No mention of Scotland in budget allocations

[Updated below] Listening live to the UK Chancellor’s Autumn Budget Statement and the opposition response, just finished, it was notable that he said that in the coming financial year, England, Wales and Northern Ireland would receive their Barnett allowances – but neither then nor later on his statement, did he mention Scotland.

However, not verbally announced in the statement, there is apparently to be £400m additional funding for Scotland for its ‘shovel ready’ infrastructure projects. Cabinet Secretary for Finance, John Swinney has already committed to seeing that this money is well spent.

In terms of winner and loser, the Chancellor was composed, focused and largely made sense – with the independent Office for Budget Responsibility providing figures that back up the government’s general account of the performance of the economy,

The Shadow Chancellor was flustered, sometimes confused, unfocused, bitty and disjointed, sometimes talking in terms beyond intelligibility – not so much in the use of jargon but in disconnections; and at time almost hyperventilating. It was a strange and ineffective performance.

The intended thrust of the Shadow Chancellor’s response to the statement – which he manfully stuck to regardless – had been neutered in advance by Mr Osborne’s quoting of the support for the government’s analysis of the economic situation from the independent Office of Budget Responsibility.

Measures announced

The Chancellor did some quick sleight of hand in skating over the fact that the wealthy would benefit from the changes to personal allowances to the point that the lowering on the income level at which they will pay higher tax will actually have them paying no more tax this year or next.

However, the change in personal allowances will see those on the minimum wage seeing their tax bill halved and will see the target of a £10,000 personal allowance almost within grasp by the end of this parliament.

In general family incomes are being protected in various ways for something like a four year period.

The chancellor declared his budget to be ‘fiscally neutral’,. meaning that overall it adds up to neither a rise nor a fall in tax revenues. Any rises in taxation in one area are countered  by falls elsewhere.

  • The fuel tax rise has been cancelled.
  • A new business bank will lend to SMEs – with lending seen as a serious issue in the performance of the economy
  • Business rate relief for small businesses is extended for a further year.
  • Big business and international corporations will pay fair tax, with substantial new sums already collected.
  • HMRC’s budget is to be increased to allow it to combat big business tax avoidance more effectively.
  • Benefits overall will rise by 1% per annum for the next three years but below inflation. Labour did not challenge this.
  • A benefit cap will see families on benefit will not earn more than working families.
  • Income tax personal allowance is to rise to £9,205 from April 2014.
  • ISA limits are being raised to assist savers and provide investment for businesses.
  • Drawdown limits are to be increased for pensioners from 100% to 120%.
  • The basic state pension, having risen by 2.5% in 2012 is to go up again to deliver £110.15 per week.
  • A universal credit is to be introduced to ensure that it will always pay to work. The Chancellor noted that working income has risen by 7% where benefits have risen by 20%.
  • Disability benefit is to rise in line with inflation – which, since this will mean the new post-ATOS assessment benefit will not at all address the disaster of this particular cut.
  • £5bn of extra spending is going into capital investment in infrastructure – roads, science and education. Of this, £1bn is for roads – the A1, A5, M1 and an upgrading of the M25; £1bn for rail works -including  high speed rail links to the N and NW and the extension of the Northern Line underground to Battersea and to the Olympic Park; there will be additional funding for city broadband development [didn't catch the amount]; £600m for UK science research infrastructure; £220m for colleges; and £1bn for new schools, free schools and academies.
  • Schools will be free to set their own pay and performance conditions.
  • Corporation tax is being progressively lowered to a point where the UK’s will be substantially lower than its major competitors. This is designed to attract inward investment, boosting both job creation and growth.
  • There will be two private sector jobs created for every one lost in the public sector – with continuing efficiency savings to be made in Whitehall bureaucracy. The civil service is said today to be lower in numbers than at any point since World War II.
  • There will be a cut to the tax relief available on pension pots.
  • There will be no new property tax – meaning no raising of stamp duty and none of Vince Cable’s nonsensical ‘mansion tax’. The Chancellor’s judgment is that this would require an expensive wholesale property revaluation which would cost more than could be generated  by raising stamp duty. Deputy Prime Minister the LibDem’s Nick Clegg was sufficiently juvenile to feel compelled to make his disagreement with this decision visible – and pulled faces for the edification of the opposition.
  • And yes, there are, as leaked, to be tax breaks for shale gas development [fracking]; and there is to be a single government office for shale oil and gas.

