Osborne Carefully Shuffles His Financial Deck

The Chancellor’s Autumn Statement 2015 was more about cuts and shuffling his limited financial resources around to plug holes in health, police, defence and welfare spending than tax.

For most taxpayers, their status remains the same, with no major changes.

George Osborne took labour’s thunder away on two counts – U-turns on withdrawing tax credits for poorer families and cutting police spending – by withdrawing both.

He gave the excuse that higher than expected tax revenues and more savings in other government departments offered him the flexibility not to make the cuts most people expected.

However, sometime between now and the next election in 2020, the Tories will face a leadership election and crafty George may just have an eye on challenging for top dog after playing second fiddle for a decade.

Two main tax changes

The main tax changes were aimed at two thorny areas –

  • Disguised employment – where a contractor or consultant claims they are self-employed when really they have some arrangement in place as an employee. New fines of up to 60% of the tax due plus new legislation is on the way to clear up ambiguities in the law.
  • Property investment – Buy to let landlords and second home owners will face a hefty extra 3% stamp duty levy on the purchase of a home where they do not intend to live from April 2016. Osborne reckons this will raise an extra £1 billion in tax by 2021 and release homes for first time buyers

His other news about the British economy is that the Office of Budget Responsibility has audited his figures and reckons GDP of around 2.4% a year for the next five years.

Shaky outlook

“Britain leads the way as the fastest growing economy in the G7,” Osborne told MPs.

He confusingly added ‘alongside the United States’ and failed to mention faster growing economies in several countries outside the G7, such as India and China.

The outlook for the UK for the next five years looks OK on the face of the figures, but Osborne is shrewd enough to know that world growth is still weak and faces many challenges.

Circumstances outside his control could undermine all the hard work at re-establishing Britain’s economy and despite the feel-good factor of more jobs, reasonable growth and falling debt, much could still go wrong.

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