Osborne: safe haven status saves £21.5bn

GEORGE Osborne, the chancellor, will today claim to have saved the taxpayer some £21.5bn in debt interest payments, arguing his deficit reduction plan has kept yields on government bonds at record lows.

Osborne is expected to announce the so-called “safe haven dividend” when he delivers his Autumn Statement to the House of Commons this afternoon. It is expected to contain a raft of so-called micro-measures designed to boost flagging growth without the need for tax cuts or higher government spending.

The chancellor has used forecasts from the Office for Budget Responsibility, which predicted Britain’s interest payments before the Budget in March, when the yield on 10 year gilts was 3.6 per cent.

At the end of last week, the rate on 10 year gilts was 2.3 per cent – 1.3 per cent less – equating to a implied saving of £21.5bn by 2015-16. However, this number will change if the OBR adjusts its forecasts for growth or public finances, as is widely expected.

Osborne is also expected to announce a package designed to boost smaller firms, including a new scheme to encourage investment in small and medium-sized start-up companies. Individuals who invest in these companies will receive 50 per cent income tax relief up to an investment limit of £100,000. Those who reinvest their gains in the business will pay no capital gains tax in 2012-13.

He will also announce a £50m fund to invest alongside “business angels” to help fund small, high-growth businesses.

And he will extend rate relief for small businesses for six months until April 2013. Those with a rateable value of less than £6,000 will pay no rates while those with a rateable value up to £12,000 will get some relief. In total, 500,000 firms will benefit.

Osborne is also expected to unveil prompter payment of government contractors, who currently have to wait up to 100 days before being paid.

A Treasury source said: “The overall tone is that the chancellor wants to continue to protect Britain from the gathering debt storm.”

Meanwhile, the chancellor is expected to announce an extention of free childcare for the most disadvantaged two year olds. The number of eligible children will be doubled from 130,000 to 260,000, costing the government an extra £650m by 2014-15.