UK Treasury chief predicts no recession in Britain this year
U.K. Treasury chief Jeremy Hunt is staging a moment of high political theater Wednesday, unveiling his budget to a crowd of baying lawmakers as consumers demand more help with the high cost of living and workers press for higher wages with strikes at schools, hospitals and the offices of civil servants.
Even as Hunt plays his historically scripted role — emerging from his official residence with the spending plan in a battered red dispatch box, then carrying it to the House of Commons where he was greeted by jeers and cheers — the truth is he sought to be as boring as possible.
That's because the last time the government staged a similar “fiscal event,” the mini-budget presented by Hunt's predecessor last September, it set off an economic catastrophe by promising huge tax cuts without saying how it would pay for them. The value of the pound plunged, mortgage rates soared and the central bank was forced to intervene to protect pension funds.
This time, strong and stable is the goal. He predicted the country will not enter technical recession this year and that the government will “take whatever steps are necessary for economic stability.”
“Today the Office for Budget Responsibility forecast that because of changing international factors and the measures I take, the U.K. will not now enter a technical recession this year,” he told the House of Commons on Wednesday.
At one point, he even offered funding for the “curse” of potholes, handing over 200 million pounds ($241 million) to local communities to get rid of them.
He added that Britain's independent budget watchdog “forecast we will meet the Prime Minister's priorities to halve inflation, reduce debt and get the economy growing. We are following the plan and the plan is working. But that's not all we've done.”
There have been predictions that the country would dip into recession in part because of record inflation and rising energy prices due to the war in Ukraine.
Most of the big-ticket items in the budget — an extra 5 billion pounds ($6.1 billion) of defense spending over the next two years, increased funding for child care and help for workers saving for retirement — have already been announced.
“We shouldn't expect much in the way of rabbits or hats in this budget,” said Sarah Coles, head of personal finance at the investment adviser Hargreaves Lansdown. “Jeremy Hunt needs to remain boring and predictable to avoid unsettling the markets.”
But even as Hunt delivered his remarks to Parliament, many people across the country are seething about a cost-of-living crisis that is eroding the spending power of workers as Russia's war in Ukraine has helped fuel the highest inflation in four decades. The strikes are similar to widespread unrest in France about the economic situation and plans to increase the retirement age.
Government workers, teachers, subway drivers and the young doctors who staff the nation's hospitals were walking the picket line Wednesday, furious that public-sector workers have borne the brunt of the budget austerity implemented by Hunt's Conservative Party after it took power following the global financial crisis.
The British Medical Association, which represents the fully qualified physicians known in the U.K. as “junior doctors,” says first-year doctors have seen their pay fall by 26% over the past 15 years after accounting for inflation.
That means first-year doctors now earn as little as 14.09 pounds an hour, compared with up to 14.10 pounds an hour for baristas at Pret a Manger, a sandwich and coffee shop chain that just gave workers a third raise in less than 12 months, the group said.
Rebecca Lissman, 29, a trainee in obstetrics and gynecology, said junior doctors are just asking is to be “paid a wage that matches our skill set.”
“I want to be in work, looking after people, getting trained,” she said. “I don't want to be out here striking, but I feel that I have to.”
The government says the medical association's comparison to baristas is misleading because most doctors actually make more than the basic minimum salary and have much higher lifetime earning potential than shop workers.