Chancellor George Osborne delivered his Autumn Statement 2012 on Wednesday 5 December 2012.
The overall tone of the Autumn Statement 2012 was "pain now, pain later," according to the Telegraph.
Osborne said in his Autumn Statement 2012 speech that "the British economy is healing." But he also emphasised that "there are no miracle cures. Just the hard work of dealing with our deficit and ensuring that Britain wins the global race."
Here we look at some of the key points from the Autumn Statement 2012, including those relating to the Coalition Government's debt reduction targets, official forecasts for UK economic growth, and the confirmation of the new "employee-shareholder" contracts (previously referred to as "employee-owner" contracts.
'Age of austerity' extended to 2018
The work of dealing with the deficit is set to be even harder and even more protracted.
The official schedule for the current 'age of austerity' was extended to 2017/2018, as the Coalition Government is set to miss Osborne's target (announced in 2010) to eliminate the budget deficit by the end of the current parliament in 2015.
NIESR's Jonathan Portes argues that because of this, "the Autumn Statement confirms that ultimately self-defeating austerity is just that. Weaker tax revenues, the result of weak growth, mean that the government's original fiscal targets are now unachievable."
OBR expects UK economy to contract in Q4 2012...
Coinciding with the Autumn Statement 2012, the Office for Budget Responsibility (OBR) published its latest growth forecasts.
The OBR expects the economy to contract by 0.1% in Q4 2012.
The OBR's forecast "would put the UK within a whisker of an unprecedented triple-dip, just when it had bounced back from the double-dip," Sky's Ed Conway notes.
A triple-dip recession scenario would see the current recovery in UK economic growth go into reverse, plunging the economy back into negative territory for two or more successive quarters.
...but no triple-dip recession?
However, the OBR expects growth in Q1 2013 to be positive, meaning that the UK would avoid a triple-dip recession.
The OBR expects the UK economy to recover slowly over the coming years, growing by 1.2% in 2013 and 2.0% in 2014.
'Employee-shareholder' contracts confirmed
The Autumn Statement 2012 also included a number of employment-related announcements. Arguably the most eagerly-awaited of these was that relating to the controversial "employee-shareholder" contracts.
As XpertHR reports, Osborne also used the Autumn Statement 2012 to "confirm various employment-related announcements, including the introduction of a new 'employee-shareholder' status (previously referred to as "employee-owner" status), which will give employee shareholders shares in the company in exchange for giving up certain employment rights, including the right to claim "ordinary" unfair dismissal and to receive statutory redundancy payments."
The Coalition Government's confirmation of the new "employee-shareholder" contracts came just one day after the publication of its publication of its response to the related consultation process, which reported that only "a very small number of responses welcomed the scheme and suggested they would be interested in taking it up."
- Click here for further details of "employee-shareholder" contracts.
'Employee -ownership' contracts could cost the state £1bn per year by 2020, says OBR
The OBR reports that the introduction of "employee-ownership" contracts could cost the state as much as £1 billion per year by 2020, the Telegraph reports. It says:
The shares-for-rights measure, designed to encourage firms to boost hiring, looked fiscally insignificant in the official numbers, costing the state just £20m in 2016/17 and £80m in 2017/18 - the end of the forecast period. However, the OBR said "the cost is expected to rise towards £1bn beyond the end of the forecast horizon". Of the £1bn, it indicated that as much as £250m could be down to tax avoidance - or "tax planning" - despite the Chancellor's avoidance crackdown. [...] The scale of the potential bill will come as a surprise because the scheme, one of the centrepieces of George Osborne's speech at the party conference in October, has been broadly rejected by business. Of the 209 responses to a consultation on the subject, fewer than five companies expressed full support.
Click here to read the Telegraph article in full.
- Autumn statement 2012 - is the British economy healing?
XpertHR's guide to the Autumn Statement 2012 provides full details of Osborne's employment-related announcements, as well as coverage of developments relating to public sector pay and to taxation and benefits.
- Government issues response to consultation on employee-owner contracts
- XpertHR economic commentary December 2012: Crunch time
XpertHR's December 2012 economic commentary looks at why George Osborne's Autumn Statement 2012 could mark a turning point for the Government's economic strategy.