CITY workers were bracing themselves for tax hikes today, with private pensions likely to be targeted again in the Autumn Statement.
The chancellor has warned that he will use today’s mini-budget to force those on high incomes to pay more tax. There were also fears last night that the levy on bank balance sheets would be hiked once more.
Other measures expected to be announced in Osborne’s 12.30pm speech include the postponement of the planned 3p per litre fuel duty hike, another crackdown on tax avoidance, incentives for shale gas and reductions in welfare spending.
Over the next three years there will also be £5bn extra capital expenditure on education and transport, funded by additional spending cuts on Whitehall departments. Despite this increase in infrastructure investment, the government’s capital expenditure will have fallen sharply over the past three years, albeit on a scale broadly in line with cuts proposed under the last Labour government.
The Office for Budget Responsibility will also slash its growth forecasts for this year and next, and is expected to warn that the government’s second fiscal rule has been breached. The current six-year austerity plan is thus set to be extended even further.
Whitehall departments will be expected to cut day-to-day spending by one per cent (£950m) during the 2013-14 financial year, followed by a two per cent reduction (£2.5bn) by 2014-15, partly by sacking more civil servants. Schools, tax collection and foreign aid will escape the axe, as will army troops and gear.
The health budget will not be affected, though the UK Statistics Authority yesterday slammed ministers for claiming that NHS spending has risen in real terms between 2009-10 and 2011-12. It said that it had actually fallen.
Around £1bn of the money saved will be used to build 100 new academies and free schools, creating around 50,000 additional places.
Government spokesmen suggested ministers will be encouraged to follow the lead of education secretary Michael Gove, who last month cut over 1,000 jobs in his department.
The existing Private Finance Initiative scheme, which sees private firms working with the state on long-term infrastructure projects, will be replaced with a new programme that should give a greater role to the taxpayer and speed up the procurement process.
CBI director-general John Cridland, who has called for the government to commit funds to “shovel-ready” projects such as road building, said: “Targeting money at schools, transport and science will not just create construction jobs today but invests in our competitiveness tomorrow.”
Simon Walker, head of the Institute of Directors, said shifting spending from Whitehall will “generate significant benefits for the economy”.
“Businesses have been calling out for more investment in infrastructure, and will be pleased that it is being paid for out of savings elsewhere,” he added.