructure, regional growth and education as well as help for young people to find work. Every pound spent in this way will be paid for by a pound saved permanently.”

Recapping his announcements, Osborne said they amounted to:

  • Sticking to the deficit plan to keep interest rates as low as possible.
  • Increasing the supply of credit and money to pass those low rates on to families and businesses.
  • Rebalancing the economy with an active enterprise policy and new infrastructure.
  • Help with the cost of living on fuel duty and rail fares.

However, businesses and their advisers were not convinced. In a poll of 150 people who took part in a live panel debate during the speech hosted by BusinessZone and AccountingWEB.co.uk, 64% thought that small businesss were unlikely to benefit from the Chancellor's credit easing measures. “Unless the government finds a new way of delivering loan schemes outside of the discredited banks money will never reach small business,” commented Jonathan Russell of UK200 Group firm Rees Russell.

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By justsotax
29th Nov 2011 15:34

what a load of meaningless tosh....

none of them have got a clue what to do - they say 'neccesity is the mother of invention'.....unfortunately for us the 600 or so individuals debating the UK's future prosperity have no necessity - they draw on their large allowances and travel expenses without being impacted by such things as fuel duty - I wonder if GO could actually tell us what the price of a litre of petrol is or a pint (ok litre) of milk.

 

They talk with the economists who (after listening to a few in the last few days) come across as mere excel pivot table specialist entering a few numbers and adjusting some variances with the hope of coming up with an answer someone (anyone) will listen to and like (oh they come up with some great phrases too....but unfortunately no answers).

 

At no point is the man/woman on the ground considered - and why would they....afterall these guys are not the man/woman on the ground......they move in different circles (on different planets).  So any 'pain' that we must take is taken by the meaningless man on the street....just a victim of the numbers game....

 

Hmm...feel better now!

 

 

 

 

 

 

 

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By naomi2000
29th Nov 2011 16:24

SEIS too small to be effective

I don't think SEIS will be effective.

If a new business is going to attract money from family and friends, I expect that this will happen whether tax relief is granted or not.

If the new business is going to attract equity finance from external investors, the cost of due diligence is going to make a big hole in the tax relief as SEIS is capped at £150K . It is likely that it will remain more attractive to invest in larger "syndicated" EIS where due diligence costs can be spread over a larger investment.

 

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By nekillim
30th Nov 2011 11:34

Save £18 Billion a year!!!

Just get us out of the EU and save £18 Billion per year.

We can no longer afford to be in this expensive club.

If you are going down the tubes, the first thing you do is cancel your expensive golf club membership!!! Obvious?

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Replying to nick farrow:
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By david5541
01st Dec 2011 12:30

Just get us out of the EU and .impose chinese trade tariffs

not iranian ones they are futile and will raise nil point!

we need the funds and we dont need to subsidise the chinese....

Just get us out of the EU and save £18 Billion per year.

We can no longer afford to be in this expensive club.

If you are going down the tubes, the first thing you do is cancel your expensive golf club membership!!! Obvious?

[/quote]

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Replying to nick farrow:
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By dogsbreath
01st Dec 2011 14:37

What other tricks do you do?

nekillim wrote:

Just get us out of the EU and save £18 Billion per year.

We can no longer afford to be in this expensive club.

If you are going down the tubes, the first thing you do is cancel your expensive golf club membership!!! Obvious?

 

Excellent example of "accountants" knowing the cost of everything and the value of nothing.  Like the value of trade,  the benefits of hamonisation,  reductions (yes reductions) in red tape -- do you remember what a carnet was? -- etc., etc.

The problem with one-trick-ponies is exactly that.  Membership of the EU is a very complex arrangement that can't be glibly dismissed.

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By johnjenkins
30th Nov 2011 12:15

I agree

wholeheartedly with justsotax and nekillim. Non of the Eurocrats have got an inkling of what to do. If Hitler were alive he would clean up! Come on Boris don't let the Tories put you out to pasture as Mayor.

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By johnjenkins
01st Dec 2011 15:00

Oh no it can't,

oh yes it can.

