The United Kingdom’s finance minister, Jeremy Hunt, has hailed his plan aimed at speeding up a stagnating economy as tens of thousands of workers who are furious with the government went on strike, calling for better working conditions and wages that would allow them to navigate a worsening cost-of-living crisis.
Hunt on Wednesday unveiled childcare and tax reforms to get more people into work and corporate tax breaks to boost low levels of business investment as he presented his budget in parliament to jeers from the opposition Labour Party, which is riding high in opinion polls ahead of an election expected next year.
Hunt also said he would extend help for households hit by soaring energy bills and freeze a tax on fuel.
The chancellor of the Exchequer said the world’s sixth biggest economy was now expected to avoid a recession this year – even if 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.
“In the autumn we took difficult decisions to deliver stability and sound money,” said Hunt, who was rushed in to head the Treasury in October and undo the plans for tax cuts that sowed chaos in financial markets during Liz Truss’s brief premiership.
“Since mid-October, 10-year gilt rates have fallen, debt servicing costs are down, mortgage rates are lower and inflation has peaked,” he told parliament. “The International Monetary Fund says our approach means the UK economy is on the right track.”
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.
But 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 pounds ($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.
‘It is just a car crash’
Al Jazeera’s Jonah Hull, reporting from Leamington Spa in the English midlands, said the new budget was announced as families and businesses were “crying out for help across the country”.
“The emphasis of this budget is about restoring faith in government and stability from the public finances,” he said.
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.
Rebecca Lissman, 29, a trainee in obstetrics and gynaecology, said junior doctors are just asking is to be “paid a wage that matches our skill set”.
“I want to be in work, looking after people, getting trained,” she said. “I don’t want to be out here striking, but I feel that I have to.”
Outside St Thomas’ Hospital in central London, Leah Sugarman, 33, joined other strikers as they chanted, ‘’What do we want? Fair pay! When do we want it? Now!”
The emergency medicine doctor, who has been on the job for nine years, said she cannot afford a mortgage and struggles to live a normal life.
“We’ve all lived through COVID – that was horrendous. Most of us have come out mentally scarred from that,” she said. “And every day that I leave work, I pretty much want to cry because I haven’t been able to do the job that I chose to go into this profession for.”
She added that she has been forced to drop her work hours to less than 40 a week “because I can’t mentally go to work full time anymore”.
“It is just a car crash,” she said. “So that’s why I’m here.”
Recession avoided, just
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.
“Despite continuing global instability, the OBR report today that inflation in the UK will fall from 10.7 percent in the final quarter of last year to 2.9 percent by the end of 2023,” Hunt said.
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 pounds ($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 pounds ($7.85bn).