Background to the 2012 Autumn Statement

The Chancellor will present the Autumn Statement to the House of Commons on Wednesday 5 December. On the same day, the independent Office for Budget Responsibility (OBR) will present revised forecasts for the economy and public finances. It will also give its assessment of the Government’s chances of meeting its fiscal rules.

The economy has a long way to go before it recovers fully from the financial crisis. Economic growth has been sluggish over the last couple of years. GDP is still more than 3% below its pre-recession peak. Independent forecasters expect GDP to fall slightly in 2012 and only modest growth in the medium term. The Office for Budget Responsibility (OBR) is highly likely to downgrade its growth forecasts in the Autumn Statement.

The Chancellor has admitted that it is taking longer than expected to improve the public finances. The OBR is likely to revise up its forecasts for government borrowing and debt. This would make it harder for the Chancellor to meet his fiscal rules without further tax increases or spending cuts. The rule which requires debt to be falling as a percentage of GDP in 2015/16 is thought to be particularly under threat.

There has been speculation that the Autumn Statement will contain a number of measures, including reducing pension tax relief, clamping down on tax avoidance and changes to benefits. It has also been suggested that the increase in fuel duty due in January could be deferred.