Jeremy Hunt, the finance minister of the United Kingdom, has announced a plan aimed at boosting the country’s stagnating economy. This comes as tens of thousands of workers across the country have gone on strike, calling for better working conditions and wages to help navigate a worsening cost-of-living crisis. Hunt unveiled childcare and tax reforms to encourage more people to work, as well as corporate tax breaks to boost low levels of business investment. However, his budget was met with jeers from the opposition Labour Party, which is currently leading in opinion polls ahead of an election expected next year.
Hunt also announced that he would extend help for households hit by soaring energy bills and freeze a tax on fuel. He said that the world’s sixth biggest economy was now expected to avoid a recession this year, even though it is still set to contract. “In the face of enormous challenges, I report today on a British economy which is proving the doubters wrong,” Hunt said.
After the shocks of Brexit, COVID-19, and double-digit inflation, the UK economy is the only one among the Group of Seven nations yet to recover to its pre-pandemic size, having already suffered a decade of near-stagnant income growth. Hunt and Prime Minister Rishi Sunak resisted calls from some lawmakers in the ruling Conservative Party for big tax cuts, focusing instead on debt rules announced late last year to calm the chaos in the UK’s bond markets.
Hunt found money to extend the government’s energy bill subsidies for households by a further three months and a decade-long fuel duty freeze by another year. He also announced a new incentive for business investment that will allow companies to offset 100 percent of their capital expenditures against profits, although it represented a scaling-back of tax breaks under a previous two-year scheme. Other measures included more investment in nuclear power.
Hunt said the government would add £11 billion ($13.3bn) to the defence budget, which has been stretched by Britain’s support for Ukraine in its war with Russia, over the next five years.
Al Jazeera’s Jonah Hull, reporting from Leamington Spa in the English midlands, said that the new budget was announced as families and businesses were “crying out for help across the country”. Over the past few months, with public anger rising, industrial action has grown sharply across Britain. On Wednesday, thousands of teachers, doctors, public transport workers, and other employees again walked off their jobs in protest, calling on the government for fair pay and employment conditions.
Under a new set of forecasts, gross domestic product was set to shrink by 0.2 percent in 2023 rather than contract by 1.4 percent as projected in November by the independent Office for Budget Responsibility (OBR). Since then, energy costs, which soared after Russia’s invasion of Ukraine, have come down, and there have been signs of a recovery in some economic data.
“Today the Office for Budget Responsibility forecast that because of changing international factors and the measures I take, the UK will not now enter a technical recession this year,” Hunt said.
The OBR forecast that economic output would grow by 1.8 percent in 2024 and by 2.5 percent in 2025, Hunt said, compared with its previous forecasts for growth of 1.3 percent and 2.6 percent, respectively.
Many economists have said Hunt probably wants to hold back some fiscal firepower for closer to the next national election, but Wednesday’s forecasts underscored the limits on the government’s options going forward. They showed that Hunt’s goal to get the UK’s £2.5 trillion ($3bn) of debt to fall as a share of GDP within five years was on course to be met with a buffer of just £6.5 billion ($7.85bn).