This week the Chancellor of the Exchequer will deliver his 2015 Autumn Statement, and this year it will also be combined with the spending review, with a number of departments being asked to cut spending in real terms by as much as 20% over the next four years. Just after the financial crisis there was a lot more interest in these sorts of events than there is now when financial markets hung on every word of the Chancellor of the day, as politicians from both sides of the political divide sought to persuade febrile financial markets that they had the nation’s finances under control. While this week’s Autumn Statement is likely to be more important for political reasons than economic ones, particularly the politically difficult changes to tax credits, and the prospect that George Osborne might tweak them so that they are more in sync with the new living wage changes, it should still be able to generate some interest for certain sectors and companies in the UK economy. Given this month’s horrific events in Paris the Chancellor has had to rethink any planned reductions in the defence and Home Office budgets, which could well be significant for companies who have procurement contracts with the UK government, which was reflected in yesterday's rebound in defence stocks like BAE Systems and Cobham, and we could well see some significant announcements in terms of digital investment, in terms of cyber crime. Another focus for markets will probably be around whether the government chooses to make any changes to the controversial additional tax surcharge on bank profits of 8% on top of the usual corporation tax rate, which is due to apply from January. The main criticism is that it will discourage competition in the sector given the low level the tax kicks in which is at £25m, disproportionally affecting smaller banks like Metro Bank, who have a smaller presence and whose margins are tighter. Other areas the Chancellor could focus on in the wake of the VW emissions scandal could include an increase on vehicle and fuel duty on diesel cars. Pensions are always a favourite for cash strapped politicians, though the new pension freedoms announced in the 2014 budget were welcome, but we might see further changes to income tax relief allowances on private pensions. It’s always surprised me how little uproar there is when a Chancellor reduces incentives for private pension saving, yet one only has to question the affordability of public sector pensions and suddenly all hell breaks loose. One other area the Chancellor may give further direction on could be on housing and the Help to Buy ISA which is due to launch on 1st December. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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