With the latest report from the Office for Budget Responsibility painting a sombre outlook for the UK economy, Chancellor George Osborne has vowed that the Government will do whatever it takes to protect against ‘the sovereign debt storm’.
In line with predictions, the Chancellor announced a reduction in the economic growth forecasts for the UK, revising the forecast for 2011 down from 1.7% to 0.9%. This was accompanied by an increase in Government borrowing, with the forecast for 2011/12 rising to £127 billion. However, the Chancellor rebuffed recent reports that the UK is set to slip back into recession by the end of the year.
Key announcements for business include a new £40 billion credit easing scheme, which will underwrite loans for small and medium-sized businesses. A £1 billion business finance partnership will help to secure funding for medium-sized firms. The business rate relief ‘holiday’ for small firms will be extended to April 2013, and a new seed enterprise investment scheme for small businesses will offer 50% income tax relief for those investing up to £100,000 in start-up businesses, together with a one year freeze on capital gains tax. A £1 billion youth contract will also aim to boost employment by means of subsidised work placements for young workers.
Also central to the announcements was a National Infrastructure Plan to boost the UK’s road, rail and broadband facilities, to be funded by £5 billion of Government spending, with a further £20 billion investment from British pension funds.
Other significant announcements include a mortgage indemnity scheme aimed at helping 100,000 people to buy homes, a doubling of the number of childcare places for disadvantaged two-year-olds in England, a new 6.2% cap on regulated rail fare increases, and a cancellation of the rise in fuel duty scheduled for January, accompanied by a further increase in the bank levy.