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Business News/ News / World/  Jeremy Hunt says UK economic growth forecast downgraded in blow to Rishi Sunak government
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Jeremy Hunt says UK economic growth forecast downgraded in blow to Rishi Sunak government

Jeremy Hunt is expected to extend a 100% tax relief on capital spending to spur investment, and announce supply-side reforms like speeding up connections to the electricity grid and encouraging more people to return to the workforce

Britain's Chancellor of the Exchequer Jeremy Hunt leaves 11 Downing Street on his way to present his Autumn Statement in the House of Commons, in London, November 22. (REUTERS)Premium
Britain's Chancellor of the Exchequer Jeremy Hunt leaves 11 Downing Street on his way to present his Autumn Statement in the House of Commons, in London, November 22. (REUTERS)

Chancellor of the Exchequer Jeremy Hunt said the UK’s economic growth forecasts had been downgraded, a blow for Rishi Sunak’s government going into an expected general election next year.

The economy is due to grow 0.7% in 2024 and 1.4% in 2025, Hunt said in the House of Commons on Wednesday as he delivered his Autumn Statement, citing forecasts from the Office for Budget Responsibility. The OBR had previously forecast 1.8% growth for 2024 and 2.5% for 2025.

The worsened outlook is why Hunt has talked up his fiscal statement as focusing on growth. It’s a pivotal moment for both Hunt and Prime Minister Rishi Sunak as they try to close a poll gap of about 20 points to the opposition Labour Party ahead of a general election expected next year.

“Our choice is not big government, high spending and high tax because we know that leads to less growth, not more," Hunt said. “Instead we reduce debt, cut taxes and reward work."

Hunt is expected to extend a 100% tax relief on capital spending to spur investment, and announce supply-side reforms like speeding up connections to the electricity grid and encouraging more people to return to the workforce. 

On spending decisions, Hunt said he would raise welfare payments in line with September’s inflation figure rather than October’s lower reading, a prospect that had sparked concern among some of his MPs who worried about the impact on voters during a cost of living crisis. He also maintained the pensions triple lock, deciding not to use a lower pay figure for the latest uprating.

On debt, Hunt said he’d hit his fiscal rule of having debt falling as a share of GDP by the end of the five-year forecast with double the headroom he had in the March budget, when it was £6.5 billion. However, the Resolution Foundation has called the headroom a “fiscal illusion" based on commitments made for the years after the election that are likely to prove politically impossible to deliver.

Hunt’s plans are predicated on tight spending in the years beyond 2024, after the expected election, and will likely to lead to a deterioration in the quality of public services. It effectively means a future government — and polls point to that being Keir Starmer’s Labour — may have to unwind any tax measures announced by Hunt on Wednesday to avoid that outcome.

The chancellor is under intense pressure to announce personal tax cuts, as Tory MPs demand he reduce a tax burden that has risen to a postwar high under the Conservatives. He’s set to cut national insurance — a payroll tax — though it may not offset higher bills next April due to frozen income tax thresholds.

The government has become more bullish following a decline in inflation, which Sunak said Monday means Hunt can now start to look at tax cuts. Inflation is due to fall to 2.8% by the end of 2024, Hunt said — though that’s significantly higher than the OBR’s March forecast that inflation would be down to 0.5% at the end of next year.

The importance of this Autumn Statement has grown for Sunak after a run of failed resets, including a largely-forgotten conference speech last month, a slim legislative agenda at the King’s Speech and a reshuffle that brought back former premier David Cameron as foreign secretary.

It also follows what some allies called his worst week as prime minister, when the Supreme Court ruled against his flagship plan to send migrants to Rwanda and sowed growing discord in his Conservative Party.

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Published: 22 Nov 2023, 07:59 PM IST
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