Autumn Statement - a financial adviser´s take

One of George Osborne´s early decisions as Chancellor was that there would be no more Pre-Budget Reports, writes Paul Verwoert of Hartsfield Financial Services Limited.

Instead the tradition of the Autumn Statement was to be reintroduced, allowing the Chancellor to give an interim view of the UK´s finances.

However, the Chancellor´s 2011 Autumn Statement looked very much like a Pre-Budget Report of old. Mr Osborne made a wide range of announcements (and re-announcements) on everything from nursery care for disadvantaged two-year-olds to 100 percent capital allowances for the Black Country enterprise zone.

More details are likely to emerge when the draft Finance Bill 2012 legislation is published on 6 December.

The raft of measures were nearly all aimed at stimulating growth and limited the time that the Chancellor could spend on addressing budgetary matters.

This may have suited Mr Osborne, as the news was not good. Updated projections from the Office for Budget Responsibility  show that the Treasury  budgetary target will not be met until 2016/17, two years later than predicted at the time of the March 2011 Budget.

Key announcements

The key announcements include: 

• State pensions and working age and disability benefits to rise in line with consumer prices index (CPI) inflation of 5.2% from next April
• An increase in the state pension age to 67, phased in over two years from April 2026
• A deferral of the planned January 3p fuel price increase to August, with the August increase cancelled
• A new Seed Enterprise Investment Scheme (SEIS) to be launched from April 2012, with 50% tax relief for investments of up to £100,000 and a capital gains tax (CGT) exemption for reinvestment
• A freezing of the CGT annual exemption for 2012/13
• A variety of measures to increase the availability of finance for small and medium-sized enterprises
• The extension of the small business rate relief for a further six months from 1 October 2012

Help for small businesses?

On the surface of it, yes, with an extension to the small business rate relief holiday to April 2013, the National Loan Guarantee Scheme and Business Finance Partnership.

But under the Loan Guarantee scheme the Government is not underwriting the borrowing of SMEs themselves. What is actually being guaranteed is £20bn of capital that banks would raise in the market to lend to small businesses.

The Government hopes that SMEs will then receive a comparative reduction in their rate of borrowing of one percent. Not, in itself, unhelpful but at small levels of, say, £50,000 worth of borrowing we´re looking at an annual saving of £500.

Additionally, the credit risk remains with the bank, so we can only assume that the lenders will continue to apply their existing credit-scoring measures. Consequently, any business currently struggling to secure finance will most likely continue to do so.

With Project Merlin having failed to free-up capital for small businesses many companies are either choosing, or being forced, to say ´no´ to the banks and consider alternative means of raising the finance they need.

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