Watson Buckle Blog
Cautious optimism on the UK economy
After two budgets earlier this year, it may have come as a relief to many people that the new government has done away with the autumn Pre-Budget Report, thus ensuring there would not be a third set of tax or spending changes in 2010.
Nonetheless, its replacement – the Autumn Budget Statement – gave an interesting insight into the current state of the UK economy and the government’s thinking going forward.
The statement, by Chancellor George Osborne, followed the publication of the latest report by the new Office for Budget Responsibility (OBR) which painted a relatively upbeat picture of the UK’s current situation – growth this year would be higher than previously thought at 1.8 per cent, and slightly healthier public finances meant the number of public sector job cuts required to balance the books was revised downwards.
However, this was countered by lower growth forecasts for subsequent years – down from 2.3 per cent to 2.1 per cent in 2011 and from 2.8 per cent to 2.6 per cent for 2012.
Predictably, the Chancellor seized on the positives, saying that the latest figures showed the UK economy was moving in the right direction. Nonetheless, the OBR cautioned that the path to recovery would not be an easy one, with growth set to be slower than that which followed previous recessions and significant headwinds remaining from job insecurity in the UK and slowing global demand.
All of this means that the government may have little room for manoeuvre over the coming years, if new investment or tax cuts are needed to keep the recovery going. Nonetheless, George Osborne gave a clear indication of his priorities, with his one specific tax announcement being a plan to cut Corporation Tax arising from patent income and a pledge to begin consulting on how to reform the company tax regime, to make the UK a simpler and cheaper place to do business.
With the UK’s small businesses and exporters already playing a leading role in helping the country out of recession, it is to be hoped that the government does all it can to make life easier for them.
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John Kinsella
Tax Partner
Watson Buckle
