Daily Archives: December 4, 2012

One area where George Osborne is under pressure to act tomorrow is the thorny issue of capital allowances.

The chancellor cut these allowances back in 2010 in his first Budget, at the same time cutting corporation tax.

The problem is that many small companies complain they do not benefit from the lower corporation tax rate – and have less incentive to invest because of the allowance cuts.

The Treasury has been under heavy lobbying pressure from groups such as the Engineering Employers Federation and British Chambers of Commerce to conduct a volte face.

Interestingly, the Lib Dems (including Vince Cable) have been persuaded of the merits of this case – although there would be issues around how to pay for a reversal.

In 2010, the annual investment allowance was cut from £100,000 to £25,000 per year (from April 2012) with a cut in the rate from 20 to 18 per cent, or 10 per cent to 8 per cent.

Mr Osborne’s options include raising the annual investment allowance above the current Read more

Being prepared for big economic statements, such as tomorrow’s Autumn Statement, is a must, given the quantity of information released in such a short time. Even though this will be the 41st Budget, Autumn Statement or pre-Budget report I have covered, I try not to be complacent.

Here’s what I think is important (sorry about the length), what type of analysis is relevant to understanding Britain’s economy and public finances, and at the bottom is a moan about the way in which George Osborne has decided to follow Gordon Brown down the road of playing games with numbers.

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When Whitehall wants to put out new information without mass coverage the technique is quite simple: ministries publish the data without any press release or calls to journalists.

And so it was a few weeks ago when Decc, the energy department, published figures predicting where Britain’s future energy supplies would come from.

At a stroke of a pen, officials quadrupled their predictions for unabated gas from 8GW to 28GW; in layman’s terms, about 8 new power stations to around 28.

As such, tomorrow’s announcement by George Osborne about a new dash for gas will not come as a surprise to the industry. Ministers have been open about the need for a vast increase in gas, in part to replace the ageing nuclear reactors and coal-fired power stations coming to the end of their life.

Here are the Decc statistics: Firstly, Annex I of this spreadsheet shows you the 2012 forecasts for new energy capacity in its different forms. You can see the much lower estimate for new gas in the same spreadsheet for 2011, also in Annex I.

The stats show how Decc still does not believe that new nuclear will be truly transformative – in size terms – by 2030. The department expects nuclear to provide only a relatively modest amount of new capacity (at 9.9 GW). (Interesting to note cost problems at EDF’s site in northern France, announced yesterday.)

Tomorrow’s gas strategy statement is politically important and was insisted on by the Treasury as a way to reassure potentially nervous investors in the industry. But it does not Read more