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Finance minister says UK will avoid recession in 2023

By EARLE GALE in London | China Daily Global | Updated: 2023-03-16 09:31
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A handout photograph released by the UK Parliament shows Britain's Chancellor of the Exchequer Jeremy Hunt making his annual budget statement in the House of Commons in London on March 15, 2023. [Photo/Agencies]

The United Kingdom's finance minister — Chancellor of the Exchequer Jeremy Hunt — unveiled a budget on Wednesday afternoon that he said would bring relief to families struggling with the cost-of-living crisis and businesses grappling with a shortage of labor and rising expenses.

Hunt's budget — one of two the UK chancellor delivers annually — included changes to state-funded childcare, reforms to welfare payments, and tweaks to pensions.

As he unveiled his spending and taxation plans, which he dubbed a "budget for growth", he said the nation's arms-length Office for Budget Responsibility, or OBR, was predicting the UK would now avoid a technical recession in 2023, and that the country's economy was in line to expand in the following years, "proving the doubters wrong".

"(The OBR) forecast we will meet the prime minister's priorities to halve inflation, reduce debt, and get the economy growing," he told lawmakers in a packed Parliament.

He said the OBR was predicting inflation would fall from the 10.7 percent endured late last year, to 2.9 percent by the end of 2023. In its previous forecast, the OBR had anticipated inflation would hit 7.4 percent by the end of the year.

Hunt said the OBR was predicting the UK economy would shrink by 0.2 percent this year, before growing by 1.8 percent in 2024, and by 2.5 percent in 2025, suggesting his last budget stabilized the economy.

"Today, we deliver the next part of the plan," he said. "A budget for growth."

Hunt said his budget prioritized "removing obstacles that stop businesses investing" and addressed the nation's labor shortage, which followed its exit from the European Union in 2020. He said he was prioritizing "breaking down barriers that stop people working" and would be harnessing "British ingenuity, to make us a science and technology superpower".

Hunt claimed the government's borrowing costs had fallen, mortgage rates were down, and that inflation had peaked, which, he said, all signaled better times ahead.

The chancellor said the better financial outlook meant the government could expand its commitment to offer 30 hours of free childcare each week, to start at nine months instead of 3 years.

He also said the government would also continue to help people with their heating bills, by extending until June an initiative that caps energy prices. Energy bills, which had shot up because of supply issues connected to the Russia-Ukraine conflict, had been a major cause of the nation's cost-of-living crisis.

The chancellor also said the government would create 12 new investment zones aimed at stimulating economic growth.

But he disappointed many lawmakers from his ruling Conservative Party, which sees itself as the party of low taxation, by announcing corporation tax would go up, from 19 percent to 25 percent.

The chancellor also vowed to spend 20 billion pounds ($24 billion) during the next two decades on low-carbon energy projects.

Hunt said he would make it harder for people to qualify for disability payments, forcing many back to work. He said people receiving welfare payments would also be required to try harder to find work.

Hunt also said he was increasing the annual tax-free allowance for pensions, from 40,000 pounds to 60,000 pounds, and ending the lifetime allowance, which had limited the size of pension pot that people could accrue to 1.07 million pounds and which had previously forced many high-earners, including doctors, to take early retirement instead of facing a big tax bill.

The chancellor also said he would increase the UK's spending on defense, by 11 billion pounds during the next five years.

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