LONDON, March 15 (Reuters) – British finance minister Jeremy Hunt set out new forecasts for growth, debt and inflation in his annual budget on Wednesday, plus new measures to grow the economy.
Citing new Office for Budget Responsibility figures, Hunt said inflation was set to fall from 10.7% in the final quarter of last year to 2.9% by the end of 2023.
The new OBR forecasts estimated the economy would contract by 0.2% this year, followed by growth of 1.8% in 2024; 2.5% in 2025; 2.1% in 2026; and 1.9% in 2027.
The unemployment rate is expected to rise to 4.4%.
Underlying debt is forecast to be 92.4% of GDP next year before hitting 93.7% in 2024-25; 94.6% in 2025-26, and 94.8% in 2026-27. It is estimated to fall to 94.6% in 2027-28.”
The deficit is forecast to fall in every single year of the forecast, down to 5.1% of GDP in 2023-24, to 3.2% in 2024-25, 2.8% in 2025-26, 2.2% in 2026-27 and 1.7% in 2027-28.
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INCENTIVES FOR INVESTMENT
The government will introduce a new policy of ‘full expensing’ for the next three years, which could become permanent “as soon as we can responsibly do so”.
Worth an average of 9 billion pounds ($10.9 billion) a year, it will enable any investment in IT equipment, plant or machinery to be deducted in full and immediately from taxable profits. Corporation tax will rise to 25% from April 2023.
CHANGES TO CHILDCARE
In households where all adults are working at least 16 hours, the offer of 30 hours of funded childcare for three-and-four year-olds will be extended, over time, to every single child over the age of 9 months.
Funding will also be increased to nurseries and the minimum staff-to-child ratio will move from 1:4 to 1:5 for two-year-olds in England.
CHANGES TO PENSIONS
The pensions annual tax-free allowance will rise from 40,000 pounds to 60,000 pounds, and the lifetime allowance will be abolished altogether in a bid to stop older workers leaving the labour market.
FUTURE CHANGES TO INVESTMENT
Hunt will set out later this year a plan to unlock investment from defined contribution pension funds and other sources, plus a move to make the London Stock Exchange a more attractive place to list. It will also set out its response to the challenges created by the U.S. Inflation Reduction Act.
Britain will add a total of 11 billion pounds to its defence budget over the next five years, putting it at nearly 2.25% of GDP by 2025.
Britain will scrap the Work Capability Assessment, meaning disabled benefit claimants will be able to seek work without losing financial support.
A new programme called Universal Support will also provide funds to help disabled people find appropriate jobs and put in place the support they need.
($1 = 0.8276 pounds)
Reporting by Kate Holton and Suban Abdulla
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