LONDON: Britain’s Chancellor of the Exchequer Rishi Sunak (center) holds the Budget Box as he poses with members of his Treasury team prior to leaving 11 Downing Street in central London yesterday to present the government’s annual budget to Parliament. – AFP

LONDON: Britain’s pandemic-hit economy is set to extend its solid recovery into next year despite strong inflationary pressures, finance minister Rishi Sunak announced yesterday as he delivered the government’s latest budget to parliament. Confirming plans for multi-billion-pound funding projects aimed at driving long-term recovery and reducing pressure on the state-run health service, Sunak added that the government was reducing state debt that soared during the pandemic.

And after triggering an outcry by cutting Britain’s foreign aid budget, the chancellor of the exchequer vowed just ahead of a UN climate summit to restore the funding in the coming years where help for poorer countries will be pivotal. “Today’s budget delivers a stronger economy for the British people: stronger growth, with the UK recovering faster than our major competitors,” Sunak said in his speech.

Growth recovery
UK gross domestic product output is expected to rebound by 6.5 percent this year before slowing slightly in 2022, said chancellor of the exchequer Sunak. The 2021 forecast was much stronger than the 4.0-percent GDP growth predicted in March but Sunak added that the pace of output would slow to 6.0 percent next year.

Sunak said the UK economy was on course to return to its pre-pandemic level at the turn of the year, while recognizing that “people are concerned about global inflation” which is rising at a fast pace as economies reopen after lockdowns. Sunak said the UK annual inflation rate was forecast to climb to an average of 4.0 percent over the next year from 3.1 percent currently, with price rises fuelled by soaring energy costs and supply constraints. Britain’s growth expectation this year meanwhile compares favorably with Europe’s biggest economy Germany, which Wednesday forecast GDP expansion of around 2.6 percent in 2021.

Germany’s slower-than-expected rebound from a pandemic-induced slump last year was largely owing to bottlenecks in global supply chains, its government said. On the eve of its budget, the UK government revealed plans to raise minimum wage rates and end a freeze on pay rises for public-sector workers.
But the boost to salaries is likely to be offset by rising inflation, which is denting Britons’ spending power. A further hit has come from the government returning welfare benefit payments to pre-pandemic levels, after a temporary hike to help families through the virus outbreak.

British unemployment meanwhile risks soaring in the coming months after the government ended its costly jobs furlough scheme, which paid the bulk of wages for millions of private-sector workers during the pandemic. Government borrowing rocketed to around £320 billion ($442 billion, 381 billion euros) in the financial year to March, driven higher by costly COVID support. That was equivalent to 14.9 percent of gross domestic product, the highest UK level since the end of World War II.

World Cup boosts
While reducing the deficit is a priority for Sunak, the chancellor wants to drive recovery with the help of large spending projects as well. The Treasury last week announced investment totaling almost £7.0 billion on transport outside London. The government will also pump almost £6.0 billion extra into its National Health Service, which is struggling to treat all patients as virus cases surge again.

Sport is set for some largesse, with British bids to stage the 2025 women’s rugby World Cup and the 2026 Tour de France Grand Depart in line to share £30 million of funding. A further £11 million is due for the UK-Ireland bid to host the 2030 men’s football World Cup. At his last budget in March, Sunak unveiled plans to ramp up tax on company profits to 25 percent from 19, starting in 2023. And the Conservative government recently broke an election pledge by announcing a tax hike to fix a social care crisis. The government said the increase brought Britain into line with France, Germany and Japan, which have all raised social insurance levies to help care for ageing populations. -AFP