“Today’s Statement showed a Government that is maintaining borrowing levels at a reasonable level coupled with the anticipation of strong long term growth,” added Shilen Shah, bond strategist at Investec Wealth & Investment. “However, fortunately for George Osborne, this has been made possible by an economic environment of both low inflation and low interest rates. Indeed Labour has been somewhat snookered by Osborne’s mix of growth numbers and economic balancing.”
Richard Stone, chief executive of The Share Centre also noted that the resilience of the UK economy got Osborne out of a tight corner.
“The Autumn Statement was a highly political affair with a U-turn on tax credit changes and the police budget being protected as compared to the potential cuts trailed in advance,” he said. “The Chancellor was able to score these political points as a result of the strength of the UK economy. His borrowing forecasts have been boosted by an increase in the projected rate of growth in 2016, lower inflation and interest rates expected to stay lower for longer, which reduces the burden of debt interest. In addition the Chancellor will raise revenues from the levy on large employers for apprenticeships, and a higher rate of stamp duty on second homes and buy to let properties.”
Not all commentators were quite so welcoming. Julian Chillingworth, CIO of Rathbones, warned that the upgrading of the forecasting may threaten their credibility going forward.
“Modelling changes by the Office for Budgetary Responsibility have enabled the Conservatives to scrap much of their controversial cuts to tax credits, raise disability spending and dramatically reduce cuts to real departmental expenditure limits, all the while managing to increase the cyclically-adjusted budget surplus by the end of the current parliament by 0.1% of GDP,” he said.
