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‘No miracle cure’ as UK austerity drive continues

Chancellor George Osborne delivered his third and arguably most economically significant Autumn Statement to the House of Commons, against a background of global economic uncertainty.

With the past year bearing witness to ongoing difficulties in the eurozone, the Chancellor faced something of a delicate balancing act in his bid to encourage growth while sticking to the austerity programme.

As predicted by many economists, the Chancellor announced that growth will be slower and borrowing levels higher than originally predicted. The Office for Budget Responsibility has downgraded its growth forecasts, with the UK economy set to shrink by 0.1% this year, compared with a previous prediction of 0.8% growth, and the forecast for 2013 set at 1.2%.

While the Chancellor remains on course to meet his fiscal mandate, he will miss his target for reducing the national debt, and will instead be forced to extend austerity measures to 2018.

Despite this, Mr Osborne argued that ‘turning back now would be a disaster’, and was keen to emphasise that high earners would bear their ‘fair share’ of the load. While ruling out the introduction of a so-called ‘mansion tax’, the Chancellor confirmed that the annual cap on tax-free pension contributions will fall from £50,000 to £40,000, and the lifetime allowance will also fall, with effect from 2014.

Tax avoidance was another key concern, with the Chancellor announcing a general anti-abuse rule to take effect from next year.

The basic personal income tax allowance will see a further increase next April, rising to £9,440.

The Chancellor announced a number of measures aimed at assisting businesses and encouraging investment, including an additional 1% cut in corporation tax from 2014, and a ten-fold increase in capital allowances for plant and machinery.

In a bid to help small businesses, the Small Business Rate Relief scheme will be extended by a further year, and a new Business Bank, aimed at boosting investment in small firms, will receive £1bn of extra capital.

Following widespread calls from business groups, the Chancellor also confirmed that the 3p a litre rise in fuel duty planned for January 2013 has been cancelled.