This article is from the source 'nytimes' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at http://www.nytimes.com/2014/12/04/business/british-treasury-chief-policy-statement-george-osborne.html
The article has changed 4 times. There is an RSS feed of changes available.
| Version 2 | Version 3 |
|---|---|
| In Autumn Statement, George Osborne Points to Economic Success | In Autumn Statement, George Osborne Points to Economic Success |
| (35 minutes later) | |
| LONDON — Still battling to clean up Britain’s public finances, George Osborne, the chancellor of the Exchequer, on Wednesday offered limited giveaways to Britons but claimed credit for delivering them rapid economic growth. It was his last big economic policy statement before the country’s national election next spring. | LONDON — Still battling to clean up Britain’s public finances, George Osborne, the chancellor of the Exchequer, on Wednesday offered limited giveaways to Britons but claimed credit for delivering them rapid economic growth. It was his last big economic policy statement before the country’s national election next spring. |
| And in an effort to show that his Conservative Party is willing to take on big business, Mr. Osborne announced a plan — still sketchy in its details — to impose a 25 percent profit tax on multinationals that do business in Britain but have structures that enable them to shift much of the tax liability offshore. | |
| Mr. Osborne said that the government would ensure that big multinational businesses “pay their fair share of tax” — a response to complaints that companies including Google and Starbucks have used complex accounting arrangements to limit their tax liability in Britain. | |
| “Some of the largest companies in the world, including those in the tech sector, use elaborate structures to avoid paying taxes,” he said. | |
| How the new tax would be calculated has not yet been specified, although the Treasury said it would go into effect next April. | |
| Some tax experts, though, predicted that the plan would have minimal effect on the business and tax strategies of multinational companies. | |
| By several measures, Britain is Western Europe’s economic success story, with one of the fastest levels of growth in major developed economies and rapidly falling unemployment. On Wednesday, the growth forecast for 2014 in Britain was upgraded to 3 percent, from the 2.7 percent predicted in March. | |
| That is on par with growth in the United States and much better than the economic performance in the 18-country eurozone currency union, of which Britain is not a member. | That is on par with growth in the United States and much better than the economic performance in the 18-country eurozone currency union, of which Britain is not a member. |
| But many of those new British jobs are paying low wages, productivity levels are continuing to disappoint, and tax receipts have fallen short of expectations. | But many of those new British jobs are paying low wages, productivity levels are continuing to disappoint, and tax receipts have fallen short of expectations. |
| Just after he came to power in 2010, Prime Minister David Cameron promised to “balance the books” within five years. On Wednesday, Mr. Osborne said that while the country’s budget deficit was falling, it was “still too high,” with borrowing projected at 91.3 billion pounds, or about $146 billion, this year and £75.9 billion next year. | |
| National debt is now expected to exceed 80 percent of gross domestic product this year, peaking at just over 81 percent in 2015. | National debt is now expected to exceed 80 percent of gross domestic product this year, peaking at just over 81 percent in 2015. |
| That means that, whoever wins next year’s elections, the austerity and squeeze on public spending that Britain has experienced after the financial crisis are destined to continue for several years. | That means that, whoever wins next year’s elections, the austerity and squeeze on public spending that Britain has experienced after the financial crisis are destined to continue for several years. |
| Nevertheless, after months in which the national discourse has been dominated by issues like immigration, Mr. Osborne is keen to steer the economy toward the center of the political debate. Opinion polls show that his Conservative Party is trusted by more voters on economic management than is the Labour Party, the main opposition in May’s general election. | Nevertheless, after months in which the national discourse has been dominated by issues like immigration, Mr. Osborne is keen to steer the economy toward the center of the political debate. Opinion polls show that his Conservative Party is trusted by more voters on economic management than is the Labour Party, the main opposition in May’s general election. |
