British Finance Minister Jeremy Hunt presented the country’s new draft budget, noting that he is forced to make “difficult decisions” to provide the best “path to stability” for the economy.
According to Hunt, estimates by the Office for Budget Responsibility (OBR) of Great Britain show that a recession in the economy has already begun. Nevertheless, by the end of 2022 the British GDP is expected to grow by 4.2%.
The OBR forecasts for the U.K. economy in 2023 and 2024 were worsened, mainly because of high energy prices, he said.
British GDP is expected to decline by 1.4 percent in 2023 and increase by 1.3 percent in 2024. The OBR’s March forecasts called for growth of 1.8% and 2.1%, respectively.
Forecasts of economic recovery for 2025 and 2026 were improved to 2.6% from 1.8% and to 2.7% from 1.7%, respectively.
National inflation will be 9.1% this year and slow to 7.4% in 2023, OBR forecasts.
“They confirm that our actions today will lead to a significant slowdown in inflation from the middle of next year,” Hunt said.
He noted that his budget blueprint calls for two new rules.
“First, government debt as a percentage of GDP must decline in five years. Second, government borrowing over the same period must be less than 3 percent of GDP,” the Financial Times quoted Hunt as saying.
In the current fiscal year, Britain’s borrowing will amount to 7.1% of GDP, Hunt noted. The budget deficit, according to new estimates of the OBR, this fiscal year will be 177 billion pounds (March forecast – 99,1 billion pounds).
The U.K. government will keep the plan to subsidize household and business energy costs totaling 55 billion pounds, drafted by former Prime Minister Liz Truss and former finance minister Kwasi Kwarteng, Hunt said.
Hunt’s draft includes a number of tax measures that should increase budget revenues. In particular, it is planned to reduce the threshold of the annual income of Britons, which will be subject to the maximum tax, to 125.14 thousand pounds from the current 150 thousand.
In addition, the income tax and inheritance tax cuts planned by Kwarteng will be frozen. It is also expected to eliminate the excise tax exemption for electric cars starting in 2025.
The draft budget also includes an additional 2.3 billion pounds for education.
