Chancellor George Osborne handed tax sweeteners to voters and small businesses ahead of a June referendum on European Union membership but warned the economy would grow more slowly than previously forecast, Reuters reports. .
Cuts in corporation and capital gains taxes and moves to ease income tax for many households also aimed to please lawmakers from his own Conservative Party, many of whom disagree with Osborne and Prime Minister David Cameron’s view that Britain should stay in the EU.
Osborne used his annual budget statement to warn voters that leaving the bloc, which Britain joined in 1973, would usher in a period of dangerous volatility and slapped a surprise levy on sugary drinks that will help boost revenues. He said he would miss a target for bringing down public debt this year, but stuck to his plan to get the public finances back into the black by the end of the decade although borrowing in the years before that was revised up.
“Financial markets are turbulent. Productivity growth across the west is too low. And the outlook for the global economy is weak. It makes for a dangerous cocktail of risks,” Osborne said. Osborne, whose chances of becoming prime minister are tied to Britain’s recovery from the financial crisis, blamed the slowing global economy and weak productivity growth at home for the sharp cuts in economic growth projections.
Cameron has said he will stand down before a general election in 2020 but could be gone sooner if he loses the EU vote on June 23. Osborne’s main rival for the party leadership, London Mayor Boris Johnson, is backing the ‘Out’ campaign.
Britain’s economy was on track to grow by only 2 percent this year, Osborne said, slower than 2.4 percent forecast in a budget update in November, and by 2.2 percent in 2017, down from November’s 2.5 percent estimate. Britain’s independent budget forecaster, The Office for Budget Responsibility (OBR), expects growth to be stuck at 2.1 percent in the following three years, he added.
Osborne warned the outlook would be worse if Britons voted to leave the EU, adding that the OBR had said a “Brexit” could have “negative implications for activity via business and consumer confidence and might result in greater volatility in financial and other asset markets”. Osborne conceded he would miss a target he set for himself as the budget forecasters said public debt would rise this year as a share of gross domestic product.
Osborne has committed the government to bringing down the debt ratio each year and to turning the budget deficit into a surplus by the 2019/20 financial year. Osborne said his latest plans still foresaw a budget surplus by the end of the decade equivalent to 0.5 percent of GDP despite the slower economic growth outlook.
To hit that target, he would seek a further 3.5 billion pounds of savings in public spending by the 2019/20 financial year, he said. Osborne’s ability to make up for missing tax revenues quickly has been constrained by the upcoming EU referendum and he announced on Wednesday that he would keep a freeze on fuel duty, something he had been widely expected to end.
Earlier this month, Osborne dropped a plan to close generous tax loopholes in the pension system, at least for now.