The Chamberlain News

Osborne will use Autumn Statement to give ‘Northern Powerhouse’ fresh legs

Devolution, the NHS, new roads, flood defences, fracking and, of course, the budget deficit – are all topics likely to feature when George Osborne makes his Autumn Statement to the House of Commons this lunchtime. Chief blogger Paul Dale looks forward to what the Chancellor may have to say.

For a more detailed preview of the Statement, download the Briefing Paper from Chamberlain News publisher RJF and leading Chartered Accountancy and Business Advisory practice MHA Bloomer Heaven: RJF Public Affairs/MHA Bloomer Heaven Autumn-Statement-2014-Briefing-Paper.

One thing is absolutely certain. Mr Osborne will not miss an opportunity to accelerate further his ‘Northern Powerhouse’ vision which has been gathering a head of steam in recent weeks.

The Chancellor is likely to set out plans to give Leeds, Sheffield and Manchester more London-style self-rule with devolved powers and budgets and will put some flesh on the bones of the HS3 high speed trans-Pennine railway.

He may also announce plans to allow councils in the North to keep a greater proportion of the revenues raised from business rates in their area.

The implication, clearly, will be that the great cities of the Midlands can one day benefit from a measure of independence too – but only if Combined Authorities are established, preferably in Mr Osborne’s view under the leadership of metro mayors.

The extent to which Northern Powerhouse happens, and the way in which it happens, cannot be determined until after next year’s General Election. It will be a matter for the new Government, of whichever political colour, to decide how far to travel down a rocky road from Westminster to the regions that has hit so many dead ends in the past.

In response to the Heseltine report the Government has made decentralisation a key focus, with LEPs being specifically referenced. The Financial Times reported this month that Communities Secretary Eric Pickles has been pressing for a second tranche of enterprise zones as part of a push to devolve more power to the regions.

Mr Osborne will bring MPs up to date with the latest efforts to eliminate the budget deficit by the end of this Parliament, as well as confirming controversial pre-election Government plans to embark on a major road building programme.

The Autumn Statement provides an update to MPs and the public on the Government’s plans for the economy, and is an opportunity for Osborne to comment on the latest economic forecasts provided by the Office for Budget Responsibility (OBR).

Whilst taxation plans were traditionally set out in the Budget, they are now also announced in the Autumn Statement.

The following policy statements are expected:

Roads

The Government has launched six strategic road network feasibility studies, designed to inform the first Road Investment Strategy. The Prime Minister told the Confederation of British Industry (CBI) conference recently that a road improvement strategy would be at the heart of the Autumn Statement.

Transport minister John Hayes put the number to be spent on delivering the strategy at £24 billion. It has been described by the Treasury as “the biggest ever upgrade of the strategic road network” and a programme to “improve some of the most notorious and long-standing road hot spots in the country”.

Fracking

When the first national UK shale colleges were announced in November 2014, Business, Enterprise and Energy Minister Matthew Hancock MP described shale gas as ‘a once-in-a-generation economic opportunity”.

It has been confirmed that the Government is preparing to announce plans for a ‘sovereign wealth fund’ in the Autumn Statement.

Commercial Secretary to the Treasury Lord Deighton stated during a House of Lords debate on the Infrastructure Bill that: “as a Government we support the idea and want to explore … creating a sovereign wealth fund with the money that comes from shale gas”.

Devolution of corporation tax powers

The Government policy paper “Building a prosperous and united community” included a package of proposals to strengthen the economy in Northern Ireland.

The paper committed the Government to make a decision on whether to devolve corporation tax powers to Northern Ireland no later than the Autumn Statement.

This commitment has been confirmed in written answers by both the Secretary of State for Northern Ireland Theresa Villiers and David Gauke.

Alok Sharma MP, in a sitting of the Treasury Select Committee, claimed that should the Government decide to devolve corporation tax powers to Northern Ireland, it would be very difficult to deny similar powers to Scotland and Wales.

Green Climate Fund

Mr Osborne is expected to give the green light to £1 billion in funding for an international Green Climate Fund designed to help poorer countries mitigate and adapt to climate extremes.

“The poorest and most vulnerable on the planet are already suffering the effects of climate change and it’s our moral duty to act,” Secretary of State for Climate Change Ed Davey told the BBC in November 2014.

Flood defences

A six-year programme of flood and coastal defence schemes will be announced, according to a press release from the Committee on Climate Change. Alongside this, the Environment Agency will publish an assessment of long-term flood defence funding needs.

Tax avoidance

The chancellor is expected to crack down on firms that use arrangements known as ‘Double Irish’ schemes to avoid paying tax. A number of big technology companies such as Google, Apple, Microsoft and Facebook use schemes which allow them to collect profits in the UK and register their tax base in Ireland, where they pay lower rates of tax.

Mr Osborne was among a group of 20 finance ministers who pushed the Organisation for Economic Co-operation and Development to re-examine international rules that allow technology companies to shift profits into tax havens.

He also told the Conservative Party conference in Birmingham in September that he was looking at ways to clamp down on tax avoidance by multinationals.

There is no shortage of advice for Mr Osborne, with organisations queuing up to tell the Chancellor how to fix the economy. His in tray has a number of submission on the subject of business rates reform and housing expansion.

Here is a selection of responses to consultation on the Autumn Statement:

 The British Retail Consortium stated that the business rates system was in need of fundamental reform and is seeking a statement of intent from the Government. It also wants the 2 per cent cap on business rate rises from last year’s statement extended for another year.

 Trade Union Congress general secretary Frances O’Grady said the statement “needs to lead on driving wages back up and delivering a recovery where the rewards of growth are fairly shared”.

 The Local Government Association has, as part of a wider call for more powers for local councils, recommended the devolution of controls over business rates.

 The Federation of Small Businesses wants “total reform of business rates”, claiming that the current system is “broken, subjective, misunderstood and is holding back growth and job creation”.

 The British Chambers of Commerce called for business rates to be frozen for the next two years and also wants a comprehensive review of the business rates system by 2015.

 The Association of Convenience Stores called for a permanent two per cent cap on annual increases to business rates, as well as a pledge to freeze rates for small businesses for at least the next two years.

 The Forum of Private Business called for a short term package of support for small firms ahead of the general election, with more ambitious reforms coming afterwards.

 The Centre for Cities called for further devolution to cities in order to improve local growth. Such action should be strong enough to “supersede the political barriers of collaboration” between cities.

 The CBI’s package of recommended growth measures includes a tunnel under Stonehenge to relieve congestion to the South-west; keeping momentum up on the A14 upgrade; and a final decision on the guarantee for Hinkley Point C power station.

 The British Property Federation urged the Chancellor to tie business rates more closely to changes in actual rental levels.

 The National Housing Federation requested more control for housing associations in order to tackle the housing crisis. It also called for a cross-party commitment to end the current housing crisis within a generation.

 The British Beer & Pub Association called for a freeze in the business rates multiplier ahead of overall reform, claiming that the current system “places far too high a burden on businesses, particularly small, family-owned businesses such as a typical pub.”

 The Chartered Institute for Housing recommends the Autumn Statement be used to set up a £100m fund for private tenants at risk of becoming homeless, as well as allowing councils to borrow more to build more. It also recommends removing stamp duty for older home owners who receive pension credits, in order to make downsizing a more affordable option for lower-income older people.

Post updated 3 December 2014.