Britain’s economy will grow faster than expected in the run-up to next year’s general election, finance minister George Osborne said Wednesday in a vote-chasing budget aimed at wooing pensioners and savers.
Chancellor of the Exchequer Osborne hiked his 2014 and 2015 economic growth forecasts and cut his borrowing targets, but vowed to maintain austerity as he addressed parliament on the coalition government’s tax and spending plans.
Osborne warned the recovery would be jeopardised if the Conservative-Liberal Democrat coalition pulled away from deep spending cuts, which are aimed at eliminating the huge deficit inherited from the opposition Labour party in 2010.
However, with Labour edging ahead in recent opinion polls, Osborne — a senior member of Prime Minister David Cameron’s Conservatives — sought to deliver eye-catching measures in his fifth annual budget before the May 2015 election.
– Faster growth than rivals –
“We are now growing faster than Germany, faster than Japan, faster than the United States. In fact there is no major advanced economy in the world growing faster than Britain today,” Osborne said.
But he stressed: “Faster growth alone will not balance the books… there will have to be more hard decisions, more cuts.”
The Chancellor unveiled various incentives for savers, whose returns have slumped since the Bank of England slashed its key interest rate to the current record-low 0.50 percent five years ago.
He outlined plans to offer more choice to retirees on how they draw their private pensions, and signalled the creation of a new pensioners’ savings bond that will offer attractive rates.
Osborne also lifted the level at which workers start to pay income tax to £10,500 (12,550 euros, $17,500) per year from 2015/2016.
“Hard working people keep more of what they earn and more of what they save,” he told lawmakers.
“You’ve earned it and you’ve saved it and this government is on your side.”
Osborne was blasted by Labour leader Ed Miliband, who argued that many Britons face a cost of living crisis amid soaring domestic energy bills.
“Standards of living not rising steadily and sustainably, but falling sharply and steeply,” Miliband told a rowdy House of Commons.
British gross domestic product was set to grow 2.7 percent in 2014, up from the previous forecast for expansion of 2.4 percent, said Osborne.
The economy was then predicted to expand by 2.3 percent in 2015, upgraded from the previous growth estimate of 2.2 percent.
It had expanded in 2013 by 1.8 percent, which was the fastest growth rate since before the global financial crisis.
– Borrowing set to slide –
Osborne anticipates wiping out Britain’s annual budget deficit by the end of the decade after cutting state borrowing forecasts.
The government will borrow £108 billion ($179 billion, 129 billion euros) in the current 2013/2014 financial year that runs from April until March.
Borrowing was then expected to drop to £95 billion in 2014/2015, followed by £75 billion, £44 billion and £17 billion in subsequent years, with a surplus of almost £5 billion expected in 2018/2019.
In the run-up to the budget, Osborne had unveiled plans for a higher subsidy on childcare costs and the extension until 2020 of a scheme that helps people to join and move up the property ladder by offering government-backed loans for house purchases.
In another boost, official data showed Wednesday that British unemployment is falling and the number of people in work has struck a record high.
Wednesday’s budget is also the last before Scotland votes in a referendum on whether to become independent from the rest of Britain — a poll that has implications for North Sea oil revenues and role of the pound currency.
Also on Wednesday, the Treasury announced plans to introduce a new 12-sided one-pound coin, in an effort to curb counterfeiting.