Low interest rates will continue, infrastructure investment will increase and credit will be encouraged towards small and medium-sized businesses.
Chancellor George Osborne claimed the Government will also “accelerate its supply-side reforms to support enterprise and create a balanced model of economic growth in the medium term”.
The backdrop to his plans to protect the economy is that, according to the Office for Budgetary Responsibility (OBR) – and “as a result of the ongoing impact of the financial crisis, the euro area crisis and commodity shocks – economic growth will slow and borrowing will have to rise. The independent OBR expects the UK economy to grow by 0.9% this year and 0.7% in 2012. These figures compare to forecasts in March of 1.7% and 0.7% respectively.
The OBR’s global growth forecasts have been revised downwards from 4.3% to 3.5% and from 1.8% to 0.5% for the eurozone.
The details announced amount to a Plan B given he admitted that he would not be able to get national debt down by 2014-15 and be rid of the structural deficit which is now expected to disappear by 2015-16.
Some of the more relevant specifics are:
Infrastructure
The Government will use the savings from current spending generated over the Spending Review 2010 period to fund £6.3bn of additional infrastructure spending, of which £1.3bn was announced earlier in the autumn.
An extra £1bn of new private sector investment in regulated industries will be supported by government guarantee.
The Government is also announcing commitments to £5bn of capital projects in the next Spending Review period, as part of the National Infrastructure Plan that includes a proposed deal with two groups of UK pension funds to support additional investment in UK infrastructure.
Credit easing
The Government will introduce a National Loan Guarantee Scheme with up to £20bn of guarantees for bank funding to be made available over two years. This will allow banks to offer lower-cost lending to smaller businesses, subject to state aid approval.
An additional £1bn will be made available through a Business Finance Partnership which will invest in smaller and mid-sized businesses in the UK through nonbank channels.
Enterprise
A new Seed Enterprise Investment Scheme (SEIS) will come into effect from April 2012, offering 50% income tax relief on investments, and will offer a capital gains tax exemption on gains realised in 2012-13 and then invested through SEIS in the same year.
