LONDON (Alliance News) – The focus for the Autumn Statement, due to be delivered by UK Chancellor
George Osborne on Wednesday, will be whether he will stick to his budget surplus target, following figures on the UK’s public finances coming in below expectations last week and amid a series of defence spending pledges by the government.
On Friday, the Office for National Statistics said the UK’s government deficit, or the gap between how much it spends and how much it brings in, rose 16% year-on-year in October to GBP8.2 billion, substantially ahead of the GBP6.0 billion deficit forecast by economists in a poll by Reuters.
Osborne has tabled a plan to eliminate the deficit and have the UK in a budget surplus of around GBP10.0 billion by 2020, but these figures will put this target in doubt. The spending cuts required to get there will be announced on Wednesday as part of the government’s Comprehensive Spending Review, which will outline the spending plans for the next five years.
The Chancellor is seeking to cut around GBP20.0 billion in public spending from “unprotected” areas, including the police, science, local government and justice. The burden on these areas to absorb the full brunt of the cuts has been increased by Osborne adding defence to the list of areas protected from spending cuts, which already included health, schools and overseas aid.
Add to the government’s plan to put billions of additional pounds into the National Health Service in order to avoid a cash crisis and by the announcement on Monday of a GBP12.0 billion boost to the defence budget as part of the Strategic Defence and Security Review.
The increased defence spending came after Home Secretary
Theresa May had last week secured support for increased border security protocols and more checks on firearms to prevents guns being smuggled into the country following the terrorist attacks which hit Paris on November 13.
Osborne, speaking during an interview with the BBC’s Andrew Marr on Sunday, declined to commit to his original plan for a GBP10.0 billion surplus by 2020, an indication he may have to bend on this target in order to soften the impact of the cuts.
The Institute of Directors, a prominent think-tank, has urged Osborne to “hold his nerve” on deficit reduction.
Simon Walker, director-general of the IoD, said the chancellor must not compromise on the plans if he wants to meet his goal of creating a “low tax, high wage” economy.
Robert Wood, UK economist at Bank of America Merrill Lynch, noted, however, that Osborne’s fiscal rules require a surplus, rather than a GBP10.0 billion surplus, and this could leave room for the chancellor to reduce spending cuts and to raise the planned deficits a little, while sticking to his target of running a surplus by 2020.
Elsewhere in the statement on Wednesday and the accompanying spending review, Osborne is expected to update on his attempts to sell a range of state-owned business in order to raise tens of billions of pounds. The Ordnance Survey, Land Registry, Channel 4, the Green Investment Bank and the Royal Mint all are expected to be put on the block, with the proceeds likely to be earmarked for infrastructure spending.
Osborne also is expected to confirm the starting rate for the new flat-rate state pension when it comes into force in April and may announced a major shake-up of pension tax relief, though most industry experts expect this will be delayed to the Budget next year. He may also announce plans to limit pension contributions.
Other measures which may emerge could include a confirmation of plans to turn empty prisons into residential buildings. The plans would focus on Victorian prisons in inner city locations which are no longer fit for purpose and could be converted into large housing developments.
Category: Daily Witness, National
