Budget 2014: George Osborne warns of hard choices ahead despite higher growth
OBR raises growth forecasts for 2014 once again
Wednesday 19 March 2014
George Osborne warned today that the country still has a long haul in front of it to close the deficit despite higher growth and lower borrowing this year.
The Office for Budget Responsibility raised growth forecasts for 2014 the second time in four months, from 2.4 per cent to 2.7 per cent - albeit lower than the Bank of England’s 3.4 per cent forecast - and cut borrowing estimates to £108 billion from the £111 billion expected in December’s autumn statement.
The recovery is feeding into the public finances as borrowing falls by £24 billion over the OBR’s forecast horizon compared with December’s forecasts, moving into a £5 billion surplus by 2018/19.
The upgrade to forecasts means the economy will be £16 billion bigger than previously thought. But the Chancellor stressed little progress had been made in cutting back the country’s structural deficit, which is impervious to the ups and downs of the economy. Osborne said: “Faster growth alone will not balance the books... there will have to be more hard decisions, more cuts.”
The Bank of England also warned of the hard yards to come. Minutes of the Monetary Policy Committee’s latest meeting noted signs that the UK’s recent growth spurt may not have been as reliant on a consumer spending spree and resurgent housing market as first appeared, but said “there remained some way to go to ensure that the recovery was both balanced and sustainable”.
Read more New 12-sided pound coin announced
Air Passenger Duty reforms welcomed by airlines
Stamp duty clampdown hits rich
Tax relief for regional theatre shows
Osborne reduces taxes on business investment
Summary of The Independent's Budget coverage
The comments came as the UK’s unemployment rate remained steady at 7.2 per cent for the quarter to January, meaning that the Bank’s forward guidance framework — which rules out rate rises until the proportion of jobless falls to 7 per cent — is still in place. Rate-setters say expectations of a first interest rate rise next spring are “reasonable”.
Policymakers noted “initial signs that the anticipated broadening from household to business spending might have already begun” after recent official figures showed business investment spending rising at an annual pace of 8.5 per cent at the end of last year. But trade figures show the UK’s goods trade gap with the rest of the world widening to £9.8 billion with little sign of rebalancing seen in the longer term. In the quarter to January, export volumes were 0.9 per cent ahead of a year earlier, but imports up 4.6 per cent.
Threadneedle Street is still concerned over the rise in the pound — up 1.5 per cent over the last month - hampering an export recovery and keeping a close eye on wages, which rose 1.4 per cent on last year. Single-month figures stripping out bonuses showed relief for squeezed households coming into view with salaries up 1.8 per cent compared to January last year — almost catching up with the Bank’s Consumer Prices Index inflation benchmark, which stands at 1.9 per cent.
But wages are still sluggish by historical standards. Markit chief economist Chris Williamson said: “It still looks a long while off before pay will be rising at a sufficiently strong pace to worry policymakers into raising interest rates.”
- 2 Katie Hopkins attacked me on Twitter — so I reported her to the police for inciting racial hatred
- 3 Tidal: Jay Z's Spotify rival streaming service criticised for making wealthy artists even richer
- 4 Brixton squat flats now costing up to £3k per month show how out of control rent is in London
- 5 A new (old) cure for MRSA? Revolting recipe from the Dark Ages may be key to defeat infection
Costa Concordia: Shipment of Mob drugs was hidden aboard cruise liner when it hit rocks off Italian coast, investigators say
Brixton squat flats now costing up to £3k per month show how out of control rent is in London
A new (old) cure for MRSA? Revolting recipe from the Dark Ages may be key to defeat infection
Jeremy Clarkson 'could be given minder' ahead of a potential Top Gear return
Germanwings plane crash: Transcript reveals passengers 'screamed for over five minutes' before plane crashed into mountain
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
Street preacher quoting from the Bible fined for calling homosexuality an 'abomination'
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
The West has it totally wrong on Lee Kuan Yew
David Cameron calls Labour 'hopeless, sneering socialists' while announcing 7-day NHS plans
Negotiable: Recruitment Genius: This leading supplier of compliance software a...
£24000 - £30000 per annum: Recruitment Genius: The Associate System Engineer r...
Negotiable: Recruitment Genius: An Executive Assistant is required to join a l...
£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...