Britain misses deficit target in pre-election budget

3rd December 2014, Comments 0 comments

Britain's finance minister George Osborne unveiled his last major budget update before next year's general election, admitting a key deficit-cutting target had been missed but revising up economic growth forecasts.

Osborne said the economy was now forecast to grow by 3.0 percent this year compared with a previous prediction of 2.7 percent, and also revised up the estimate for 2015 to 2.4 percent from 2.3 percent.

But he admitted that the deficit, though falling, "remains too high" at a forecast £91.3 billion (115 billion euros, $143 billion) in the year to March 2015, higher than a previous estimate of £86.4 billion earlier this year.

That represents 5.0 percent of gross domestic product, compared with 10.2 percent when the coalition government came to power in 2010.

"Today against a difficult global backdrop I can report higher growth, falling unemployment, falling inflation and a deficit which is half what we inherited," Osborne told parliament.

"We inherited an economy in crisis... I present a forecast that shows the UK is the fastest growing of any major advanced economy," he added.

With employment rising but many new jobs lower paid, the government has seen tax receipts shrink, hindering its bid to reduce the country's budget deficit further.

Osborne's Conservatives, led by Prime Minister David Cameron, had promised to bring the public deficit to an end by the time of the election in 2015.

He said the deficit was forecast to fall to 4.0 percent next year, before moving into a surplus of 0.2 percent in 2018/19.

He added that the government's achievements were significant particularly considering that "the warning lights are flashing over the global economy" including a stagnating eurozone.

- 'Cost of living crisis' -

With Britons headed for the polls in May, Osborne was careful to tone down the austerity measures that have dominated previous budgets although he cautioned that his was not "a net give away".

Instead he unveiled extra spending on infrastructure -- mainly road-building and flood defences -- as well as a package to support British exports to emerging markets in Asia, Africa and South America and an overhaul of property taxes.

While warning of "very substantial savings" needed in public spending, he promised £2.0 billion in extra money for the National Health Service -- a key battleground in the 2015 polls.

He also said the government would legislate to allow Northern Ireland to set its own corporation tax, a key demand in the province which said it has been penalised because of the far lower rate of 12.5 percent in the neighbouring Republic of Ireland.

The government has come under pressure ahead of the elections from the opposition Labour party and trade unions, which have warned that economic growth has not translated into higher living standards for many people.

Britain's economy is outperforming the eurozone but in recent months market analysts have raised concerns regarding the impact of falling inflation on British wage growth.

"For working people, there is a cost-of-living crisis," Ed Balls, the shadow finance minister from the opposition Labour party, told lawmakers.

Also on Wednesday, Osborne said the government would repay the £1.9 billion of debt still outstanding from Britain's role in World War I.

War Loan bonds are among the most widely held in Britain, with an estimated 120,000 holders.

"It is a sign of our fiscal credibility and it's a good deal for this generation of taxpayers," he said.


© 2014 AFP

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