Britain is now officially in a recession, Chancellor of the Exchequer Jeremy Hunt said on Thursday as he delivered his Autumn Statement to Parliament, having unveiled a new fiscal plan to weather the economic “storm.”
A recession is a downturn in economic activity when a country’s GDP declines for two consecutive quarters. As a result, the national budget commonly receives less tax revenue as businesses make less money, pay drops, and unemployment increases.
The chancellor announced a raft of “difficult decisions” including around £30 billion ($35 billion) in spending cuts and £25 billion ($29 billion) in tax hikes. A six-year freeze on income tax thresholds and a lowering of the top rate of income tax to £125,000 ($147,000) are also among the measures.
According to Hunt, the energy industry will be hit with an expanded windfall tax of 35% up from 25% as part of his new budget plan.
The fiscal measures also include a 10% increase in the state pension, benefits and tax credits, as well as a rise in the National Living Wage from £9.50 ($11.21) an hour for those aged 23 and above.
“The Office for Budget Responsibility (OBR) judge that the UK, like other countries, is now in recession,” Hunt told MPs. “It says higher energy prices explain the majority of the downward revision in cumulative growth since March.”
“The OBR confirm that because of our plans, the recession is shallower, and inflation is reduced. Unemployment is also lower with about 70,000 jobs protected as a result of our decisions today,” he explained.
According to the OBR, the UK economy is still forecast to grow by 4.2%, but would shrink by 1.4% next year, before rising by 1.3%, 2.6%, and 2.7% in the following three years. The inflation rate is projected to be 9.1% this year and 7.4% in 2023. Unemployment is expected to rise from the current 3.6% to 4.9% in 2024 before falling to 4.1%.
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