Economic Growth Forecasts
The Office of Budget Responsibility will, later this week, announce the forecasts for economic growth. The July predictions anticipated growth of 2.4% this year, however, the Chancellor’s comments about ‘storm clouds’ suggest the economy is not as strong as previously thought.
This is then expected to have an impact on the surplus targets. The Chancellor presented plans to run a £10bn surplus by 2020-21, however with a slower economy and lower tax revenues than anticipated, the targets could be reduced to more modest levels. George Osborne is also expected to explain how he will raise revenue for the £5bn of anti-tax avoidance measures announced in the Summer Budget.
A key focus on the Summer Budget was the cuts to tax credits. These were subsequently quashed by the House of Lords and the Chancellor will be expected to explain how he intends to mitigate this. In numerous interviews, George Osborne has claimed to have listened to the concerns about the policy and alternative cuts, but these changes are likely to spark debate.
The Chancellor is also due to announce five-year spending plans across Whitehall departments to show how he will deliver the £20bn of cuts or tax increases to deliver his promise of eliminating the public sector deficit by 2020-2021. George Osborne has promised the cuts will come from government efficiencies.
There has been a lot of speculation this week about the pensions system and the receipt of tax relief. George Osborne has suggested the current system of tax relief on contributions, tax in and tax-free out, will be scrapped in favour of a new ISA-style tax treatment. This would mean there would be no tax liability on the savings, but on the withdrawal.
In addition to this, the Chancellor is expected to confirm that the state pension will be uprated to £119.30 a week. This means it will be in-line with the government’s “triple lock” promise to increase it by whichever is the highest of wage growth, inflation or 2.5%.
Osborne has promised a series of measures which he says will turn “generation rent” into “generation buy”. The plans are to build 200,000 new starter homes which will be offered to first-time buyers at a 20% discount.