Hunt, hemmed in by debt, set to focus on growth in UK budget

By William Schomberg

LONDON (Reuters) – British finance minister Jeremy Hunt will announce on Wednesday how he will try to speed up the world’s sixth-biggest economy after the shocks of Brexit, a heavy COVID-19 hit and double-digit inflation have left it lagging behind its peers.

Hunt – who is due to make a budget speech to parliament at around 1230 GMT – has dismissed calls from other lawmakers in the ruling Conservative Party for big tax cuts now to boost their fortunes before an election expected in 2024.

He claims that the jump in borrowing costs following Liz Truss’s tax cuts was due to her having rushed into the Treasury last year. “mini-budget” It was made clear that future growth cannot be funded solely through the bond market.

Hunt will not be confined by his promise to reduce Britain’s debt of 2.5 trillion pounds (3.0 trillion dollars). Instead, Hunt will try to address some of the reasons for Britain’s economic woes.

“In the autumn we took difficult decisions to deliver stability and sound money,” According to extracts from his budget speech, Hunt will speak. “Today, we deliver the next part of our plan: a budget for growth,” He adds.

Britain is the only Group of Seven country whose output is below its pre-pandemic level, placing pressure on Hunt with Prime Minister Rishi Unak and the Labour Party which leads opinion polls.

Rachel Reeves was Labour’s future finance minister and sought to keep Hunt in the spotlight by calling for urgent action.

“With 13 years of economic mismanagement and sticking-plaster politics leaving us lagging behind, what we need to see is some real ambition from the government,” Reeves said.

Hunt has ruled out major spending sprees or tax cuts. Instead, he will address the severe shortage of job candidates by changing welfare and childcare rules. This will allow Hunt to help hundreds of thousands of people get back to work.

The Guardian newspaper reported that Hunt would announce a 4-billion-pound expansion in childcare for English one- and two-year-olds.

He is expected to announce plans to improve skills training and to give green light to 12 investment areas.

Labour attacked last week the government’s policies “chaotic” Approach to business taxation: The corporation tax rate will jump from 19% next month to 25%

Hunt suggested new incentives for business investments in an effort to lessen the tax burden.

Nurses, teachers, and other public sector workers are pressuring him for higher wages, while the armed force demands more money to support Ukraine’s war with Russia.

MORE ENERGY HELP

A three-month extension to energy bill subsidies will be available for households who are facing high inflation and tax hikes as Hunt announced in November. Hunt is expected to extend the decade-old fuel duty freeze.

According to the Treasury, the budget would also provide cost-of living assistance to businesses.

However, economists predict that Hunt will not use more than half of the 30 billion-pound windfall from the public finances. This leaves some firepower to be used for the next election.

The British government debt, which is just below 100% of Gross Domestic Product, is slightly higher than the average in the euro zone but much lower than the G7 that includes Japan. It stands at less than 20% of G7’s total.

Hunt’s options for the future could be limited if Britain’s fiscal watchdog becomes more pessimistic about the economic outlook.

The UK is likely to experience a less severe recession than the Office for Budget Responsibility (OBR), which forecasted a 1.4% slump by 2023 in its November forecasts. However, the projections of growth could be reduced after that, which would reduce tax revenues.

Bond dealers polled by Reuters expect government borrowing to fall to 125 billion pounds in the 2023/24 financial year – down from the 140 billion pounds or 5.5% of GDP which the OBR forecast in November.

($1=0.8222 pounds)

(Writing and graphics by William Schomberg; Graphics and Editing by Alison Williams

The February consumer price index report has been released. It shows that inflation has increased by 6% compared to last year.

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