An improvement in public finances means that tax credits will no longer be phased out according to the announcement of the 2015 Autumn Statement and Spending Review delivered by Chancellor George Osborne on Wednesday, November 25.
Changes included more help for first time buyers, extra control given to local councils which could result in a rise in council tax, and an additional 2% to be budgeted on defence. However, there will be no cuts or changes to the policing budget.
So how could the announcement affect you?
- Tax Credits: Due to an improvement in public finance, tax credits are expected to be phased out naturally as the government introduces universal credit. This means that the tax credit taper rate and thresholds remain the same.
- Help to Buy: More will be done to help first time buyers get onto the property ladder. The Help to Buy Scheme will now include shared ownership. Also from April 1 2016, people buying additional properties as second homes or as a buy to let will pay an additional 3% in stamp duty. The additional money raised from the tax will then be used to continue to help first time buyers.
- Council tax: Local councils will be provided with the power to increase council tax by up to 2% to help towards the cost of social care within that area. From 2020 they will also be able to keep all the money from business rates collected from shops and business in order to help pay for local services such as libraries, transport and street repairs.
- NHS: The NHS will see a benefit from the Autumn Statement as Osborne has promised an additional £10 billion more a year by 2020 to fund more operations, treatments and a seven day a week service at hospitals. To help combat the staff shortage in the NHS, the cap on the number of nurses and midwifes that can go into training each year has been removed and grants will be replaced by loans. This should be able to provide an additional 10,000 more nurses and other healthcare professionals across the country.
- Pensions: The basic state pension will benefit with a rise of £3.35 a week to boost it to £119.30 in total.
- Tampon Tax: In response to the recent discussions on the Tampon Tax, although the 5% VAT will remain, the £15 million that it generates each year will be allocated towards women health charities.
Local leaders react to Autumn Statement
Marc Jones, portfolio holder for finance and property at Lincolnshire County Council, said: “Keeping in mind that we’ve made significant cuts already, we are looking over the next period up to 2019/20 at around £130 million coming out of our yearly budget, on top of which, we didn’t hear anything today about the living wage, as that would place and additional £30 – 35 million worth of pressure.
“So potentially, £160 – 165 million we need to find in cuts.”
Marc Jones is also the Conservative candidate for the police and crime elections that will take place in May next year. He added: “I’m really pleased that they’ve listened to people’s concerns and it’s really important that we don’t undermine the work that the police are doing.
“Crime is lower but certain areas are rising. Sexual crime is a key important area rural crime remains a massive challenge.
“Certainly they’re areas that I would want to tackle if I get elected in May and I look forward to seeing the detail of budget proposals as to how much money Lincolnshire police gets and obviously the county council.”
Lincolnshire Police and PCC Alan Hardwick said they will expect further details on the plans before they make a comment.
Jaclyn Gibson, Assistant Director for Business Development and Finance at City of Lincoln Council, said: “As ever with Spending Review announcements it will take some time for us to digest all of the information it contains and we will need to look beyond today’s headline announcements to assess the real effect on the council and the residents of Lincoln.
“Local authorities have already suffered a significant reduction in resources in order to contribute to the required public expenditure reductions and today’s Spending Review looks to provide little relief. The council itself has seen its government funding assessment cut by £4.5m which equates to 43% over the past five years.”
What it means for local businesses
Colin Davie, Executive Member for Economic Development, said: “The chancellor continues to put economic security at the heart of his strategy, and today’s announcement shows he clearly recognises what’s important to local businesses.
“There is good news on key infrastructure issues such as roads, flood defences, broadband, and energy.
“And support that helps Lincolnshire businesses to invest in their own projects is also to be welcomed, and will be of benefit to both the local and national economy.
“However, growth is not just achieved through improving infrastructure –skills and innovation are also vital and I’m pleased to see investment in these areas.
“The chancellor’s commitment to the arts and culture should also be applauded. These are an important way to attract people to the county and can help boost our thriving tourism industry.
“However, the local impact of changes to the business rates policies needs to be properly understood, and it is a shame there were not specific commitments for the East Midlands or Lincolnshire.
“But, ultimately, I’m optimistic that this latest Spending Review will help us build on the upwards momentum we’re experiencing in the local economy.”
James Pinchbeck, Marketing Partner, Streets Chartered Accountants, said: “It’s a balancing act; the Chancellor’s success in achieving his goals will be dependent on realising public sector ‘efficiencies’, attaining tax revenues and businesses thriving whilst at the same time delivering public sector services and infrastructure investment.
“The specific tax related issues were the new higher rates of Stamp Duty Land Tax (SDLT) on the purchase of buy to let and second homes and the timing of payments for capital gains due on the sale of residential property.
“There were also announcements regarding support for the Midlands Engine, but in terms of Lincolnshire we still need to get to grips with our part in the engine and what this support may look like.”
Subscribe free to the Lincolnshire Business magazine, out this Friday, for more reactions and analysis from business leaders on the Autumn Statement.