Autumn Statement 2011 - Protecting the economy

Sound public finances are essential to maintain confidence in the UK economy during a period of global uncertainty and to secure sustainable long-term growth. Due to the ongoing impact of the financial crisis, the euro area crisis, and high global commodity prices, the Office for Budget Responsibility (link) is forecasting slower growth in the UK economy. In turn, this would make it necessary for the Government to borrow more money to make up for the shortfall in tax receipts.

In order to maintain economic stability and to meet its fiscal targets, the Chancellor has announced some reductions in public spending. The Government will:

set plans for spending in 2015-16 and 2016-17 in line with the reductions in the current Spending Review period;
raise the State Pension age to 67 between April 2026 and 2028, as people live longer, saving an expected £60bn in today’s prices between 2026-27 and 2035-36;
set public sector pay increases at an average of one per cent for the two years after the current pay freeze comes to an end; and
freeze the couple and lone parent elements of the Working Tax Credit in 2012-13 and not increase the child element of Child Tax Credit by more than inflation.

The intensifying euro area crisis is now causing alarm in the markets and affecting economies in many countries, including our own. As a consequence of this, businesses are finding it harder to get hold of the financing they need to operate. To support the economy through this difficult period, the Government will take action to inject money directly into the parts of the economy that need it, including:

up to £21bn of support known as credit easing, through a National Loan Guarantee Scheme and a Business Finance Partnership. This will strengthen the flow of credit to smaller businesses that do not have ready access to capital markets. This will complement the other elements of monetary activism that are happening, including keeping interest rates low and quantitative easing.
a reduction of the maximum Asset Purchase Facility limit for purchases of eligible private sector assets by £40 billion to a ceiling of £10 billion, financed by the issuance of central bank reserves, Treasury Bills and the DMO’s cash management operations.

View the Government’s announcements on the other key themes for the Autumn Statement:

Autumn Statement 2011 - Protecting the economy

Share

Autumn Statement 2011