Britain’s budget will move into surplus for the first time in nearly 20 years by 2018, George Osborne predicted on Thursday as he claimed his “economic plan is working”.
In the most upbeat Autumn Statement he has delivered Mr Osborne said new figures from the Office of Budget Responsibility showed that GDP had grown by 1.4 per cent this year – 0.8 per cent higher than predicted in March.
Borrowing will be £111 billion this year - £9 billion less than predicted at the time of the Budget in March. Employment is predicted to rise by 400,000 while unemployment rates will fall to 7 per cent by 2015 – raising the possibility of the Bank of England raising interest rates within two years.
Among the main measures announced by Mr Osborne were:
- Next year's fuel duty rise will be cancelled. Rail fairs will also be capped at the rate of inflation instead of rising by one per cent above it.
- Employers will no longer have to pay national insurance contributions for staff under the age of 21 – of whom there are 1.5 million. At the same time there will be a requirement for job seekers aged 18 to 21 to start a traineeship, work experience or community work after six months or lose their benefits.
- In a move to help the high street, firms taking over vacant town centre shops will be able to claim 50 per cent relief from business rates. There will also be a discount on business rates worth £1,000 to every retail premises in England with rateable value up to £50,000.
- Mr Osborne also confirmed that the money had been found to fund an expansion of free school meals to all school children up to year two and a new married tax allowance which would be updated in line with personal tax allowances. He also confirmed that funding would be made available for a programme to upgrade school kitchens.
The issue was the subject of an extraordinary coalition row between Deputy Prime Minister Nick Clegg and the Conservative Education Secretary Michael Gove when Lib Dem sources accused Mr Gove's officials of "lying" and "talking bollocks" when they warned they may have to raid the Department for Education's basic needs budget to pay for the upgrade.
Mr Osborne also announced an additional 30,000 student places next year, with the cap on student numbers abolished altogether in 2015.
Declaring that “Britain's economic plan is working but the job is not done,” Mr Osborne warned of “more difficult decisions” to come to ensure that the economic recovery continues.
He announced further cuts in some departmental budgets and the Government’s contingency reserve, cutting £1billion a year in spending for the next three years.
Overall the Office for Budget Responsibility is now forecasting that borrowing over the next five years would be £73 billion less than previously thought, with Britain running a "small cash surplus" by 2018/2019.
Mr Osborne claimed: “The hard work of the British people is paying off and we will not squander their efforts.”
He revealed that the recession had been even deeper than feared - with GDP down by 7.2 per cent rather than 6.3 per cent - the equivalent of £3,000 per household and one of the sharpest falls globally.
But he said that UK was now growing faster than any other advanced economy.
He sat down to Tory cheers declaring: “Britain's moving again; let's keep going.”
But shadow chancellor Ed Balls accused Mr Osborne of being in “complete denial”. He said living standards for families were falling “year on year on year”.