Budget 2023: UK economy will avoid recession in 2023 and inflation set to plummet, says chancellor
Jeremy Hunt said the British economy is “proving the doubters wrong” and will avoid recession, as he delivered his first full budget speech to Parliament.
The chancellor said the government’s plan for the economy was “working” as he announced what he called a “budget for growth”.
He said forecasts from the Office for Budget Responsibility (OBR) showed the UK would avoid recession – two-quarters of negative growth – in 2023, despite previous predictions.
But the economy will still contract overall this year by 0.2%, and the OBR has warned living standards are still expected to fall by the largest amount since records began – although the decline is not as bad as had been forecast in November.
Budget 2023 – read more:
Politics live: The budget as it happened and reaction
The key points of the budget at a glance
The OBR forecasts also said inflation in the UK would fall from 10.7% in the final quarter of last year to 2.9% by the end of 2023.
Mr Hunt said it showed Rishi Sunak’s goal of halving inflation this year would be met, but he added: “We remain vigilant and will not hesitate to take whatever steps are necessary for economic stability”.
However, Labour leader Sir Keir Starmer said the chancellor’s “boasts” about lower inflation were “ridiculous”, adding: “The idea that it’s a tax cut, British people can see through that.
“They see their tax burden at its highest level for 70 years and they know it’s not the government that’s lowering inflation.
“It’s working people, earning less, enjoying less. It’s their sacrifice that is helping to bring inflation down and they deserve better than another cheap trick from the government of gimmicks, making them pay whilst trying to claim the credit.”
Interest Rate Expectations
A number of other plans were unveiled by Mr Hunt, including:
• Bringing charges for prepayment meters in line with direct debit charges, impacting over four million households and saving them an average of £45 per year
• Making duty on draught products in pubs up to 11p lower than supermarkets
• Maintaining the freeze in fuel duty
The chancellor also said £11bn will be added to the defence budget over the next five years – following an announcement earlier this week – saying it would be nearly 2.25% of GDP by 2025. The government’s ambition is for it to reach 2.5%, he added.
And after reports he would increase the pensions lifetime allowance to £1.8m in an attempt to encourage doctors and other high earners back to work, Mr Hunt decided to scrap the limit entirely, as well as increasing the pensions annual tax-free allowance from £40,000 to £60,000.
He told the Commons: “In the face of enormous challenges I report today on a British economy which is proving the doubters wrong.
“In the autumn we took difficult decisions to deliver stability and sound money. Since mid-October, 10-year gilt rates have fallen, debt servicing costs are down, mortgage rates are lower and inflation has peaked.
“The International Monetary Fund says our approach means the UK economy is on the right track.”
But Sir Keir said the only permanent tax cut in the budget was for “the richest 1%”, adding: “How can that possibly be a priority for this government?”
Please use Chrome browser for a more accessible video player
‘This a failure you can measure not just in the figures but in the empty pockets of working people,’ says the Labour leader.
The Labour leader continued: “Again we see a failure to grip the long-term challenges. No determination to create growth that unlocks the potential of the many – working people being made to pay for Tory choices and Tory mistakes.”
Some policies were revealed ahead of the chancellor’s speech, including keeping the cap on energy prices at £2,500 for a further three months, despite a planned rise to £3,000 in April, and 12 new investment zones.
Sky News also reported last night his promise to provide 30 hours of childcare a week to parents of one and two-year-olds, and to give a further cash injection to the sector to increase the availability of existing free childcare for three to four-year-olds.
But Mr Hunt went further on this measure, saying the care would be available from September 2024 when a child reaches nine months, as well as promising to increase funding for nurseries and pay those on Universal Credit upfront for the childcare they need to get.
However, he also confirmed the ratio for how many children each staff member looks after can be raised from one per four to one per five – though he said it was optional for both providers and parents.
There were more announcements to fit with Mr Hunt’s “three E’s” philosophy – enterprise, employment and education.
They included:
• Incentive payments of up to £1,200 for childminders who sign up to the profession
• Enhanced credit for small and medium businesses, and creative firms
• An extension to relief for theatres, orchestras and museums
• Tax relief on energy efficient measures in firms
• £900m investment into supercomputing
The chancellor also confirmed widely reported plans to abolish the Work Capability Assessment for disabled people to “separate benefit entitlement from an individual’s ability to work”.
Mr Hunt promised a new programme called Universal Support, describing it as “a new, voluntary employment scheme for disabled people where the government will spend up to £4,000 per person to help them find appropriate jobs and put in place the support they need”.
And he said there would be a £400m fund to help those who are forced to leave work because of a health condition to get support in the workplace.
Please use Chrome browser for a more accessible video player
Chancellor Jeremy Hunt MP has announced that the energy price guarantee will remain at £2,500 until the end of June.
Mr Hunt confirmed he would keep the incoming rise in corporation tax – from 19% to 25% – despite anger from some of his own backbenchers.
