The UK budget delivered by Chancellor Hunt was a classic case of accentuating the positives, of which there have been few in recent years. Avoiding a technical recession has been grasped as a win that ‘proves the doubters wrong’, ‘delivers stability’ and ‘restores credibility’ after the chaos of last autumn’s dance with Trussonomics. The Office for Budget Responsibility (OBR) now forecasts that although a technical recession could be avoided, the economy is still expected to be 0.2% smaller this year than last. Growth is expected to return in 2024.
The impact of the dramatic spike in inflation continues to work through the economy so our standard of living will suffer. The OBR expects our living standards to fall by a cumulative 5.7% over the next two years. Moves on energy prices are therefore welcome among consumers, and the projection that inflation will be 2.9% by the end of the year is encouraging. Motorists will be also glad of the freeze on fuel duty.
Much of what the Chancellor announced in the budget focussed on building a dynamic economy, with the headline items targeted at addressing low business investment and high levels of economic inactivity. There were largely no surprises in the budget, with most key announcements around pension allowances, business tax and allowances, disability welfare reforms and childcare support trailed well in advance.
Locally, champions of a lower rate of corporation tax for Northern Ireland will be perturbed by the Chancellor’s view that the 19% UK rate has not incentivised investment. With the rate increasing to 25%, our differential with Ireland is now more significant. The dramatic move on full expensing of investment costs may well offset much discontent over the move on the headline rate. As with all budgets, time will tell.