Chancellor Jeremy Hunt is promising a plan to weather an economic “storm” as inflation and the cost of living crisis continues to worsen and affect Britons across the country.
It comes as the Office for budget Responsibility forecasted that the UK’s inflation rate wil;be 9.1 per cent this year and 7.4 per cent next year.
He said in his speech in Commons today: “The OBR confirm that our actions today help inflation to fall sharply from the middle of next year.
“They also judge that the UK, like other countries, is now in recession. Overall this year, the economy is still forecast to grow by 4.2%.
“GDP then falls in 2023 by 1.4%, before rising by 1.3%, 2.6%, and 2.7% in the following three years.
“The OBR says higher energy prices explain the majority of the downward revision in cumulative growth since March.
“They also expect a rise in unemployment from 3.6% today to 4.9% in 2024 before falling to 4.1%.” He noted “today’s decisions mean that over the next five years, borrowing is more than halved”.
He added: “This year, we are forecast to borrow 7.1% of GDP or £177bn; next year, 5.5% of GDP or £140bn; then by 2027-28, it falls to 2.4% of GDP or £69bn.
“As a result, underlying debt as a percentage of GDP starts to fall from a peak of 97.6% of GDP in 2025-26 to 97.3% in 2027-28.”
The tax hikes and spending cuts are expected to lower the UK’s economic growth prospects for the coming years, but, the Autumn Statement from Mr. Hunt has been expected to result in a stronger British Pound, according to analysts.
This is because the market’s reaction to today’s fiscal event will come down to credibility, as opposed to former PM Liz Truss’ growth agenda.
“The Chancellor’s Autumn Statement will instantly be judged by the value of the pound and gilt yields,” says Nigel Green, chief executive of deVere Group.
“If the pound rallies and the cost of government borrowing falls it will be a win for Sunak’s government.”
Mr Hunt has reversed almost all of the tax measures outlined by his predecessor Kwasi Kwarteng.
In September, Mr Kwarteng announced his “shock and awe” mini-budget, and markets had been very quick to react at the time.
It was followed by days of turmoil in the markets, a fall in the value of the pound and rises in the cost of UK government borrowing and mortgage rates.
Mr Kwarteng had announced £45bn worth of unfunded tax cuts, which inevitably came alongside the prospect of increased borrowing.