British finance minister George Osborne has admitted that economic growth there this year will be half the 1.2 percent that was forecast just three months ago, but said he would not change course on austerity.
In his annual budget speech to parliament, Osborne revealed the Office for Budget Responsibility (OBR), the official budget watchdog, does not think Britain will slip into recession for a third time this quarter:
“GDP for the last year turned out to be a little higher than the OBR forecast in December, but this year their output forecast is reduced to 0.6 percent growth. And despite the recession in the eurozone, the OBR’s central forecast today is that we [will] avoid a second quarter of negative growth here in the UK,” Osborne told lawmakers.
There are plenty of doubters. The Labour opposition argues the Conservative-led government’s austerity measures are not bringing down the deficit and have not saved Britain’s AAA rating, but are stifling growth.
Osborne’s response in parliament: “It is taking longer than anyone hoped, but we must hold to the right track”.
He did say that growth was expected to pick up to 1.8 percent in 2014, after the 0.6 percent this year and UK growth was expected to be stronger than in France and Germany in 2013 and next year.
Osborne announced several tax changes to try to spur economic growth, including a cut in corporation tax to 20 percent in 2015 – it was 28 per cent when the coalition government came to power – and a reduction in employment taxes for businesses.
There will also be a “Help to Buy” scheme whereby the government could to take an interest-free 20 percent stake in newly built homes in order to underpin the housing market.