Autumn Statement: Osborne's statement in full

The full statement from Chancellor George Osborne.

Autumn Statement document in full (PDF)

Read our round-up of Chancellor George Osborne's key points

 

The UK economy is recovering from the biggest financial crisis in generations. Prior to the crisis, underlying competitiveness fell and economic growth was driven by unsustainable levels of debt. The June Budget 2010 set out the Government's plan to reduce the deficit and rebuild the economy. The actions taken restored stability, reduced market interest rates to record lows and set in place a plan to build a stronger and more balanced economy for the future.

Since then, the UK economy has been hit by a series of shocks which have significantly weakened the economic and fiscal outlook:

• higher than expected inflation, driven by a sharp increase in global commodity prices - the Office for Budget Responsibility (OBR) consider this to be the main reason the economy has grown more slowly than expected since the June Budget 2010;
• the euro area crisis has increased instability and uncertainty - this is feeding through to household and corporate spending decisions and to tighter credit conditions across the world; and
• most significantly for medium-term growth prospects, the full scale and persistent impact of the 2008-09 financial crisis has become clearer - the OBR has now significantly revised down its projection of the trend rate of growth by a margin consistent with previous financial crises.

The intensifying sovereign debt crisis shows how important it is for the Government to implement its deficit reduction plan and maintain the UK's position as a safe haven. The Government is therefore taking action in the Autumn Statement to ensure it continues to meet its fiscal targets and protect the economy.

The Government will deliver permanent reductions in spending, using the savings over the Spending Review period to fund infrastructure investment critical to growth and to support social mobility. The Government will complement the monetary activism of low interest rates and quantitative easing by launching a package of credit easing measures to protect the flow of credit to smaller and mid-sized businesses. Finally, the Government will accelerate its supply-side reforms to support enterprise and create a balanced model of economic growth in the medium term.

The Autumn Statement sets out the actions the Government will take in three areas:

• protecting the economy;
• building a stronger economy for the future; and
• fairness.

Protecting the economy

The OBR forecast that, as a result of the ongoing impact of the financial crisis, the euro area crisis and commodity shocks economic growth will be slower, the trend level of economic 6 Autumn Statement 2011 output will be lower, and borrowing will be higher over the forecast period. In order to maintain economic stability and meet its fiscal rules, the Government will:

• set plans for public spending in 2015-16 and 2016-17 in line with the spending reductions over the Spending Review 2010 period;
• raise the State Pension age to 67 between April 2026 and April 2028 in response to changes in demography. This measure is expected to save around £60 billion in today's prices between 2026-27 and 2035-36;
• set public sector pay awards at an average of one per cent for each of the two years after the current pay freeze comes to an end. Departmental budgets will be adjusted in line with this policy, with the exception of the health and schools budgets, where the money saved will be recycled;
• uprate the child element of the Child Tax Credit and disability elements of tax credits in line with the Consumer Prices Index in 2012-13. The Government will not go ahead with the planned £110 above inflation increase to the child element of the Child Tax Credit and will not uprate the couple and lone parent elements of the Working Tax Credit in 2012-13, to ensure the welfare system remains affordable; and
• adjust the allocation of Official Development Assistance in line with the OBR's revised growth forecast, so that the UK spends 0.56 per cent of Gross National Income on Official Development Assistance in 2012, and 0.7 per cent in 2013 and thereafter.