Chancellor delivers his Budget with giveaways to support the economy

Chief Economist at KPMG UK, Yael Selfin comments on today’s Budget announcement

Chief Economist at KPMG UK, Yael Selfin comments on today’s Budget announcement

“Capitalising on the boost from a stronger economic outlook, the Chancellor’s focus turns to repairing the public finances and levelling up” says Yael Selfin, Chief Economist at KPMG UK.

“We estimate that the package of measures announced today will boost the level of GDP by around 0.6% at its peak in 2023-24, helping to sustain the recovery from the pandemic.

“Government borrowing has been revised down by £51bn in 2021-22, the largest downward in-year revision since 1970, thanks largely to stronger than expected recovery in the first half of the year.

“Since the OBR closed its economic forecast, annual GDP in cash terms has been revised up by around 2.5%, suggesting that in the near-term the Chancellor may end up with more room for manoeuvre than was pencilled in at the Budget. However, that will likely be offset by setbacks further down the line, including the impact of supply chain bottlenecks and staff shortages. The upsurge in inflation and the inevitable rise in interest rates will also take their toll on public finances.

“The Chancellor has set out new fiscal rules to repair the public finances after the pandemic, including a commitment to balance the current budget by the third year of the forecast horizon and the underlying debt to start falling by that time. While the return to fiscal prudence is welcome, in reality higher spending may be required to meet the rising demand for public services in the future, putting a question mark around fiscal sustainability.

”The Chancellor used the improved OBR economic forecasts to fund over £100bn of spending commitments spread across the next three years. This represents a relatively generous overall settlement for most departments.”




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