What the Autumn Statement means for you

The Autumn Statement was never going to be filled with festive cheer given current difficult economic conditions, but there were a few measures announced which will help those struggling to meet living costs.

The freeze on January’s planned fuel rise is good news for motorists, and more than a hundred thousand families will benefit from additional free childcare places for two-year olds - but there’s no escaping the fact there are difficult times ahead for most of us.

Unemployment is set to reach a high of 8.7million in late 2012, while economic growth next year will be just 0.7%, down from the 2.5% that was predicted back in March.

Kevin Mountford, head of banking at MoneySupermarket, said: “Although there were some positive elements to the announcement to help stimulate growth in the economy, it is still clear that there is a winter of austerity ahead before the green shoots of recovery begin to sprout.

“Until then, households have to take control of their finances and become their own ‘Chancellor’ by reviewing their household budget, to get through the tough times ahead.

"Looking at all outgoings and shopping around for the best products for their individual needs is a great way that people can give their finances a boost.”

Here, we take a look at some of the key measures announced in the Autumn Statement and how they might affect you…

Education

An extra £1.2billion will be spend on education, with some £600million going to authorities that need new school places and the remainder towards funding 100 new free schools.

The Chancellor also announced that the number of free childcare places for deprived two-year-olds will double to 260,000, at a cost of £380million a year by 2014-15, which will help families struggling to meet the high costs of childcare.

Mark Jones, LV= head of protection, said: “Parents are all too aware that having a child comes with a hefty bill, especially when looking at the cost of childcare. Our Cost of a Child report shows that on average childcare costs add up to £67,430 per child, with the greatest proportion of those arising when the child is aged between one and four years old.”

Transport

A 3p-a-litre rise in fuel duty which was due to be introduced in January has been cancelled, and the 5p increase scheduled for August will be reduced to 3p.

 The Chancellor claimed that as a result, the average family will save £144 in fuel costs next year. Meanwhile, January’s rise in regulated rail fares will now be capped at 6.2%, not 8.2%.

The rise affects season tickets and long distance off-peak fares, as well as London tubes and buses.

Public sector pay

Public sector pay will only rise by an average of 1% for two years after the current pay freeze ends in 2012.

Pensions

Starting in 2026, the state pension age will rise from 66 to 67. This is eight years earlier than the original plan which would have seen the increase take place between 2034 and 2036.

Michelle Mitchell, Charity Director for Age UK said: “The decision to speed up the timetable to increase the State Pension Age to 67 will come as a bitter blow to many people fast approaching retirement especially those in ill-health, caring for relatives and those out of work.”

However, the government maintained its commitment to increase the basic state pension by the triple guarantee under which state pensions will always rise by the greater of earnings, prices, or 2.5%, so that it will rise by 5.2% in line with September’s CPI.

This will mean an extra £5.30 a week in pensioners’ pockets, bringing the basic state pension to £107.45 a week from April next year.

The pension credit will also be uprated by £5.30, but this cost will be met through reductions in savings credit provided to pensioners with slightly higher incomes.

Other benefits

Fears that the Chanceller would uprate state benefits by less than inflation were allayed after he confirmed that most working age state benefits will rise by the planned 5.2%.

The basic state pension and employment benefits, including Jobseeker's Allowance and income support, are among the government payments due to rise in line with the September CPI rate.

The standard minimum income guarantee in the pension credit system will increase by 3.9% in April next year, to £142.70 per week for single pensioners, and to £217.90 a week for pensioner couples.

The child element of the working tax credit will be uprated in line with inflation, but other elements, such as the couple and lone parent elements, will not. A planned "over-indexation" rise in the child element of child tax credit, of £110 above inflation, will also now not take place.

Homebuyers

The Chancellor announced that he would ‘reinvigorate’ the right-to-buy scheme so that council and housing association tenants are offered discounts to enable them to buy the homes they live in.

The government has promised to replace each home sold.

This is part of the Chancellor’s housing strategy to help people get on the property ladder, which include the government joining forces with the country’s house builders in offering special indemnity insurance to the UK’s mortgage lenders.

In return, lenders must provide 95% loan to value (LTV) mortgages to up to 100,000 potential buyers of newly-built properties.
This will ensure that, if there is a double dip in the housing market and these homes end up being worth less than the mortgages on them, the lenders will be able to recover their losses.

But the first-time buyer stamp duty tax break will end on March 24, 2012 as planned, despite calls for it to be extended. The government said the plan had failed to increase the number of first-time buyers entering the market.

Please note: Any rates or deals mentioned in this article were available at the time of writing.

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