What to expect from George Osborne's autumn statement

The chancellor George Osborne is preparing to deliver his autumn statement to the House of Commons.

He'll use the speech to review the state of the UK economy, to outline ongoing efforts to tackle the deficit, and to discuss what the government is doing to encourage growth and investment.

The Treasury has already said that the autumn statement is not due to contain any new policy announcements and will be merely an update of growth forecasts and existing policies.

However in light of recent evidence that suggests the economy is in increasing difficulty, Mr Osborne is expected to use the statement to reveal some major new initiatives.

The chancellor will also be revealing the latest economic forecasts from the independent Office for Budget Responsibility (OBR).

He is expected to confirm that growth will be lower and borrowing much higher than planned. In the budget in March, the OBR cut its growth forecast for 2011 to 1.7% and its 2012 forecast to 2.5%. It is expected to cut both again to around 1%.

The chancellor will deliver his speech at 12.30pm. Follow live coverage of the build-up here on MSN UK Money.

Meanwhile here are some of the things George Osborne may or may not be considering:

1) Abandoning the 50p top rate of income tax

While this would find favour with many Tory backbench MPs and business leaders, it almost certainly won't happen. Russell Lynch, writing in the Evening Standard explains why: "There is no way George Osborne would open up the Conservative's most vulnerable flank - its status as the rich man's party - while the economy is hovering over the danger zone. Besides, for all the fury that the 50p income tax rate engenders among the nation's wealthy, it's difficult to find the smoking gun which definitely proves it's killing the economy."

Mr Osborne has already given himself some room for manoeuvre on this issue. He's announced he won't make a decision on the future of the 50p tax rate until Revenue & Customs (the tax office) has concluded an investigation into how much it has raised. This report isn't due until next year.

2) Cutting corporation tax to 15%

The Institute of Directors (IoD) is lobbying for this to be done by 2020. "A 15% corporation tax would act like a magnet, boosting domestic business and attracting global capital into the UK," argues Simon Walker, the IoD director-general. Mr Osborne has already said that the tax rate will be reduced from the present 26% to 23% by 2014. If he announced a further reduction, it would be something of a surprise and warmly welcomed by the business community.

3) Cutting VAT

Despite much support for this measure, not least from the Labour Party which has made it one of its five points in an action plan for growth, Mr Osborne will be unlikely to want to be seen reversing this policy so soon. VAT went up from 17.5% to 20% at the start of this year. Were it to be cut, the chancellor would need to explain from where the equivalent sum of money would come.

4) Reducing pension contribution tax relief

This currently amounts to nearly £30 billion a year in lost revenues for the government.

The accountancy firm PricewaterhouseCoopers has calculated that the money raised could fund an increase in the income tax threshold so that only those earning over £50,000 a year would have to pay the 40% rate.

CityWire reports that Revenue & Customs has estimated that increasing the threshold by 20% would remove one million people from this tax band and save taxpayers £700m over the next year. "This course of action would also help offset the reduction of child benefits to higher rate tax-payers," they add, "and leave enough money to raise the personal allowance closer to the coalitions target of £10,000."

5) Introducing a National Insurance Contributions (NICs) holiday for small business

Labour is proposing something similar: a one-year national insurance tax break for every small firm which takes on extra workers, helping small businesses to grow and create jobs. This might dissuade Mr Osborne from introducing such any such measure, for fear of looking as if he is adopting Labour policies.

6) Bringing forward spending on infrastructure projects

This is one thing that will be included. A multi-billion pound investment programme is to be announced, with most of the money expected to come from the big British pension funds and Chinese investment. An additional £5bn will be paid for by further cuts in the present spending round. Various road schemes around Britain and rail lines in Newcastle and between Manchester and Leeds are thought to be among 40 projects earmarked for help as part of what is being called the National Infrastructure Plan.

