Summer Budget: Economy
Osborne set out ‘to make work pay’
The government chose to concentrate on plans to “make work pay” and create 2 million more jobs rather than speed up measures to end Britain’s deficit.
The headline change was that a surplus will not be reached until a year later than previously planned, as George Osborne slowed the pace of cuts to match those of the last Parliament.
The surprise announcement that deficit reduction measures will be eased means that the UK is now expected to hit a budget surplus a year later than planned, in 2019-20. However, by 2018/19 the government is expected to borrow just £6.4bn – well within the margin for revisions over the intervening period – before reaching a £10bn surplus in 2019-20.
Debt as a share of GDP is expected to start falling next year, and should slide from more than 80% to 68.5% by 2020 as the Conservative government finds £37 billion in cuts and savings and sticks with a strict 1% pay rise regime in the public sector.
With the post-election Budget coming just a few months after the last one, there seemed little chance of major changes to growth figures and projections today.
The Chancellor announced that the economy grew by 3% in 2014, but this year’s forecast has been revised lower by 0.1% since March, to stand at 2.4%. Mr Osborne was quick to point out that such a rate is faster than America or Germany, and twice as fast as France.
“For the second year in a row, Britain is expected to have the strongest economic growth of any major advanced economy in the world,” he added. “In 2016 the OBR (Office for Budget Responsibility) has growth unchanged at 2.3% – and it is then revised up to 2.4% in the following year; a level of strong, steady growth it predicts for the rest of the decade.”
He added that the growth was being driven by stronger private consumption, and higher investment levels. Estimates of business investment were revised higher, and it is now 31.9% higher than it was in 2010.
The OBR forecasts that under the current economic conditions, almost a million more jobs will be created over the next five years. But Mr Osborne said his ambition was to go further, and create 2 million more jobs more jobs by the end of the Parliament.