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(Alliance News) - The UK will avert a recession this year, Chancellor Jeremy Hunt said on Wednesday, as he set out a GBP94 billion package to help households weather the cost-of-living crisis as part of his spring budget.
According to an Office for Budget Responsibility forecast, the UK will avoid a technical recession, he said. The UK sliding into recession was once an outcome that was all but certain, when Hunt received the keys to Number 11 following the mini-budget turmoil that led to the departure of predecessor Kwasi Kwarteng last autumn.
While no longer predicting a recession, the OBR still expects the UK economy to decline 0.2% this year. However, the prospects for outer years are more promising. The OBR predicts growth of 1.8% in 2024, 2.5% in 2025, before slowing to 2.1% in 2026.
"In the face of enormous challenges, I report today on a British economy which is proving the doubters wrong," Chancellor Hunt said.
"We remain vigilant, and will not hesitate to take whatever steps are necessary for economic stability. 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."
Also according to the OBR, inflation in the UK will slow markedly to 2.9% by the end of 2023 from 10.7% in the fourth quarter of 2022.
"[The OBR] forecast we will meet the prime minister's priorities to halve inflation, reduce debt and get the economy growing. We are following the plan and the plan is working," Hunt added.
Turning to government debt, Hunt expects underlying debt to sit at 92.4% of gross domestic product by next year, before hitting 93.7% in the fiscal year ending 2025, 94.6% in 2026, 94.8% in 2027 and back to 94.6% in 2028.
Hunt confirmed that the energy price guarantee, which caps average household bills at GBP2,500, will be extended at its current level from April to June. It had been due to rise to GBP3,000 in April, and the cost of scrapping the planned 20% increase will amount to around GBP3 billion.
Among measures announced by Hunt, fuel duty once again will be frozen for the next year. In addition, he announced what was dubbed a "Brexit pubs guarantee" which will see the duty on products on draught in pubs up to 11 pence below the duty in grocery stores from August.
Hunt said: "Because inflation remains high, I have decided now is not the right time to uprate fuel duty with inflation or increase the duty. So here's what I am going to do: for a further 12 months I'm going to maintain the 5p cut and I'm going to freeze fuel duty too. That saves the average driver GBP100 next year and around GBP200 since the 5p cut was introduced."
He continued: "Today, I will do something that was not possible when we were in the EU and significantly increase the generosity of Draught Relief, so that from 1 August the duty on draught products in pubs will be up to 11p lower than the duty in supermarkets, a differential we will maintain as part of a new Brexit pubs guarantee."
Tim Martin, founder and chair of pub chain JD Wetherspoon PLC, was an outspoken advocate of Brexit.
Hunt also set out plans for 12 key investment zones in the country, or "12 potential Canary Wharfs". Among possible candidates are areas in the West Midlands, Manchester, Liverpool, Yorkshire, Scotland, Wales and Northern Ireland. The zones will receive GBP80 million worth of support.
Hunt touted what he believes to be an attractive corporation tax rate in the UK, despite a planned hike to 25%. Only 10% of firms would pay the top rate, Hunt added.
Commenting on the decision to freeze fuel duty again, Ian Plummer, commercial director at Auto Trader Group PLC, said:
"The chancellor's decision to extend the 5p fuel duty cut for another year is good news for the vast majority of drivers struggling with the cost of living. But one thing it won't do is encourage demand for electric vehicles even though the 2030 ban on sales of new petrol and diesel cars looms ever closer. Since last summer demand for EVs has fallen back and the Chancellor should be ready to use the tax system to encourage drivers to make the switch by reducing VAT on the public charging networks."
By Eric Cunha, Alliance News news editor
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