If USSR can do it (yes I know it's slightly different) then surely we can go back to EFTA. In fact the EU is bankrupt and by this time next year if it's not disbanded we will all go down with it. The structure has to be changed because it is a drain on all resourses and that's not what it should be about.

If Greece had their own currency they could have devalued, people would have spent loads of money on holiday - coffers full again.

Trouble is the politicians still want a Federal Europe.

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By ladylaff
01st Dec 2011 16:17

Stop blaming Europe for domestic problems

As one who does much trade with Europe, I categorically disagree with the idea that we need to get out of Europe and think it is very dangerous and unhelpful to dismiss all its countries as technocrats.  Do people realize for example that Germany has much less red tape when it comes to small business?  For many years now it has been possible, in companies of 10 or less, to dismiss employees on 30 days notice when necessary for financial reasons.  Much easier than in the UK.  Do people know that in Belgium and the Netherlands it is FAR easier for small IT companies to sell into the public sector?  In the UK we impose much red tape onto ourselves and when people complain about it we blame everything on the EU. It's wrong, facile and if we keep deluding ourselves that Europe is responsible for all of our economic woes, we'll end up even more isolated and poor as a nation. 

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By dogsbreath
01st Dec 2011 16:32

Federal Europe

Hmm,  can't say they do.  The Germans are battling with the reality of having the benefits of a single currency without transferring their wealth to other nations.

One thing's for sure,  Europe is definitely going through some huge changes in strategy.  There can't be many people in Europe who think that expansion for the sake of it has not been a good thing.  That and the systemic lies that lead to under-qualified states (Greece, etc.) joining the Euro.

To suggest that the UK can thrive on its own apart from Europe is simplistic at the very least. With globalisation and our lack of large-scale manufacturing,  not to mention the Internet knocking seven bells out of trading,  it's likely to be rather lonely outside of a European trading bloc.  The UK is a shadow of its former self -- stop deluding yourself otherwise,  for goodness sake we haven't even got an aircraft carrier.

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By johnjenkins
01st Dec 2011 21:26

At long last

we hear tonight that the structure of Europe needs to be looked at. Perhaps someone is listening to me and many others.

The concept of free trade, movement of labour amongst countries (not only Europe) is sound. The imposition of rules and regulations determined by an unelected rabble on sensible people is not only lunacy but destructive as we can now see. We are quite capable of governing ourselves without the interference of an unelected body.

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Replying to petersaxton:
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By david5541
05th Dec 2011 14:55

EUROPE 27 STATES-EU-EEC-EURO-17 STATES-MIXUPS

[quote=johnjenkins]

we hear tonight that the structure of Europe needs to be looked at. Perhaps someone is listening to me and many others.

The concept of free trade, movement of labour amongst countries (not only Europe) is sound. The imposition of rules and regulations determined by an unelected rabble on sensible people is not only lunacy but destructive as we can now see. We are quite capable of governing ourselves without the interference of an unelected body.

the concept of free trade being an ADVANTAGE to the UK when it comes to the EU is an anathema:

most of the eu/euro/PIIGS/bail out/club med countries are basket cases having been bank rolled by THE EEC well before it was rebranded the EU.

there are simple basic facts that have always made the uk a NET BILL PAYER/CONTRIBUTOR to the EEC.

a)we are small country that relies on overseas trade-france and germany have far more INTERNAL trade.

b)its alot easier to get work or set up a business here than in all EEC countries so immigrants make the trail here to learn english

c)VAT EEC bills are paid by every penny of our chinese, african carribean Imports.

d)THE LABOUR/SOCIAL SERVICES SUBSIDY in all eec countries mean that the UK is not playing on a level playing field (why else did peugoet sack british workers closing its factory and keep french one?s)

e)social chapter; european fisheries policy; CAP; human rights legislation; all other EU directives the british follow methodically and carefully; everyone else pays lipservice to it-QED spanish fisherman in british waters; financial serices industry directives post 2008.........;

get real:

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