Five things to look out for in the Autumn Statement

On Wednesday, George Osborne will deliver the first Conservative Autumn Statement as well as the Comprehensive Spending Review for the period up to 2019/20. As he makes his statement, here are five things to look out for that have a specific impact on Wales.

1. Will he aim for budget surplus?

The Chancellor has reportedly refused to confirm that he intends to stick to his original aim of a budget surplus by 2020, fuelling much speculation that a slow-down in the economy might make him to trim his ambitions. This matters a great deal, because Osborne’s aim is less about the actual cash and much more about shrinking and reshaping the state – not just the UK state but the Welsh Government and local government too.

So whatever he decides, we are not just looking at a smaller Welsh block grant – possibly down about £1 billion over the next five years – but at a fundamental remodelling of what governments do and how they do it.

2. Changes to social security

With about a quarter of working age households in Wales getting help with the cost of living from Tax Credits, the Chancellor’s revised proposals following the Lords rejection of his previous plans are crucial.  I cannot see Osborne leaving the current system intact, so expect some of his planned changes to reappear, perhaps presented in a new guise, with other changes being phased in. In place of the cuts to Tax Credits, many have speculated that Housing Benefit will be reduced by 10% across the board – a reduction that would hit the working poor and workless families equally hard.

Whatever he announces, the changes will almost certainly be focused on children and people of working age. The one thing you are unlikely to hear is any reduction in benefits for Wales’ 600,000 pensioners – a position that is increasingly unsustainable.

3. Changes to taxes

With income tax, national insurance and VAT rates fixed, the Chancellor’s options are essentially to tinker with tax reliefs and exemptions. He’s tried this before – remember the pasty tax? – but there’s plenty of other weird and wonderful quirks he could address to raise some cash.  There’s also been speculation that fuel duty might rise – personally I would not bet on that.

4. A Welsh Funding Floor

Long awaited, Osborne is widely expected to announce a ‘funding floor’ to prevent the further convergence or ‘squeeze’ on the Welsh block grant. Discussions were said to be continuing last week, so it remains to be seen whether whatever is announced will put an end to disputes about under-funding of Wales.

This is a real game changer, for if it is agreed it opens the door to a referendum on a Welsh rate of income tax – which the UK government ‘expects’ to be in place by 2020.

5. Changes to GB services

Last but by no means least are the cuts and changes to non-devolved services such as the police, justice and HMRC. These are just as much part of the fabric of our everyday lives as devolved functions, as well as providing much needed jobs.

Look out for our reaction to the announcement on Thursday.

Victoria Winckler is Director of the Bevan Foundation.