But writing for the online journal Public Finance, Patrick Nolan, chief economist at the Reform think thak, argues that: "Increased capital spending is unlikely to significantly and rapidly increase employment as modern infrastructure projects are less labour intensive and the labour that they employ is often skilled. The days of building infrastructure with 'picks and shovels' are long gone. The employment created is not likely to match the areas where unemployment is currently highest."

7) Introducing 'credit easing'

This is another thing that is definitely going to be included. It was first announced by the chancellor during this year's Tory party conference. 'Credit easing' is a process whereby the government borrows sums of money in financial markets and then directs that money towards companies in need of funding. It's being promoted as a way to underwrite loans to small businesses who are struggling to get credit. But there is a fear that the process, by increasing Britain's national debt in the short term, may mean the UK's credit rating is in danger of a downgrade.

8) Proposing to relax employment laws to make it easier to sack workers

This has been met with opposition from both parties within the coalition government. It looks like any such measure would be limited in scope. The business secretary Vince Cable has already stated that he does not want to create an environment in which employees would be afraid of their employers.

9) Introducing measures to help create jobs for young people with no or few qualifications

The government has already proposed establishing a new "£1bn jobs fund" that will help companies invest in training for new staff. It is likely this will be reiterated by Mr Osborne in his statement, perhaps with some additional intiatives.

10) Helping buyers of new homes to borrow up to 95% of their value

The prime minister has announced some details of a mortgage indemnity scheme, in which it is intended the government will underwrite part of the risk to lenders. David Cameron has said that the scheme could help up to 100,000 people in England. Mr Osborne will be expected to expand upon this in his statement.

11) Exempting struggling businesses from energy taxes

The Telegraph has reported that the chancellor is planning to offer help to British companies under pressure because "new green taxes are raising energy bills to very high levels... It is understood that the Treasury is looking at giving the most help on energy bills to industries that use a lot of electricity, including aluminium, steel and chemical production."

Jeremy Nicholson of the Energy Intensive Users Group - which represents major industrial firms - is quoted as saying said other industries also needed help. "We've heard encouraging noises from the Treasury on the biggest energy users but there has been resistance within the Department for Energy and Climate Change to helping other industries like glass and paper. Just helping the most affected won't be enough."

12) Freezing fuel duty

There are two rises in fuel duty scheduled for next year: one in January, postponed from April of this year, and one in August that was originally due in April 2012. There has been some speculation that the chancellor will delay these rises once again. A survey conducted among members of the AA suggested that rises in fuel duty would lead to people cutting back on food shopping and household goods. But any delay would mean the chancellor would have to find the equivalent sum of money from elsewhere, and at a time when train fares are already set to rise.

And last but not least...

13) Expressing a wish to reduce 'the burden of red tape'

No budget or financial statement would be complete without this all-too-familiar proposal.

In conclusion...

The BBC's economics editor Stephanie Flanders sums up the autumn statement with the gloomy, if realistic, assessment that: "The bottom line is that [the] statement is not going to be fun for the government or, I'm afraid, for all of us... It's not going to be fun for George Osborne because he is going to have to announce substantially higher borrowing numbers through to the end of the parliament, even though the borrowing figures so far this year have been broadly as forecast."

She adds: "The bad news for all of us is that the OBR (Office for Budget Responsibility) thinks the economy has got less room for manoeuvre as well. If the OBR has followed the same methods it has used in the past, it will have informed the Treasury that the UK now has less room to grow over the next few years, even though growth in the past year has been so much slower than forecast."

However the Liverpool Daily Post offers a timely reminder. "It's important to remember that governments of all hues have a track record of issuing dire prognostications the week before a budget or autumn statement," it says, "only for the statement itself to turn out to be a lot less drastic.

"It's all about expectations management. If we fear the worst, but the worst doesn't happen, then the media and the public blow a sigh of relief, rather than get upset about more moderate proposals."

We'll all find out who's right and who's wrong when the chancellor gets to his feet in the Commons at 12.30pm.

• Follow live coverage of the chancellor's autumn statement here on MSN UK Money
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