The end of year financial review announced by the Chancellor has received a mixed reaction, with some groups faring better than expected, whilst others are furious that more is not being done to help them.
The Autumn Statement came at the same time as the Office for Budget Responsibility released its latest growth forecasts and the two battled for top billing in the headlines.
The OBR predictions made for depressing reading, with the overall growth figure chopped to 0.9% for 2011 and even lower – 0.7% – for next year. However, it forecast that the economy would see a massive turnaround by 2013 and GDP would be up by 2.1% before rising by 3% in the following two years.
There was also bad news about the predicted levels of unemployment, as the OBR said that it believed the number of those out of work would increase to 8.7% by the end of 2011 but would drop to 6.2% by the end of this parliamentary term.
Public sector workers, already having fallen out of love with the government, received further bad news from the Chancellor today. Although he confirmed the pay freeze will be lifted next year, he said public sector employees would only receive 1% for the first two years, not the 2% they had been hoping for. He said he was imposing the cap to be ‘fair to those who work hard to pay the tax to fund it.’
George Osborne also said that salaries for public sector employees should be tied far more closely to regional averages and a series of benchmarking exercises would be carried out across the country, to see how closely the wages could be changed in the future, to match local markets. Experts predict that this is not likely to be received warmly, as workers outside London could find themselves worse off.
Moving away from the public sector gripes, there were many other groups which are likely to be just as unhappy with the Chancellor.
Many had expected to see tax credits slashed or frozen and they were not disappointed. Other than the child and disability elements of the tax credit payment, all other parts will be frozen, despite the spiralling levels of inflation leaving many households with no money to pay for essentials. The rise in the child portion of the tax credit has now also been scrapped.
However, it wasn’t all bad news as, despite the rumours which had been circling the market, the government has agreed to honour the inflation-linked rise, despite the figure being far higher than in recent years.
This increase in state benefits includes those in receipt of the state pension and both the basic allowance, as well as pension credit, will rise by £5.30.
Pensioners of the future hoping to retire after 2026 will find they have to work longer as the state retirement age change to 67 has been brought forward by two years.
George Osborne also pledged to tackle the thorny issue of unemployment and has said a scheme will be introduced which means that young people will find it easier to get their foot on the career ladder. The incentive means that youngsters who have been out of work for three months or longer can expect to be automatically provided with work experience in the private sector, whilst those unemployed for at least nine months, there would be the chance of a position in a private enterprise, partially funded by the government.
The Chancellor also gave a boon to families who are currently living in social housing. He said that the right-to-buy scheme would be receiving a makeover and would allow those living in homes owned by one of the schemes to receive a 50% discount on the purchase price.
If you need advice on managing debts, speak to Baines & Ernst.