Autumn Statement 2013: background briefing - Commons Library Standard Note

Published 03 December 2013 | Standard notes SN06767

Authors: Daniel Harari, Dominic Webb, Gavin Thompson, Feargal McGuinness, Edward White, Paul Bolton

Topic: Economic policy, Economic situation, Public expenditure, Taxation

The economic backdrop to the Chancellor’s Autumn Statement is different from recent ‘set-piece’ events; the economy is growing at its most consistent rate since 2010 with forecasters expecting this improved performance to continue in 2014.

Reflecting the better economic outlook, the independent Office for Budget Responsibility (OBR) is expected to revise its forecasts for GDP growth upwards and lower its government borrowing forecasts. Its new assessment of the economy and public finances will be published alongside the Autumn Statement.

Analysis of the factors underpinning the improved growth performance and of whether the recovery can be sustained over the long-term is provided in section 2, while recent trends in bank lending to consumers and businesses, including small firms, are examined in section 3.

Despite higher growth rates, earnings are still growing by less than inflation, extending a phenomenon that began at the start of the 2008/2009 recession. The issue of rising energy bills has become totemic in the current political debate on living standards. Background information on green levies on energy bills, together with proposed policy changes, is provided in section 4.

The Chancellor is likely to present details of how policies that have been announced earlier in the year, and costing approximately £2 billion, are to be funded. These include:

• Universal free school meals for first three years at primary school (cost: £600 million)

• Transferable tax allowance for some married couples (cost: £700 million)

• An aspiration to scrap the rise in fuel duty planned for September 2014 (cost: £700 million)

The Government has already announced a range of policies to reduce energy bills, to be funded in part by measures to reduce tax avoidance.

Even with the expected improvement in the forecasts for the public finances, the deficit is still expected to be over £100 billion in 2013/14 (over 6% of GDP), limiting the Chancellor’s room for manoeuvre. Any further policy announcements will likely be paid for via tax increases or redeploying existing spending commitments.

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