Chancellor likely to bank windfall, and stick to deficit-cutting agenda
Help for homeowners to pay energy bills and extra funds for the NHS to prevent a winter healthcare crisis are expected to be highlights of George Osborne's autumn statement on Thursday.
After three successive quarters of solid economic growth, and with consumer confidence picking up, the chancellor should be able to announce a healthy upward revision in growth forecasts, which will be published by the independent Office for Budget Responsibility alongside his speech.
The OBR had pencilled in GDP growth of just 0.6%, but most analysts now expect a figure closer to 2%. For 2014, the OBR forecast in March was 1.8%; the City consensus is now a more respectable 2.3%.
The improving economic backdrop is also helping to drive up the Treasury's tax take, and analysts expect the chancellor to be able to announce that the deficit on the public finances will be up to £15bn lower both this year and next than he planned for in March.
While Osborne is likely to bank most of that modest windfall, and stick to his deficit-cutting agenda, he could have scope for a few targeted giveaways.
With political pressure over energy bills rising, and concern over NHS waiting times ahead of the busiest months for hospitals, the chancellor is likely to address current challenges rather than indulge in triumphalist rhetoric.
David Cameron and Nick Clegg are unveiling proposals that they say will cut £50 off average energy bills while sticking to the government's green commitments. This will involve extending green schemes including the Energy Company Obligation – a set of requirements under which firms have to help reduce carbon emissions by insulating customers' homes – for a longer period, in order to reduce costs.
Writing in the Sun on Sunday, Cameron and Clegg say their proposals will reduce bills "without taking any help away from poor families or sacrificing our green commitments; and in a way that will keep Britain's lights on in the long term too".
To ensure that the plans are carbon-neutral, they will say that anyone buying a new home could get up to £1,000 from the government to spend on energy-saving measures.
Government sources say they expect Osborne to offer some extra help for hospitals as waiting times in A&E departments have risen as a result of an expanding elderly population and lack of social care in the community.
Gavin Kelly, director of independent thinktank the Resolution Foundation, said that the autumn statement would be a key indicator of government priorities: "Big moments like the autumn statement are often viewed by politicians as an opportunity to speak to the hot issues of current politics. For the next few months these are likely to be energy prices and how the NHS is coping with the winter period. People will be looking to see whether the chancellor says anything that significantly affects either of these.
"More widely, the autumn statement will reveal something important about the government's economic and political strategy. Will any fiscal slack be used to fund further popular giveaways ahead of the election or will it be used to make progress with the deficit and demonstrate the coalition's resolve to stick to its austerity argument?"
Julia Unwin, chief executive of the Joseph Rowntree Foundation, said Osborne should focus on addressing the fall in real incomes: "Recent positive changes in the economy do not outweigh the damage that has been done to the incomes of the poorest during the recession. We need to ensure that growth does not leave the poorest people and places behind.
"Prioritising an improvement in the living standards of people in poverty is essential, and although the cuts were felt across the income spectrum, we know that those in the poorest areas were the hardest hit. This gap should not be allowed to continue to grow."