LONDON (AFP) - Britain’s economy is set for faster-than-expected growth this year, the coalition government predicted Wednesday as it vowed to move from austerity to prosperity in its last budget before elections.
Finance minister George Osborne hiked Britain’s 2015 growth forecast to 2.5 per cent in the coalition’s final budget before May’s general election, up from a prior estimate of 2.4 per cent after 2.6-per cent expansion last year, and cut his deficit forecasts.
To cheers and jeers from rowdy lawmakers, and with 50 days to go until election day on May 7, there were voter-friendly sweeteners too with tax cuts on beer, cider and spirits, while a fuel duty rise was axed following a slump in world oil prices.
There was also a reward for savers – who have long been punished by Britain’s record-low interest rates – with the introduction of a new personal savings allowance under which the first £1,000 (S$2,000) in interest will be tax free.
“This is a budget that takes Britain one more step on the road from austerity to prosperity,” said Chancellor of the Exchequer Osborne, a key member of Prime Minister David Cameron’s Conservative party.
“Today, I report on a Britain that is growing, creating jobs and paying its way,” he told lawmakers.
Gross domestic product (GDP) was expected to expand by 2.3 per cent in both 2016 and 2017, he said.
But opposition leader Ed Miliband, the head of the Labour party, hit back saying: “It’s a recovery for the few from a government of the few”.
The Conservative-Liberal Democrat coalition, which rose to power in 2010, has unleashed billions of pounds of cuts to state spending in order to bring down a record deficit inherited from the previous Labour administration.
In a wide-ranging announcement, Osborne unveiled a tax on profits aimed at cracking down on multinationals that shift profits offshore, and also increased a special tax on the banking sector.
“Our new diverted profits tax is aimed at large multinationals who artificially shift their profits offshore,” he announced following controversy over the British tax affairs of global giants such as Amazon, Google and Starbucks.
“I can confirm that we will legislate for it next week and bring it into effect at the start of next month,” he said.
There were also perks for pensioners, who will be allowed to swap regular retirement incomes for cash lump sums.
In reaction to slumping world oil prices, he cancelled a planned hike on fuel duty while announcing £1.3 billion of support for Britain’s North Sea oil industry.
The centre-right Conservatives and their junior coalition partners the Liberal Democrats are hoping to capitalise on their stewardship of the economy, which has staged a solid recovery since it won power in 2010.
Britain’s deficit was set to reach 4 per cent of GDP in 2015/2016, falling further until 2018/2019 when it was forecast to stand at a surplus of 0.2 per cent.
Osborne said that the government would not chase “short term” gimmicks and would instead stick to its deficit-slashing plan.
Tax avoidance and evasion measures meanwhile would seek to raise £3.1 billion over the forecast period.
“We choose... to use whatever additional resources we have to get the debt and the deficit falling,” Osborne said.
“No short term giveaway can ever help as much as the long term benefits of a national economic recovery.”
Opinion polls indicate a tight battle on May 7 with the main opposition Labour party, which argues that painful austerity measures have hurt the poor.
“This is a budget people won’t believe from a government that is not on their side,” Miliband said.