Chancellor George Osborne has made his latest Budget announcement against the backdrop of the OBR’s assessment of the global economy as “questionable” and responded with a draft of changes promising to bring us into budget surplus by 2020.
Osborne began by declaring that “eight years ago we were one of the worst prepared countries to deal with the financial crisis; now we are one of the best prepared.”
When he first became chancellor in 2010, he said, borrowing was at £1 in every £4, now it is at £1 in every £14.
Despite what he described as a “cocktail of risks” affecting our economy, and despite the OBR downgrading their forecast for this year’s growth from 2.4% to 2.2% (and indeed downgraded for each subsequent year until 2020), Osborne maintained that we are on course for a budget surplus by 2020.
The OBR cited a “globally weak” economic outlook and low production in the West as causes for their reduced growth forecast and Osborne responded by arguing that he would be making “plans to fit the figures” and not vice versa, reiterating the importance of working within our means as a country.
He criticised previous chancellors for not heeding the OBR’s warnings and instead over-estimating growth, which he said cost the country billions.
The OBR’s prediction for our annual economic growth over the next six years was at average of around 2.1%; predictions which are, according to Osborne, “predicated on our EU membership”.
Despite downgraded growth forecasts, the Chancellor maintained that wages are forecast to continue to increase, and cited the OBR’s prediction that apparently another 1 million jobs will be created during this parliament.
Meanwhile, debt as a percentage of GDP is forecast to be higher than expected, meaning the Osborne has officially missed his fiscal targets on this score. Debt as a portion of GDP is predicted to be at 82.6% next year, then 81.3% in 2018, 79.9% in 2018, 77.2% in 2019 and 74.7% in 2020.
Despite this, Osborne still predicts that we will reach a budget surplus of £10.4 billion (or 0.5% of total GDP) by 2019/20 and £11 billion the year after.
Included in his proposals is a reduction in corporation tax from 20% to 17%, coupled with the promise to crack down severely on large scale tax evasion by big companies. This clampdown will involve various measures from the closure of loopholes to limiting capital gains and will, according to the Chancellor, raise some £12 billion, though this figure is contended by some commentators.