Budget 2013: Osborne Halves Growth Forecast

Chancellor George Osborne has given his 2013 Budget statement to the House of Commons

Chancellor George Osborne halved his official growth forecast in his 2013 budget speech, although insisted that the UK would avoid a “triple dip” recession. Growth this year will be 0.6%, down from the 1.2% predicted only four months ago.

In a move to try and restart growth, the Chancellor cut corporation tax by 1% to 20%, and created an “Employment Allowance” that will help small companies by saving them the first £2000 of National Insurance contributions. He also proposed dropping stamp duty completely from equity investments on growth markets such as AIM.

For workers, he talked of an “aspiration nation” making the first £10,000 earned from April 2014 free from income tax. The petrol tax excalator was also scrapped, and there was a 1p cut on tax on beer.

He also continued the cuts on government departments, talking of the £11 billion underspend this year with a 1% cut to the budgets of most departments, with only education and the NHS budgets protected. From 2015/16 spending on infrastructure goes up by £3 billion and the government has committed to spending 0.7% of GDP on international development.

Osborne proposed two different “help to buy” schemes to aid people looking to purchase a house: an “equity loan” where the government will loan the house buyer up to 20% of the value of a new build home; and a “mortgage guarantee” where lenders will be incentivised to make more mortgages available for people with small deposits. The share prices of house builders jumped after this news but commentators have raised the issue of these schemes creating government backing for similar problems to the cause of the “sub-prime mortgage crisis” in the US.

George Osborne failed to meet his targets on deficit reduction and public sector net debt is forecast to rise to 75.9% of GDP this year, 79.2% next year, and 82.6% the year after and 85.1% in 2015-16. But he says it will fall to 84.8% by 2017-18.

Labour leader Ed Miliband called the statement “more of the same budget from a down graded chancellor” with flat wages and rising prices. He also noted that British people are worse off in 2013 than in 2010 according to the Office of Budget Responsibility, and said the Chancellor was “humiliated” by the UK’s loss of its AAA rating on which Osborne previously put such prestige. In response to the budget, Miliband said:

“Millions are paying more so millionaires pay less”