| On Wednesday, he urged Britons not to risk “the economic security we have gained” and said that he had a “long term economic plan on course to prosperity.” | On Wednesday, he urged Britons not to risk “the economic security we have gained” and said that he had a “long term economic plan on course to prosperity.” |
| Mr. Osborne’s most eye-catching announcement was a change to the stamp duty, a tax levied on the purchase of properties, to shift more of the burden onto higher-value homes. That appeared to be an attempt to pre-empt the opposition Labour Party’s plans to place an annual “mansion tax” on expensive properties. | |
| He also described a measure to curb the losses from the financial crisis that banks can offset against their taxes. | He also described a measure to curb the losses from the financial crisis that banks can offset against their taxes. |
| Concessions also included the abolition of air passenger taxes for children, and of a tax levied when pensions are inherited by spouses. Similarly, married people will also be able to inherit tax-free savings accounts from their partners without paying any duty. | Concessions also included the abolition of air passenger taxes for children, and of a tax levied when pensions are inherited by spouses. Similarly, married people will also be able to inherit tax-free savings accounts from their partners without paying any duty. |
| For all those voter tidbits, though, Mr. Osborne had few options to turn Wednesday’s spending plan, known as the Autumn Statement, into a festive, pre-Christmas giveaway. That is because government borrowing remains stubbornly high, with a budget deficit of around 5.8 percent of gross domestic product — higher than many countries in the eurozone. The Autumn Statement is the treasury chief’s stage for outlining the state of the nation’s finances and the government’s future tax and spending plans | For all those voter tidbits, though, Mr. Osborne had few options to turn Wednesday’s spending plan, known as the Autumn Statement, into a festive, pre-Christmas giveaway. That is because government borrowing remains stubbornly high, with a budget deficit of around 5.8 percent of gross domestic product — higher than many countries in the eurozone. The Autumn Statement is the treasury chief’s stage for outlining the state of the nation’s finances and the government’s future tax and spending plans |
| “He doesn’t have anything like as much room for maneuver as he would like to have,” said Philip Rush, chief British economist for Nomura in London. “There is no fiscal room to come out with a big pledge on tax cuts.” | “He doesn’t have anything like as much room for maneuver as he would like to have,” said Philip Rush, chief British economist for Nomura in London. “There is no fiscal room to come out with a big pledge on tax cuts.” |
| “The fact that productivity has been weak means you have been creating a labor-intensive recovery,” Mr. Rush added, “and these are lower-paying jobs than the ones that were being created pre-crisis. The mix of jobs in the economy is relatively low skilled compared with beforehand. They are not generating the tax receipts you would have expected.” | “The fact that productivity has been weak means you have been creating a labor-intensive recovery,” Mr. Rush added, “and these are lower-paying jobs than the ones that were being created pre-crisis. The mix of jobs in the economy is relatively low skilled compared with beforehand. They are not generating the tax receipts you would have expected.” |
| Mr. Rush said that Britain remained at risk if the global economic picture deteriorated. The country, he said, could be left with “an economy with no spare capacity but still a very large deficit,” adding that “in terms of the longer-term fundamentals, there is still a lot of weakness.” | Mr. Rush said that Britain remained at risk if the global economic picture deteriorated. The country, he said, could be left with “an economy with no spare capacity but still a very large deficit,” adding that “in terms of the longer-term fundamentals, there is still a lot of weakness.” |
| But for now, economic growth rates in Britain are the envy of most European finance ministers. | But for now, economic growth rates in Britain are the envy of most European finance ministers. |
| Government officials attribute the country’s relative success to the fact that Britain is outside the euro currency union and can set its own economic path. That is how its central bank, the Bank of England, was able to embrace a bond-buying stimulus program, called quantitative easing, which the United States Federal Reserve also employed to revive growth. The European Central Bank, trying to juggle the priorities of 18 different countries, has not yet heeded many economists’ call to embark on a similar stimulus program. | Government officials attribute the country’s relative success to the fact that Britain is outside the euro currency union and can set its own economic path. That is how its central bank, the Bank of England, was able to embrace a bond-buying stimulus program, called quantitative easing, which the United States Federal Reserve also employed to revive growth. The European Central Bank, trying to juggle the priorities of 18 different countries, has not yet heeded many economists’ call to embark on a similar stimulus program. |