But in a bid to keep businesses happy, he introduced a new benefit where every pound a company invests in equipment can be deducted in full and immediately from taxable profits – “a corporation tax cut worth an average of £9bn a year for every year it is in place”.
In what appeared to echo recent Labour policy, the chancellor announced continued state-financed investment in nuclear power and the launch of Great British Nuclear, saying the public body will “bring down costs and provide opportunities across the nuclear supply chain to help provide up to one quarter of our electricity by 2050”.
And he said nuclear energy would be reclassified as “environmentally sustainable” to give it the same access to investment incentives as renewables.
Today’s statement was Mr Hunt’s first full budget as chancellor – having been brought in by Liz Truss to reverse a number of measures from her disastrous mini-budget last October and kept on by Rishi Sunak after he took over as prime minister.
It came against a backdrop of mass industrial action, with hundreds of thousands of workers today staging what is believed to be the biggest walkout since the current wave of unrest began.
Teachers, university lecturers, civil servants, junior doctors, London Underground drivers and BBC journalists are among those taking to picket lines around the country amid widespread anger over pay, job security, pensions and conditions.
Labour’s shadow chancellor, Rachel Reeves, said ahead of the budget that it was “an opportunity for the government to get us off their path of managed decline”.
She added, if her party were in power, their focus would be on securing the highest growth in the G7.
“Our plan will help us lead the pack again, by creating good jobs and productivity growth across every part of our country, so everyone, not just a few, feel better off,” she added.
Our politics, business and finance reporters will be hosting a Q&A after the budget statement. To submit a question, click here.
World
Donald Trump says Vladimir Putin wants to meet – and that he and Barack Obama ‘probably’ like each other
Donald Trump says a meeting is being set up between himself and Vladimir Putin – and that he and Barack Obama “probably” like each other.
Republican US president-elect Mr Trump spoke to reporters at his Mar-a-Lago resort in Florida on Thursday, saying Russian president Mr Putin “wants to meet, and we are setting it up”.
“He has said that even publicly and we have to get that war over with. That’s a bloody mess,” Mr Trump said.
Kremlin spokesperson Dmitry Peskov said on Friday there was a “mutual desire” to set up a meeting – but added no details had been confirmed yet and that there may be progress once Mr Trump is inaugurated on 20 January.
“Moscow has repeatedly declared its openness to contacts with international leaders, including the US president, including Donald Trump,” Mr Peskov added.
“What is required is a mutual desire and political will to conduct dialogue and resolve existing problems through dialogue. We see that Mr Trump also declares his readiness to resolve problems through dialogue. We welcome this. There are still no specifics, we proceed from the mutual readiness for the meeting.”
Donald Trump and Vladimir Putin in July 2017. Pic: AP
Trump on Obama: ‘We just got along’
Mr Trump also made some lighter remarks regarding a viral exchange between himself and former Democrat President Barack Obama at Jimmy Carter’s funeral on Thursday.
The pair sat together for the late president’s service in Washington DC on Thursday, and could be seen speaking for several minutes as the remaining mourners filed in before it began.
Mr Obama was seen nodding as his successor spoke before breaking into a grin.
Asked about the exchange, Mr Trump said: “I didn’t realise how friendly it looked.
“I said, ‘boy, they look like two people that like each other’. And we probably do.
“We have a little different philosophies, right? But we probably do. I don’t know. We just got along. But I got along with just about everybody.”
The amicable exchange comes after years of criticising each other in the public eye; it was Mr Trump who spread the so-called “birther” conspiracy theory about Mr Obama in 2011, falsely asserting that he was not born in the United States.
Read more:
Trump to be sentenced today over porn star hush money
The Hollywood celebrities who have lost homes to wildfires
Insults continued for years, with Mr Obama famously dedicating much of his final White House Correspondents’ Dinner speech in 2016 to jokes at his political rival’s expense.
Mr Trump has repeatedly attacked the Obamas, saying the former president was “ineffective” and “terrible” and calling former first lady Michelle Obama “nasty” as recently as October last year.
On Kamala Harris’s campaign trail last year, Mr Obama said Mr Trump was a “78-year-old billionaire who has not stopped whining about his problems since he rode down his golden escalator nine years ago”, while the former first lady said that “the consequences of him ever being president again are brutally serious.”
World
‘The future is in our hands’ scientists say, as 2024 becomes first year to pass 1.5C global warming threshold
Last year was the warmest on record, the first to breach a symbolic threshold, and brought with it deadly impacts like flooding and drought, scientists have said.
Two new datasets found 2024 was the first calendar year when average global temperatures exceeded 1.5C above pre-industrial levels – before humans started burning fossil fuels at scale.
The record heat has not only has real-world implications, as it contributed to deadly flooding in Spain and vicious drought in places like Zambia in southern Africa.
