George Osborne makes his Autumn statement to the Commons.

29th November 2011

Ian Copelin, Investment Director, my wealth, comments “The Chancellor of the Exchequer, George Osborne, today gave his Autumn Statement to the House of Commons.  It was keenly awaited by the markets given the backdrop of global uncertainty and slowing economic growth due to the European debt crisis.

It was announced that the Office for Budget Responsibility (OBR) now estimates that the UK economy will grow by 0.9% in 2011 (versus an earlier estimate of 1.7%) and 0.7% next year (versus 2.5% previously).

Consequently, George Osborne said that the government will now have to borrow more and extend spending cuts to narrow the budget deficit – which is now expected to be £120 billion during the next financial year (ending March 2013), versus his previous forecast of £101 billion.

As a result, George Osborne announced that the duration of his austerity plan will be extended by two years – spending will be cut by 0.9% a year in real terms starting in April 2015, adding to £80 billion of reductions he already planned, allowing him to meet his target of eliminating the structural budget deficit.

George Osborne also said that he was cancelling the 3p per litre increase in fuel duty which was scheduled for January 2012 and said that the government will provide funds to limit rail fare increases to RPI plus 1 percentage point, rather than 3 percentage points.

The market reacted positively to the statement:  as I write (3.15pm), 10-year gilts have advanced, with yields down 4 basis points at 2.23% (well below the 2.35% for the equivalent German bonds); the pound has strengthen to $1.562 against the US dollar; and the FTSE-100 has risen 10.6 points or 0.2%.”