Osborne: UK safe haven status saves £21.5bn

Chancellor George Osborne is expected to claim today he has saved the taxpayer £21.5bn in debt interest payments.

In his Autumn Statement at 12.30pm, Osborne will argue his deficit reduction plan has kept yields on gilts at record lows, reports City AM.

He is expected to announce a so-called 'safe-haven dividend' which will be put towards other projects aimed at kick-starting UK growth.

Osborne will use forecasts from the Office of Budgetary Responsibility, which predicted the UK's interest payments before the Budget in March, when the yield on 10-year-gilts was 3.6%.

At the end of last week, the yield had fallen to 2.3% which equates to an implied saving of £21.5bn by 2015-16. However, this number will change if the OBR adjusts its forecasts for growth or public finances as is widely expected, according to City AM.

The chancellor is expected to confirm today that UK growth will be lower and borrowing much higher than planned.

In the Budget in March, the OBR cut its growth forecast for 2011 to 1.7% and its 2012 forecast to 2.5%. However, it is expected to reduce both again to around 1%.

Borrowing, which had been forecast to be £37bn in 2014-15 - is now widely predicted to more than double to £81bn.

The government has pledged to eliminate the UK's structural budget deficit over five years and at the time of the Budget it was on course to do this by 2014-15.

Some details of credit easing, youth employment schemes and infrastructure investment have already been unveiled.

However, yesterday the OECD warned the UK was likely to slip back into recession.

The economic think tank predicted a 0.03% contraction in the UK economy this quarter, and a further 0.15% the next.

Bank of England governor Sir Mervyn King also warned MPs growth would be flat for the next six months as the eurozone crisis threatens the UK's recovery.

IFAOnline will be giving you all the key points and analysis as the chancellor delivers his Autumn Statement. Please join us from 12.30pm to find out how the chancellor's plans will impact investors.