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LONDON — Britain will duck a technical recession this year, Chancellor Jeremy Hunt said as he delivered the U.K.’s budget Wednesday.
Introducing the “budget for growth” — the first full-fat fiscal event under prime minister Rishi Sunak — in the House of Commons, Hunt said the U.K. economy had “proved the doubters wrong” as he pointed to a smaller economic contraction this year than originally forecast.
The U.K. faces gloomy predictions about its economic prospects after the tumultuous tenure of Liz Truss sparked market turmoil. Hunt was brought in in the dying days of Truss’ premiership to steady the ship and has been kept on by Sunak.
“Today, the Office for Budget Responsibility forecasts that because of changing international factors and the measures I take, the U.K. will not now enter a technical recession this year,” he told the Commons, citing figures from the U.K.’s independent fiscal watchdog.
The OBR predicted in November that the U.K. economy would enter a recession in 2022, and contract by 1.4 percent in 2023.
“But today the OBR forecast we will not enter a recession at all this year with a contraction of just 0.2 percent,” Hunt said.
The OBR is also predicting that inflation will fall from 10.7 percent in the final quarter of last year to 2.9 percent by the end of 2023, “more than halving” — a key political goal of Sunak’s government heading into the next election.
The chancellor vowed to deliver “prosperity with a purpose” with his budget, which mixed cost-of-living measures with moves aimed to turning around Britain’s sluggish economic growth prospects. Despite opposition from some in his own party, he’s sticking to a planned hike in corporation tax — from 19 to 25 percent — but sought to woo business with a three-year plan to ease taxes on capital investment.
In other key measures announced by Hunt Wednesday:
- — The U.K.’s Energy Price Guarantee — which caps mounting bills at a set price — will remain at £2,500 for the typical household for the next three months. Energy charges from prepayment meters — typically used by the poorest households — will also be brought in line with other energy charges.
- — Fuel duty on petrol and diesel will remain frozen at its current rate, in a move cheered by the Tory backbenches but likely to be questioned by climate campaigners.
- — A new “Brexit Pubs Guarantee” will keep duty on a pint of beer frozen and aim to keep duties lower in pubs than in supermarkets.
- — 12 new ‘investment zones’ — areas with loosened tax and regulatory rules — are being promised across the U.K.
According to a report in the Guardian Hunt is also expected to announce an increase in free childcare for working families.
However, there is unlikely to be any major movement on cutting taxes — a move which will anger some Tory MPs holding out for tax cuts to boost the party’s ailing position in the polls.
This developing story is being updated.