It is also highly symbolic.
Countries agreed in the landmark Paris Agreement to limit warming ideally to 1.5C, because after that the impacts would be much more dangerous.
The news arrives as California battles “hell on earth” wildfires, suspected to have been exacerbated by climate change.
And it comes as experts warn support for the Paris goals is “more fragile than ever” – with Donald Trump and the Argentinian president poised to row back on climate action.
What caused 2024 record heat – and is it here to stay?
Friends of the Earth called today’s findings from both the EU’s Copernicus Climate Change service and the Met Office “deeply disturbing”.
The “primary driver” of heat in the last two years was climate change from human activity, but the temporary El Nino weather phenomenon also contributed, they said.
The breach in 2024 does not mean the world has forever passed 1.5C of warming – as that would only be declared after several years of doing so, and warming may slightly ease this year as El Nino has faded.
But the world is “teetering on the edge” of doing so, Copernicus said.
Prof Piers Forster, chair of the UK’s Climate Change Committee, called it a “foretaste of life at 1.5C”.
Dr Gabriel Pollen, Zambia’s national coordinator for disasters, said “no area of life and the economy is untouched” by the country’s worst drought in more than 100 years.
Six million people face starvation, critical hydropower has plummeted, blackouts are frequent, industry is “decimated”, and growth has halved, he said.
Paris goal ‘not obsolete’
Scientists were at pains to point out it is not too late to curb worse climate change, urging leaders to maintain and step up climate action.
Professor Forster said temporarily breaching 1.5C “does not mean the goal is obsolete”, but that we should “double down” on slashing greenhouse gas emissions and on adapting to a hotter world.
The Met Office said “every fraction of a degree” still makes a difference to the severity of extreme weather.
The California fires were whipped up by strong, dry winds and likely worsened by climate change. Pic: Reuters
Copernicus director Carlo Buontempo added: “The future is in our hands: swift and decisive action can still alter the trajectory of our future climate”.
Climate action is ‘economic opportunity’
Copernicus found that global temperatures in 2024 averaged 15.10°C, the hottest in records going back to 1850, making it 1.60°C above the pre-industrial level during 1850-1900.
The Met Office’s data found 2024 was 1.53C above pre-industrial levels.
The figures are global averages, which smooth out extremes from around the world into one number. That is why it still might have felt cold in some parts of the world last year.
Greenpeace campaigner Philip Evans said as “the world’s most powerful climate denier” Donald Trump returns to the White House, others must “take up the mantle of global climate leadership”.
The UK’s climate minister Kerry McCarthy said the UK has been working with other countries to cut global emissions, as well as greening the economy at home.
“Not only is this crucial for our planet, it is the economic opportunity of the 21st century… tackling the climate crisis while creating new jobs, delivering energy security and attracting new investment into the UK.”
World
Picture shows baby girl moments after birth on packed migrant dinghy heading for Canary Islands
Photographs have captured the moments after a baby girl was born on a packed migrant dinghy heading for the Canary Islands.
The small boat was carrying 60 people and had embarked from Tan-Tan – a Moroccan province 135 nautical miles (250km) away.
One image shows the baby lying on her mother’s lap as other passengers help the pair.
The boat’s passengers – a total of 60 people, including 14 women and four children – were rescued by a Spanish coastguard ship.
Coastguard captain Domingo Trujillo said: “The baby was crying, which indicated to us that it was alive and there were no problems, and we asked the woman’s permission to undress her and clean her.
“The umbilical cord had already been cut by one of her fellow passengers. The only thing we did was to check the child, give her to her mother and wrap them up for the trip.”
Coastguards rescued all 60 people aboard the boat. Pic: Salvmento Maritimo/Reuters
The mother and baby were taken for medical checks and treated with antibiotics, medical authorities said.
Dr Maria Sabalich, an emergency coordinator of the Molina Orosa University Hospital in Lanzarote, said: “They are still in the hospital, but they are doing well.”
When they are discharged from hospital, the pair will be moved to a humanitarian centre for migrants, a government official said.
They will then most likely be relocated to a reception centre for mothers and children on another of the Canary Islands, they added.
Thousands of migrants board boats attempting to make the perilous journey from the African coast to the Spanish Canaries each year.
Read more from Sky News:
Why have California fires spread so quickly?
Ryanair sues passenger
US presidents gather at Carter funeral
In 2024, a total of 9,757 people died on the route, according to Spanish migration charity Walking Borders.
Mr Trujillo said: “Almost every night we leave at dawn and arrive back late.
“This case is very positive, because it was with a newborn, but in all the services we do, even if we are tired, we know we are helping people in distress.”
-
Sports2 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports9 months agoStory injured on diving stop, exits Red Sox game
-
Sports1 year agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports3 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike
-
Business2 years agoBank of England’s extraordinary response to government policy is almost unthinkable | Ed Conway