LONDON: Britain’s Chancellor of the Exchequer Rishi Sunak poses with the Budget Box as he leaves 11 Downing Street before presenting the government’s annual budget to Parliament in London yesterday.-AFP

LONDON: Britain yesterday sharply cut the growth forecast of its virus-ravaged economy, warning the pandemic was still causing “profound damage” in an annual budget centered on safeguarding businesses and jobs. Finance minister Rishi Sunak said the economy would expand by 4.0 percent this year, down from the Conservative government’s previous estimate of 5.5 percent growth but still better than the double-digit contraction of 2020.

Sunak warned parliament that the “coronavirus has done and is still doing profound damage”. “Our economy has shrunk by 10 percent-the largest fall in over 300 years,” he said. “Our borrowing is the highest it has been outside of wartime.” Sunak said tax on company profits would be hiked to 25 percent in 2023 from 19 percent currently.

It comes as the state’s emergency support package totals £407 billion ($568 billion, 471 billion euros), resulting in surging government debt. Britain is the worst-hit country in Europe with more than 120,000 COVID deaths and four million cases. But its economic recovery hopes have been boosted by its rapid vaccination program that has seen millions of adults receive a jab.

‘We will recover’
England’s third lockdown will start to be lifted from Monday, with the reopening of schools, followed by non-essential shops and hospitality in the coming months. “It’s going to take this country-and the whole world-a long time to recover from this extraordinary economic situation. But we will recover,” Sunak said. He said gross domestic product was expected to expand by 7.3 percent next year, which marked an upgrade from the prior guidance of 6.6 percent.

Sunak said that even after tax on company profits is hiked significantly, “the UK will still have the lowest corporation tax rate in the G7 bloc of wealthy nations. “Lower than the United States, Canada, Italy, Japan, Germany and France,” he insisted.

Furlough scheme
On the eve of the budget, Prime Minister Boris Johnson announced that it would extend its furlough scheme paying the bulk of wages for millions of private-sector workers. The multi-billion-pound furlough extension is until the end of September, five months longer than planned. The budget also confirmed the launch of an Infrastructure Bank with £12 billion in capital.

The lender will be formed to finance projects in the green economy, focusing on areas such as carbon capture and renewable energy. The economy tanked in 2020 because of the impact of the pandemic, with activity also hampered by turmoil ahead of Britain’s eventual exit from the European Union. Reflecting the problems, UK unemployment has shot up to a five-year high of 5.1 percent. – AFP