Chancellor to face ‘tough choices’ in delivering Spring Budget despite having to borrow £30bn less
Jeremy Hunt will be forced to make tough decisions in his upcoming Budget, experts have warned, despite the Chancellor having considerably more wiggle room than previously thought.
Improvements in the state of the British economy mean Jeremy Hunt will have to borrow £30bn less than the Office for Budget Responsibility’s (OBR’s) November forecast showed, according to the Resolution Foundation.
The Chancellor will, however, still face “tough choices” in delivering his Budget next week, as he will be forced to deal with the combined problems of the UK’s cost of living crisis, countrywide labour shortages and public sector strikes, the Resolution Foundation said.
It explained that falling wholesale energy prices will see lower-than-expected spending on the UK’s energy support scheme and better tax receipts due to stronger growth, meaning the Chancellor will have to borrow £30bn less than was forecast last November.
However, in delivering his Budget, Jeremy Hunt will have to address the UK’s worsening cost of living crisis that is set to see the typical British household have £1,100 less disposable income over the coming year as inflation continues to outstrip growth in pay.
Fiscal rules could also limit the Chancellor’s ability to resolve public sector pay disputes, leaving the government vulnerable to strike action.
Cara Pacitti, a senior economist at the Resolution Foundation, said: “The Chancellor will want his upcoming Budget to signal a new, lower inflation and higher growth phase for the UK economy.”
“There has certainly been some good news with the economy expected to be bigger and borrowing lower this year than feared,” Pacitti added.
However, she warned “there is no escape from having to focus on the cost of living crisis that families are still living through”.
Pacitti argued the Chancellor also needs to both “end public sector pay disputes” while tackling the “UK’s stagnant economic growth”.
Meanwhile, Britain’s mid-sized firms are calling on the UK government to push forwards with its levelling up agenda by tackling labour shortages, investing in broadband, and introducing tax cuts and subsidies for regional firms, new research from BDO showed.