British Finance Minister Jeremy Hunt announced the government’s spring budget, saying the UK economy will not enter a technical recession in 2023.
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LONDON – British Finance Minister Jeremy Hunt said on Wednesday that Britain’s economy will not enter a technical recession in 2023, as previously forecast.
Hunt said the updated outlook was based on new forecasts from the independent Office for Budget Responsibility.
A technical recession occurs when a country sees its real GDP contract for two consecutive quarters.
The Chancellor of the Exchequer said the UK economy was “proving the doubters wrong”, following earlier predictions, including from the Bank of England, that the country was facing a crisis. Longest Recession.
In its revised outlook, the OBR said it now predicts the economy will contract by 0.2% this year, before rising to 1.8% in 2024 and 2.5% in 2025. During the Autumn Statement last November, the OBR said the economy would shrink by 1.4% in 2023.
The OBR also said on Wednesday that it expects inflation to fall to 2.9% by the end of 2023, meaning the pace of price increases will be slower than previously thought.
The inflation rate currently stands at 10.1%, having fallen from a high of 11.1% in October. However, it is still well above the target level of 2%.
Hunt said of the OBR in his speech to the House of Commons, “They anticipate that we will deliver on the Prime Minister’s priorities of reducing inflation, reducing debt and getting the economy growing.”
workforce reform
In a series of budget announcements, Hunt increased the pension allowance for high earners in an effort to prevent early retirement and rectify the country’s chronic labor shortage.
The Chancellor of the Exchequer raised the limit on tax-free annual pension contributions from £40,000 to £60,000 ($73,000). He also ended the lifetime allowance on tax-free pension pots, previously capped at £1 million.
No one should be excluded from the workforce for tax reasons.
jeremy hunt
UK Conservative Party Finance Minister
The new tax-free pension allowance aims to reduce the number of high-earning, older professionals – especially doctors – who leave the workforce before state retirement age. The measure follows a six-year moratorium on annual and lifetime limits announced in 2020.
Announcing the country’s annual spending budget in the House of Commons, Hunt said, “I don’t want any doctor to retire early because of the way pension taxes work.”
,[But] The issue is bigger than doctors. No one should be thrown out of the workforce for tax reasons,” he said.
In the UK, taxpayers who save more than the lifetime allowance must pay a 25% levy or 55% tax on the extra income from their pension if they withdraw it as a lump sum.
childcare support
The finance minister also announced a package of support for working parents, many of whom are reluctant to return to work because of the cost of UK childcare – which Highest in the world according to OECD.
An extension of free childcare support would provide working parents with children over the age of nine months an extra 30 hours a week of care. Previously, the free childcare allowance was only available to parents of children aged three and four.
Hunt described the reforms, which will be introduced in phases, as “the most significant reform of childcare provisions in a decade.”
In his 2023 Spring Budget, UK Finance Minister Jeremy Hunt announced a package of aid for working parents, many of whom have been barred from returning to work because of UK childcare costs.
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“I do not want any parent with a child under the age of five to be prevented from working, as it is harmful to our economy and primarily unfair to women,” she said.
The change comes as the UK economy, already troubled by hyperinflation and widespread industrial action, faces labor shortages and a record number of furloughed workers. Chronic illness.
The number of “economically inactive” people – those who are neither working nor looking for a job – between the ages of 16 and 64 is expected to increase by more than 630,000 from 2019 to 2022.
Unlike other major economies, recent UK data shows no sign that the workers they lost are returning to the labor market, even as inflation and energy costs continue to put enormous pressure on household finances.
tax deduction withheld
Earlier on Wednesday, the Conservative government also extended its energy price guarantee – which caps a typical household’s energy bill at £2,500 a year – for three months from April to the end of June.
The budget announcement lacked any other notable tax cuts, however, as Hunt sought to maintain his reputation as a steady hand at the helm of the economy following last year’s cataclysmic collapse from then-prime minister Liz Truss’ unfunded tax cuts. had attempted.
The only permanent tax cut in the budget is for the richest 1%.
keir starmer
Labor Party leader
The UK’s economic outlook for 2023-24 now looks less gloomy than it did for 2022.
Hunt told CNBC last month that the government would look into cut taxes “As soon as we can afford it,” amid mounting pressure from some MPs in his own party to reduce the country’s levy.
The ruling Conservative Party has an electoral mountain to climb ahead of next year’s general election, with polls consistently indicating a landslide for the main opposition Labor Party. Latest YouGov Poll Putting Labor 22 points ahead of the Conservatives on Tuesday.
Responding to the budget announcement on Wednesday, opposition Labor Party leader Keir Starmer said Hunt’s pension reforms had resulted in tax cuts for the country’s wealthiest people.
“The only permanent tax cut in the budget is for the richest 1%. How can that possibly be a priority?” They said.
—Elliot Smith of CNBC contributed to this report.