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Osborne delivers another austere UK budget
LONDON—Britain’s Treasury chief unveiled another tough budget yesterday despite weaknesses in the economy that have raised fears of a third recession in a little more than four years. Though he offered beer drinkers a tax break—no doubt a popular move among some—and provided incentives for home-buyers and investments in infrastructure projects, George Osborne’s plan showed the Conservative-led government remains convinced that debt-reduction measures are the best way forward for Europe’s third-largest economy.
“We are slowly but surely fixing our country’s economic wrongs,” he said. That’s not a view shared by all. After three years of austerity, the country is borrowing more than Osborne initially thought and growing far slower than anticipated. Ed Miliband, leader of the Labour Party opposition, said the budget was “more of the same” from a government that has failed to revive the economy following its deepest recession since World War II and presided over the loss of the country’s triple A credit rating from Moody’s Investors Service.
“Today, the chancellor joined Twitter,” Miliband said. “He could have got it all in 140 characters: Growth down. Borrowing up. Families hit. And millionaires laughing all the way to the bank. Hashtag: downgraded chancellor.” While insisting that his approach was the only way to tackle the economy’s problems head on, Osborne conceded that the forecasts from the independent Office for Budget Responsibility were more downbeat than the last set less than four months ago.
The growth forecast for this year, for example, was halved to just 0.6 per cent, providing Osborne with even less room to manoeuver as a flat-lining economy keeps a lid on revenues and maintains the upward pressure on welfare spending. And though growth in 2014 is expected to triple to 1.8 per cent, down from the previous two per cent prediction, it’s still below the country’s long-run average and a fairly uncomfortable backdrop to the expected election the following year.
The economy shrank by 0.3 per cent in the last three months of 2012, and many analysts have predicted another contraction in the first quarter of 2013. That would put the UK back into a recession—technically defined as two consecutive quarters of economic contraction.
Osborne admitted that the recovery was taking “longer than anyone hoped,” and that problems in Europe were holding Britain back. The 17 European Union countries that use the euro account for around 40 per cent of British exports and many of them are in recession, some of them severe.
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