In connection with the increased spend on schools, The Chancellor committed to publishing planned reforms to replace the discredited PFI system, noting that from now on the public sector would share in the rewards as well as the risk.

 [Update] The Chancellor’s account of the UK economic situation

The Chancellor noted the slower than forecast progress in growth and in deficit reduction, pointing to the impact of the inherited deficit and of external factors like the economic problems in the world’s  biggest economies – the USA, China and preeminently in the UK’s major trading partner, the Eurozone.

He noted however, that:

  • the deficit  had come down by 25% in two years;
  • exports had doubled since 2009 [Why 2009? [We would annual breakdown figures to distil the true message of this activity over this period.];
  • 1.2 million private sector jobs had been created since 2010;
  • investment is flowing into gilts [government bonds];
  • and the UK is able to borrow on historically low interest rates.

The Chancellor’s overall message is that there can be no turning back from the policy of austerity to accelerate paying down the deficit. The government has clearly adopted a script on this, with ministers on the media and the PM at the PM’s Questions which preceded the Autumn Budget Statement, all parrotting phrases like ‘we’ve been facing economic headwinds’; and ‘how can you solve a borrowing crisis by borrowing more?’

Mr Osborne pointed out that the Office of Budget Responsibility [OBR} does not just provide independent figures - but an independent explanation of those figures.

He noted that the OBR do not see the the UK's slow growth performance nor its slower than anticipated progress with debt repayment as resulting from the government's fiscal policy.

The OBR, declared the chancellor, has identified internal economic problems affecting growth, such as credit rationing and impaired financial markets. ON credit rationing the Chancellor said that the statement would address the credit issue, a reference to the establishment he announced of a business bank to lend to SMEs.

OBR forecasts

The Chancellor gave several OBR forecasts in his address.

Their growth projections for the next five years are:

  • 0.1% for 2012.13
  • 1.2% for 2013-14: [down by 0.8% from the 2% previously forecast]
  • 2.0% for 2014-15
  • 2.3% for 2015-16
  • 2.7% for 2016-17
  • 2.8% for 2017-18

On unemployment rates, the OBR is forecasting that the UK’s unemployment will peak at 8.3%; with Mr Osborne setting this against Spain’s 20%,  the Eurozoe’s 12% and France’s 11%.

On the deficit, Mr Osborne cited figures of:

  • 7.9% in 2011-12
  • 6.9% in 2012-13
  • 6.1% in 2013-14
  • 5.2% in 2014-15
  • 4.2% in 2015-16
  • 2.0% in 2016-17
  • 1.0% in 2017-16

On cash borrowing, the Chancellor said this would be:

  • £108 billion in 2012-13
  • £99 billion in 2013-14
  • £73 billion in 2015-16
  • £49 billion in 2016-17
  • £31 billion in 2017-18

The OBR says that the government has a better than 50% chance of eliminating the fiscal deficit in 5 years – but that it is  not on target to pay down the debt burden.

In terms of borrowing expressed as a percentage of GDP, this is shown as rising gradually until 2016-17, when it starts to fall.

The OBR forecasts show the 2012-13 debt percentage of GDP as 74%. They then forecast that it will be [the Chancellor spoke at some speed and we apologise for missing the 2013-14 forecast]:

  • 79% for 2014-15
  • 79.1% for 2015-16
  • 79.2% for 2016-17
  • 77.3% for 2017-18


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4 Responses to No mention of Scotland in budget allocations

  1. He said Scotland was getting £394 million extra for buildings & infrastructure … reported on BBC news Scotland page … perhaps other money will be taken away to cancel out this boost?

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      • We think this allocation was in the text of his statement, Iain. We certainly did not hear it spoken in the Chancellor’s address to Parliament; and like you, only found out about it later.
        He may have meant to say ‘Scotland, Wales and N orthern Ireland will get their Barnett allowances’ – but what we thought we heard was ‘England, Wales and Northern Ireland will get….’
        We’ll check the record on iplayer.
        And thanks for the exact figure.

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