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(USGovernment-News.Com, December 04, 2014 ) London, UK -- The Autumn Statement has been officially announced. It has to be admitted that the government’s marketing and P R machine has been working overtime. Whether you agree with their policies or not, details have been systematically released to the point where there were few big surprises. Both the government and the opposition parties are acutely aware of the fact that we are only six months away from a General Election, so there will doubtless be political showboating on all sides for some days.
In the UK we have a budget deficit (where income generated from taxation is insufficient to cover the cost of providing public services). In simple terms there are two ways of addressing a budget deficit – either increase the amount of income (taxation) or reduce public spending. The reduction of the deficit has fallen short of government targets, which limits any big giveaways by the Chancellor.
• Although unemployment has fallen, many new jobs have been either low paid or part-time – so Income Tax generated has been either modest or non-existent
• More austerity measures are likely to be in the pipeline to cut public spending. One which was announced also addressed the thorny issue of immigration. Migrants who have no prospect of work after six weeks will lose their unemployment benefits
• The government has reiterated its commitment to tackle corporate tax loopholes by the likes of Goggle and Amazon. To this end a new 25% tax on profits generated and shifted out of the UK is going to be introduced.
But the main thrust is all about growth in the economy – a continuation of the recovery from recession. Forecasts of economic growth in the UK for 2014 are around the 3% mark but medium term projections suggest a tailing-off over the next few years . We are a trading nation and our marketplace - the global economy - is still financially wobbly, therefore we are more reliant on consumer-led growth.
The government has previously announced and re-announced a number Keynesian of capex and infrastructure upgrades. Danny Alexander, Chief Secretary to the Treasury was reported by the BBC on Tuesday as having said, "New houses support economic growth and are a crucial element of a fair society, so I've prioritised the investment of almost £2bn to ensure we can build on average 55,000 new homes a year until 2020."
As well as being “eye candy” for voters, it is hoped that the following proposed expenditure – much of it on capital projects - will boost economy as well as create jobs:
• £15bn - Roads Revolution
• £2.3bn – Flood projects
• £2bn - frontline health services
• £2bn – housing
Support for business – The chancellor announced a review of the
Business Rates scheme which will hopefully help High Street businesses, many of which have struggled to complete with on-line enterprises. Amongst other initiatives there will be a £45m package of support for exporters and an increase in Tax Credits for Research & Development for Small and Medium-sized Enterprises (SMEs). This was on the day that the Bank of England confirmed that The Funding for Lending Scheme (FLS) is to be extended for one year.
Nobody underestimates the difficulties faced in maintaining growth in Gross Domestic Product (GDP). The UK’s economy is hugely complex. Public capital spending on infrastructure not only creates jobs and pumps money into the economy, it also promotes confidence, encouraging more investment.- effectively creating a multiplier effect. Of course this is diluted if we spend our money on imported products. The improvements obviously benefit future generations.
Specific allocation of income generated by fines – the government is to utilise fines imposed on banks for the LIBOR and FOREX manipulations for specific causes. The former will be used to support Gurkhas and their families and the latter will go to GP services.
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