Britain budget targets growth

Britain’s fragile recovery alongside a series of severe government spending cuts and tax hikes.
Chancellor of the Exchequer Osborne, a Conservative member of Britain’s coalition, unveiled his 2011/12 tax and spending plans before parliament.
Osborne presented the event as a “budget for growth,” even as his drastic austerity measures risk pushing Britain back into recession, according to some analysts.
“The chancellor has promised a ‘pro-growth’ budget likely to include a number of minor tax measures aimed at cutting regulation and improving the business environment,” said Capital Economics analyst Jonathan Loynes.
Osborne was expected to announce tax breaks for the country’s lowest earners, British newspapers reported.
The salary threshold at which workers start to pay tax is set to rise by 600 pounds (US$980,692 euros) to 8 000 pounds, taking 250 000 earners out of the income tax system, according to press reports.
Economists agree that Osborne will stick to his drastic deficit-slashing plans when he unveils the budget.
“There is really very little scope for the chancellor to back down on his public spending cuts,” Daiwa economist Hetal Mehta told AFP.
Following last year’s general election, Osborne gave a painful emergency budget aimed at improving the dire state of Britain’s public finances.
Osborne remains on course to undershoot his official borrowing target of £148,5 billion (171 billion euros, US$243 billion) for the current 2010/2011 financial year that runs to the end of March.
This despite official data published Tuesday showing that public sector net borrowing surprisingly hit a much larger-than-expected £11,8 billion in February – the highest level on record for the month.
“The government still faces a long, hard slog in ensuring that borrowing comes down to anything approaching sustainable levels and from an economic perspective,” said Investec economist Philip Shaw.
The coalition, which rose to office in May 2010, is seeking to slash a record public deficit run up under the previous Labour government as a result of banking bailouts and weak taxation revenue because of the recession.
Also yesterday, the government’s independent fiscal watchdog – the Office for Budget Responsibility – was expected to publish its latest forecasts for British public borrowing and economic growth.
The OBR is widely predicted to lower its 2011 economic growth forecast to about 1,8 percent, from the prior estimate of 2,1 percent, after Britain’s economy unexpectedly shrank in the final quarter of 2010.
In a further blow ahead of the budget, separate data published on Tuesday showed that British annual inflation jumped to 4,4 percent in February, the highest level since October 2008.
Consumer price index inflation was propelled by soaring energy and clothing costs. – AFP.