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Britain hikes growth forecasts in austerity update

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(Globalpost/GlobalPost)

Britain has hiked its economic growth forecasts as the recovery picks up speed and outstrips other advanced nations, finance minister George Osborne said Thursday.

Osborne, delivering a key budget update, also vowed to pursue his deficit-slashing policy to secure the recovery, warning that Britons might have to work until 69 before claiming a state pension.

The economy will grow 1.4 percent in 2013 and 2.4 percent in 2014, Osborne said in his so-called autumn statement. That marked hefty upgrades from previous expansion estimates of 0.6 percent and 1.8 percent, given in the annual budget in March.

"Growth over the forecast period is significantly up," Chancellor of the Exchequer Osborne told lawmakers.

"I can report that Britain is currently growing faster than any other major advanced economy. Faster than France, which is contracting. Faster than Germany, faster even than America."

The economy grew 0.8 percent in the third quarter, the fastest rate for more than three years, thanks to a buoyant property market and rebounding consumer expenditure -- and despite state austerity.

"I can today report the hard evidence that shows our economic plan is working... The job is not yet done," Osborne noted.

"Yes, the deficit is down but it is still far too high and today we take more difficult decisions," he said, but added that the Conservative-Liberal Democrat coalition government would borrow less than expected this year.

Britain faces more austerity pain

The Conservative minister announced a new cap from next year on welfare spending, and outlined plans for another £3.0 billion ($4.9 billion, 3.6 billion euros) in savings in the public sector.

Osborne said the state pension age is now forecast to rise to 69 in the late 2040s.

That compares with the previous plans to raise it from 65 to 68, and means that many Britons might have to work until the age of 70.

He also unveiled new measures to tackle tax avoidance, tax evasion, fraud and error, in a crackdown to raise more than £9.0 billion over the next five years.

In a boost for companies, Osborne added that increases in business rates would be capped at 2.0 percent with effect from April 2014, while fuel duty would be frozen again next year.

"We need to secure the economic recovery for the long term," he said.

"We seek a responsible recovery, one where we don't squander the gains that we have made."

Thursday's forecasts, issued by the Office for Budget Responsibility (OBR), showed that the economy would expand by 2.2 percent in 2015, 2.6 percent in 2016, and 2.7 percent in both 2016 and 2017.

Borrowing predictions upgraded

The government was on course to borrow £111 billion in the current 2013/2014 financial year, which runs from April to March.

That was less that the previous £120 billion borrowing target, which is a measure of the public deficit.

The OBR also forecast that borrowing over the next five years would be £73 billion less than previously thought, with a "small cash surplus" by 2018/2019.

In the run-up to the autumn statement, and with one eye on the 2015 general election, Osborne recently unveiled plans to overhaul energy levies in a bid to lower household bills.

The move was aimed at countering a pledge from the opposition Labour party to freeze electricity and gas prices, should it win the election.

Meanwhile, the government said Wednesday that it will sell off its 40-percent stake in Eurostar, the high-speed cross-Channel rail service, as part of a new £20-billion privatisation drive.

Separately on Thursday, the Bank of England maintained both record-low interest rates and its stimulus amount.

Back in March 2009, the central bank slashed its key lending rate to 0.50 percent -- where it has stood ever since -- and began pumping billions of pounds into the economy to boost lending and stimulate growth.

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http://www.globalpost.com/dispatch/news/afp/131205/britain-hikes-growth-forecasts-austerity-update