Autumn Statement: A little light at the end of a tunnel
- 29 November 2011
- From the section Business
The chancellor's 47-minute Autumn Statement contained a lot of stress on the difficulties that the UK economy is in.
And a lot of emphasis on the efforts that everyone needs to make to pull us through.
But amid the pain were some rays of wintry sunshine, with help for some though, inevitably, not enough to make this a good news statement.
We already knew that the income tax personal allowance was scheduled to go up to £8,105 from next April but this was reiterated.
Nothing was said about other personal allowances or the higher rate threshold.
That will probably continue to come down to cancel out the personal allowance increase for the higher paid.
The one specific announcement was a freezing of the capital gains tax (CGT) annual exempt amount at the current £10,600.
This pays for some extensions to the enterprise investment scheme into a new Seed Investment Scheme to encourage investment in start-ups.
A 50% tax relief will be available from April 2012 together with a one-year CGT holiday on such investments.
Tax credits and pensions
There has been much speculation about changes to tax credits and further changes were indeed announced, building on the many changes already in the pipeline.
There was a commitment to increase most working age and disability benefits in line with inflation at 5.2%, but this was not an across-the-board simple uprating of everything.
In particular, working tax credits are frozen, apart from the disability elements.
Child tax credits, and the childcare element of the working tax credits, were not mentioned - apart from the child element, currently £2,555 a year for each child.
That was scheduled to go up by £110 above inflation in 2012-13, but will now simply rise by last September's inflation rate of 5.2%, a rise of £135.
Those in receipt of the state pension saw some good news with an increase of £5.30 of weekly for single pensioners, and £8.50 for a couple from next April.
The minimum income guarantee goes up more modestly - by 3.9% to £142.70 for single pensioners and £217.90 for a couple.
However, these increases for today's pensioners were rather lost in the news of change for future pensioners.
The planned increase in state pension age to 67 will now operate eight years earlier than planned from 2026.
The chancellor reiterated the planned decrease in the main rate of corporation tax to 25% from April 2012.
There was less good news for the banks: the rate of bank levy goes up to maintain the yield at £2.5bn.
But most of his attention was on encouraging enterprise, with new enterprise zones announced and a promise of 100% capital allowances in some.
An extension to the research and development tax credit for larger companies is promised for 2013, but he was also at pains to increase sources of funding for smaller businesses.
There is to be a national loan guarantee scheme, but many small businesses will be keener on the further relief from business rate increases.
A measure that affects both businesses and individuals was the confirmation of the ending of the low value consignment relief.
This is the system that allows purchases of goods such as CDs and DVDs from locations such as the Channel Islands to come into the UK without VAT.
Abolishing this relief has long been campaigned for by small businesses, who have welcomed the change, even if it means cost increases for buyers.
Dogs that did not bark
As always, speculation about some tax changes was unfounded.
There was no sign of any changes to tax relief for pension contributions, apart from a small anti-avoidance measure.
Nor was there any VAT change.
The banks will at least be relieved at the ringing commitment not to support an EU financial transactions tax.
There was no mention of devolving any further tax powers to Scotland or indeed Northern Ireland.
No doubt those subjects will come up in next year's Budget.
Nor was there any discussion of phasing out child benefit for higher earners - scheduled for 2013.
There was some good news - or moderation of the bad news - for travellers.
Train fare rises next year will be pegged to the retail prices index (RPI)+1%, instead of the planned RPI+3%.
Fuel duty was due to increase by 3p per litre from January: that will be deferred until August 2012.
The increase of a further 2p inflation element in August is cancelled.
There was also a blizzard of infrastructure investment commitments, many around travel.
At one stage it sounded as if we were getting sleeper services via the Northern Line to Battersea but these proved to be two separate items with the Scottish sleeper service protected.
And it was good to see access to my homeland of Hull encouraged with a promise to halve the tolls on the Humber Bridge.
But many of these investments, like the whole turning round of the economy, will take time.
In the meantime life is going to be tough, although it does sounds as if there is some light at the end of a long, hard tunnel.
John Whiting is the tax policy director at the Chartered Institute of Taxation, and formerly a tax partner at PricewaterhouseCoopers for 25 years. He is also the tax director at the Treasury's Office of Tax Simplification. In the interests of impartiality, the BBC has asked him to avoid any analysis of tax simplification in this article.
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