| Moreover, the Cameron government, having introduced big spending cuts in 2010, showed flexibility when deficit reduction targets were missed and extended deadlines, rather than making further spending reductions that could have plunged the country back into recession. The eurozone’s focus on deficit reduction and austerity budgets, by contrast, has been blamed for the protracted economic malaise in the currency bloc. | Moreover, the Cameron government, having introduced big spending cuts in 2010, showed flexibility when deficit reduction targets were missed and extended deadlines, rather than making further spending reductions that could have plunged the country back into recession. The eurozone’s focus on deficit reduction and austerity budgets, by contrast, has been blamed for the protracted economic malaise in the currency bloc. |
| Whether British voters are feeling the impact of growth enough to reward Mr. Osborne is a central question of next year’s election. The Labour Party has campaigned hard against the cost of living, arguing that voters are being squeezed by the lack of real wage increases. | Whether British voters are feeling the impact of growth enough to reward Mr. Osborne is a central question of next year’s election. The Labour Party has campaigned hard against the cost of living, arguing that voters are being squeezed by the lack of real wage increases. |
| “They promised living standards would rise, but while millionaires have got a huge tax cut, working people are £1,600 a year worse off” under the Conservatives, Ed Balls, who speaks for the Labour Party on the economy, said in a statement released on Wednesday before Mr. Osborne spoke. | “They promised living standards would rise, but while millionaires have got a huge tax cut, working people are £1,600 a year worse off” under the Conservatives, Ed Balls, who speaks for the Labour Party on the economy, said in a statement released on Wednesday before Mr. Osborne spoke. |
| “This cost-of-living crisis is why the chancellor will have to admit he has broken his promise to balance the books by next year,” Mr. Balls added, referring to Mr. Osborne. | |
| Wednesday’s announcement was preceded by several days of government infrastructure pledges including £2 billion, or about $3.1 billion, for health; £15 billion for road-building; and £2.3 billion for flood defenses. | |
| The government will also help finance the construction of up to 13,000 homes in a new “garden city” in Bicester, in the county of Oxfordshire, west of London. | |
| But, while grabbing headlines, the infrastructure announcements did not involve new money. Instead, they laid out how Mr. Osborne would spend investment funds already budgeted for whatever government is elected next year. | But, while grabbing headlines, the infrastructure announcements did not involve new money. Instead, they laid out how Mr. Osborne would spend investment funds already budgeted for whatever government is elected next year. |
| Before the last general election, the Conservative Party highlighted the need for budget consolidation, and some analysts say that message hampered their campaign. After the vote, Mr. Cameron became prime minister, but only by forming a coalition government with the centrist Liberal Democrats. | |
| In the Conservative Party, there is a lively debate about the appropriate level of optimism to sound on the economy this time. In October, Mr. Cameron promised that, if re-elected, he would make around £7 billion in tax cuts by 2020. How this would be funded against the backdrop of weak public finances remains unclear. | In the Conservative Party, there is a lively debate about the appropriate level of optimism to sound on the economy this time. In October, Mr. Cameron promised that, if re-elected, he would make around £7 billion in tax cuts by 2020. How this would be funded against the backdrop of weak public finances remains unclear. |
| But the Conservatives are betting that discussion of the economy will play to their strengths, despite the disappointing progress on cutting debt and the deficit. | But the Conservatives are betting that discussion of the economy will play to their strengths, despite the disappointing progress on cutting debt and the deficit. |
| “The government knows that it has a lot more credibility on the economy than Labour,” Mr. Rush, the Nomura economist, said, “and that it makes a lot of political sense for them to keep the debate on this area.” |