Alexa
  • Directory of Taiwan

UK budget to promote growth on shoestring

UK budget to promote growth on shoestring

The British government will seek to promote economic growth on a shoestring when it unveils its annual budget Wednesday as soaring inflation, rising unemployment and a runaway deficit leave little room for voter-friendly giveaways.
As concern grows about the possibility of a domestic double-dip recession, Treasury chief George Osborne is expected to stick to his guns on a tough austerity program slashing government spending on services from health to education to bring down the country's debt.
Osborne is instead likely to announce less costly reform measures to encourage private sector investment _ and offer some smaller gifts to a cash-strapped general public such as a freeze on fuel duty.
"The budget is going to be ashamedly pro-growth, pro-enterprise and pro-aspiration," Osborne said earlier this month.
Britain is struggling to recover from its worst recession since the end of World War II. The country was in recession longer than the other Group of Seven industrialized nations and a shock 0.6 percent contraction in gross domestic product growth in the final quarter of last year has heightened fears for the future.
Economists expect the Office for Budget Responsibility, the agency set up by Osborne to keep forecasts at arm's length from the government, to revise downward its forecasts for growth this year and next _ from 2.1 percent and 2.6 percent respectively _ when it provides updates alongside the budget.
Those figures are well above the predictions of 1.5 percent and 2 percent from the Organization for Economic Cooperation and Development, which has warned that Britain still faced "significant headwinds."
Still, the OECD gave a tick of approval to Prime Minister David Cameron's tough spending restrictions to tackle a deficit running at around 10 percent of gross domestic product.
But statistics released on the eve of the budget showing that inflation continues to edge higher _ to an annualized 4.4 percent, more than double the Bank of England's 2 percent target _ have made Osborne's task even tougher.
As well as increasing the likelihood of a near-term hike in interest rates, persistently high inflation means that the government will likely have to borrow more over the medium term, making Osborne's plan for fiscal consolidation trickier to achieve.
Other figures out Tuesday showed that public borrowing increased in February as the tax haul unexpectedly shrank to 11.8 billion pounds, compared to 9.5 billion pounds a year earlier. That was nearly double the 6.9 billion pounds forecast by economists and a record for February.
Osborne first outlined plans in October to slash some 80 billion pounds ($128 billion) of public expenditure over five years, and has already lifted sales tax from 17.5 percent to 20 percent in a bid to raise an extra 13 billion pounds for the country's coffers this year. More painful measures are still to come, including spending cuts on services like welfare and a rise in the retirement age.
Public spending will be cut by more than 2 percent of GDP this year in a bid to bring down borrowing to 148.5 billion in 2010/11, down from 156 billion pounds in 2009/10.
Osborne and Cameron have blamed the harsh cuts on excessive spending by the previous Labour government, led by former Prime Minister Gordon Brown.
But they are still deeply unpopular with much of the electorate.
The Trades Union Congress has planned a public march for Saturday to protest what it calls "the myths used by the government to justify its deep, rapid and unfair cuts," accusing the Conservative-led coalition of scaremongering by making comparisons with hard-hit Greece.
"Massive cuts are a false economy," said TUC General Secretary Brendan Barber on Tuesday. "As we saw in the 1930s, austerity begets more austerity - more unemployment, more misery for working people, and yes, more national debt."
The TUC expects its "March for the Alternative" and rally in Hyde Park to attract at least 100,000 walkers and potentially swell to the size of the several hundreds of thousands-strong protest against the 2003 invasion of Iraq.
With little room for maneuver because of the deficit commitment, Osborne is expected to pull few surprises out of the famous red budget briefcase to win over the public.
The likely headline-grabbing measure is expected to be a freeze of fuel duties to win favor with Britons facing stagnant incomes and rising household costs _ a measure that would be partly offset by the fact that higher oil prices will give the government more taxes from North Sea oil firms.
Otherwise, the government is expected to focus on less costly reform measures to aid private sector investment, shooting for a rebalancing of the economy away from a reliance on imports by pushing exports and manufacturing.


Updated : 2021-05-17 13:01 GMT+08:00