The British budget driven by faster-than-expected growth in 2021 – archyde

British Chancellor Rishi Sunak on Wednesday unveiled a budget for a “post-Covid economy” driven by a stronger-than-expected growth forecast for 2021, focusing in particular on public services and promising to get the budget back on track.

Rishi Sunak is based on forecasts drawn up by the public body OBR which projects the return of economic activity to its pre-pandemic level in early 2022 instead of mid-2022, thanks to the reopening of the economy and to the success of anti-covid vaccines.

The Chancellor of the Exchequer affirmed that “this budget is focused on investment and on a more innovative and qualified economy”, arguing in particular that the total of government spending would increase by 3.8% per year by 2024-2025 .

However, the country is expected to see GDP growth slow to 6% in 2022. And inflation could peak “at nearly 5% next year, the highest rate in the country in three decades,” according to the OBR. .

The recovery is indeed showing signs of slowing down, penalized by labor shortages, congested supply chains and skyrocketing energy prices, not to mention a high level of new cases of Covid-19.

– Tax increases –

“With fuel prices at the highest in eight years, I am not ready to put more pressure on families and small businesses,” said Mr. Sunak, before announcing that a planned increase in a tax on fuel was canceled.

The government had already unveiled a fund of 500 million pounds to help disadvantaged households this winter.

But this budget contains “little new support to help people with the lowest incomes cope with soaring energy bills,” denounced the National Energy Action association.

To finance these measures, the government had already announced an increase in social security contributions, breaking a campaign promise, as well as an increase in the tax on companies which will go from 19 to 25%.

The Chancellor, however, confirmed the reduction of a surcharge on banks, to cushion the increase in corporate tax for the sector.

A vast overhaul of alcohol taxes, which will increase on strong alcohol but will decrease in particular on sparkling wines, has also been announced.

A few days before the opening of the COP26 climate conference in Glasgow, environmental issues have been flown over, Rishi Sunak relying mainly on the 26 billion pounds of capital investment unveiled last week as part of his strategy of carbon neutrality.

And if the Minister of Finance has announced an increase in taxes on long-haul flights, they decrease on the other hand on short flights, which denounces in particular the railway union Aslef: before the COP26 “it only sends bad signals “.

– “Parallel universe” –

The main Labor finance official, Rachel Reeves, taunted the Chancellor: “Bankers who take short flights while drinking champagne will applaud this budget” but “families in difficulty will think that Rishi Sunak lives in a parallel universe”.

“The climate emergency should have been the centerpiece of these budgetary guidelines (…) but Mr. Sunak spent more time discussing taxes on cider,” blasted Greenpeace.

The NGO estimates that the Chancellor’s announcements cover only 5% of the expenditure necessary to achieve the country’s climate objectives.

The Conservative official is also keen to start a recovery in British public finances, the country having suffered a record deficit last year since World War II, at nearly 15% of gross domestic product.

The Chancellor thus announced on Wednesday new tax rules “to keep this government on the path of the discipline of responsibility”, aiming in particular at a budget surplus and a reduction in the debt ratio within three years.

Rishi Sunak also announced an objective to “reduce taxes before the end of this legislature”. But the Chancellor’s margin to be generous before the 2024 elections “may be limited by the rise in interest on the debt”, warn analysts at Pantheon Macroeconomics.

The Treasury had distilled in recent days a number of pre-announcements, including an increase in the minimum wage to 9.50 pounds per hour and the end of the wage freeze in the civil service, or six billion pounds to help the national service of health (NHS), under strong pressure, to respond to the delays in care caused by the pandemic.

ved-ode / els