UK Autumn Statement: small shift to tax-and-spend
Simon Ward
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The Chancellor defied claims that he was “boxed in”, finding room to abandon cuts to working tax credit, loosen the squeeze on departmental current spending and boost capital spending plans, while reducing cumulative borrowing and maintaining a forecast surplus of £10 billion in 2019-20.
He was able to achieve this feat partly thanks to helpful decisions by the Office for Budget Responsibility and the Monetary Policy Committee. The OBR revised up its receipts forecast significantly, citing recent higher-than-expected income / corporation tax revenues and “modelling changes”. Projected net interest payments, meanwhile, have been cut to reflect lower market rates and the MPC’s decision to delay a reversal of QE until Bank rate reaches 2%.
The Chancellor, interestingly, chose to give himself additional spending room by raising extra revenue via a new apprenticeship levy on companies, a rise in stamp duty on buy-to-let property and second homes, and an increase in council tax.
While spending plans are less restrictive, the overall pace of fiscal tightening is little changed from the July Budget. Cyclically-adjusted net borrowing is projected to fall by an average of 1.0% of GDP a year over the next four years, slightly more than the 0.9% of GDP forecast in July.
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