2015’s Autumn Statement was not short on surprises, as higher tax receipts and lower debt costs provided Chancellor of the Exchequer George Osborne with some leeway to soften austerity measures. In particular, he abandoned controversial plans to cut working tax credits and child tax credits and scrapped expected reductions to police budgets.
The deficit has fallen from 11.1% of national income in 2011 to 3.9% in 2015/16. The Government now expects to borrow £8bn less than previously forecast, with its borrowing expected to total £73.5bn in 2015/16, and then to fall every year until 2019/20, when it is predicted to post a surplus of £10.1bn. Debt as a share of GDP is predicted to be 82.5% this year – compared with previous estimates of 83.6% – after which it is tipped to fall to 81.7% in 2016/17, 79.9% in 2017/18, 77.3% in 2018/19, 74.3% in 2019/20 and 71.3% in 2020/21. The UK economy is meanwhile forecast to expand by 2.4% in 2015, 2.4% in 2016, 2.5% in 2017, 2.4% in 2018 and 2.3% in both 2019 and in 2020.
Measures designed to expand housebuilding programmes were revealed, including incentives to encourage private developers to build homes. Young first-time buyers will receive a 20% discount on around 200,000 new-build starter homes and the ‘right to buy’ will be extended in 2016 to include housing association tenants. Meanwhile, a new ‘London Help to Buy’ scheme will offer interest-free loans of up to 40% of the value of a new-build home for buyers with a 5% deposit. However, in a blow to would-be buy-to-let landlords, the Chancellor also announced the introduction of a 3% surcharge on stamp duty on buy-to-let properties and second homes. The surcharge will take effect from April 2016 and is predicted to raise £1bn by 2021. Moreover, from 2019, capital gains tax will have to be paid within 30 days of the disposal of residential property.
The Chancellor also confirmed October’s announcement that the uniform business rate will be abolished, and extended the business rates review, which will report at the next Budget in spring 2016. Elsewhere, having announced a new “apprenticeship levy” earlier in 2015, the Chancellor set the levy at 0.5% of an employer’s wage bill. The news sparked fears that this could put additional pressure on companies that already fear a squeeze from the new Living Wage.