Chancellor Jeremy Hunt on Wednesday unveiled a long list of measures to boost UK economic growth, but the medium-term outlook remained relatively unchanged.
Hunt said his budget was for “long-term, sustainable, healthy growth that pays for our NHS and schools, creates jobs for young people and provides a safety net for older people”.
It includes measures aimed at boosting business investment and employment among different groups, including mothers, older workers and the disabled.
But the Office for Budget Responsibility, a fiscal watchdog, only marginally revised up its medium-term growth forecast.
‘Budget for Growth’. . .
a £5bn extension of free childcare for one- and two-year-olds in England, to help parents return to work sooner; Schools offer wraparound care
100 percent allowance on business capital expenditure for three years
An increase in the £40,000 limit on tax-free annual pension contributions – unchanged for the past nine years – to £60,000, and the abolition of the lifetime allowance to discourage early retirement.
Returnships to help people over 50 return to work
Launch of 12 new low-tax zones designed to boost economic growth and reduce regional disparities
Functionality assessments have been abolished, allowing disabled people to sign up for jobs without fear of losing their benefits.
Tax breaks for the entertainment industry
Annual Expenditure on Business Capital Allowance
New limit for tax-free annual pension contributions
Abolishes the annual cost of additional tax-free annual pension contributions and the lifetime tax-free pension allowance.
. . . Along with measures to ease the cost of life emergencies
Extension of fuel duty freeze for 12 months
Alcohol duty rate fixed till August 2023
An extension of the £2,500 energy price guarantee for three months from April, avoiding a sharp rise in household bills this spring
In Q2 2023, annual inflation has been revised up to 6.9 percent, from the previous estimate of 8.9 percent.
Energy prices guaranteed to remain at this level for another 3 months
Inflation in Q2 2023, down from 8.9 as previously estimated
Price of fuel duty freeze in 2023-24
The UK’s medium-term economic outlook has changed little. . .
By Q1 2028, the economy is forecast to be 8.7 percent larger than in the final three months of 2019, before the Covid-19 pandemic; This is only marginally higher than the 8.1 percent increase forecast in November
Average annual growth is projected to be 1 percent from the eve of the coronavirus pandemic to 2028; It was 2.75 percent before the 2007-08 global financial crisis
Real household disposable income per person – a measure of real living standards – is expected to decline by a cumulative 5.7 per cent between 2022-23 and 2023-24. While this is 1.4 percent below the November forecast, it will still be the biggest two-year decline since records began in 1956-57.
This is despite the fact that the OBR now expects the UK economy to contract by just 0.2 per cent this year, up from the minus 1.4 forecast in November, helped by lower energy prices.
The UK economy is expected to return to its pre-pandemic peak in mid-2024. This is six months earlier than expected in November, but later than other G7 countries
. . . But the fiscal outlook has brightened
Borrowing has been cut from £170bn to £152.4bn in 2022-23, with an £8.5bn downward revision for 2023-24, helping to reduce the cost of the government’s energy price guarantee.
In 2027-28, borrowing is projected to be £49.3bn, £19.9bn less than previously forecast.
Underlying debt — or accumulated debt over time — is forecast to peak in 2026-27, a year later than the November forecast, at 94.8 percent of gross domestic product. In 2027-28, underlying debt is expected to be 94.6 percent of GDP, down 2.6 percent from the November forecast.
Public sector debt in 2022-23, £24.7bn lower than forecast in November 2022
Underlying public sector debt as % of GDP in 2027-28, 2.6 percentage points lower than November projection
Borrowing in 2027-28, £19.9bn lower than forecast in November 2022