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Forecasts for economic growth have been slashed due to the uncertainty caused by the Ukraine war and rising inflation as Chancellor Rishi Sunak acknowledged the challenges facing the UK.
The Office for Budget Responsibility downgraded growth in gross domestic product a measure of the size of the economy from the 6% forecast for this year at the time of the Budget in October to just 3.8%.
With inflation at a 30-year high, Sunak promised a series of measures to help household finances including a 5p per litre cut in fuel duty.
Sunak said the OBR had warned ‘there is unusually high uncertainty around the outlook’.
‘It is too early to know the full impact of the Ukraine war on the UK economy,’ he told MPs.
‘But their initial view, combined with high global inflation and continuing supply chain pressures, means the OBR now forecast growth this year of 3.8%.
‘The OBR then expect the economy to grow by 1.8% in 2023, and 2.1%, 1.8% and 1.7% in the following three years.’
Sunak said underlying debt is expected to fall steadily from 83.5% of GDP in 2022/23 to 79.8% in 2026/27.
He added borrowing as a percentage of GDP is 5.4% this year, 3.9% next year, then 1.9%, 1.3%, 1.2% and 1.1% in the following years.
The chancellor said the threshold for paying national insurance will increase by £3,000 from July.
He also announced he is publishing a new ‘tax plan’, which will ‘help families with the cost of living’, ‘create the conditions for higher growth’, and ‘share the proceeds of growth fairly’.
He insisted the health and care levy will stay, but added: ‘A long-term funding solution for the NHS and social care is not incompatible with reducing taxes on working families.
‘Our current plan is to increase the NICs threshold this year by £300, I'm not going to do that I'm going to increase it by the full £3,000, delivering our promise to fully equalise the NICs and income tax thresholds.
‘And not incrementally over many years, but in one go, this year. From this July, people will be able to earn £12,570 a year without paying a single penny of income tax or national insurance.
‘That is a £6 billion tax cut for 30 million people across the UK. A tax cut for employees worth over £330 a year. The largest increase in a basic rate threshold ever. And the largest single personal tax cut in a decade.’
source: PA
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