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UK growth forecasts cut as Osborne lowers corporation tax
[LONDON] Chancellor of the Exchequer George Osborne said the UK economy will grow less quickly in each of the next five years than previously forecast and blamed global turbulence as he prepared to set out where 4 billion pounds (US$5.6 billion) will be cut from spending.
The expected 2 per cent growth this year, announced by the Office for Budget Responsibility, compares with a prediction of 2.4 per cent in November. The economy will grow by 2.2 per cent in 2017 and 2.1 per cent in 2018, compared with 2.5 per cent and 2.4 per cent four months ago, he said, while arguing that his stewardship for the past six years has put Britain in a good position to deal with global headwinds.
In his annual budget speech to the House of Commons, Osborne said corporation tax for businesses will be lowered to 17 per cent by 2020 from 20 per cent now. He also set out higher thresholds for business rates for small companies, seeking to emphasize his Conservative Party's image as the champion of enterprise. The chancellor tightened loopholes that allow multi- national corporations to avoid tax.
The forecasts by the OBR are "predicated on Britain remaining in the European Union," Osborne told lawmakers in London, as he made a direct appeal to voters to keep the UK in the 28-nation bloc in the June 23 referendum.
The country faces "a dangerous cocktail of risks but one that Britain is well prepared to handle if we act now," Osborne said. "We can choose to add to the risk and uncertainty or we can choose to be a force for stability. Britain can choose short-term fixes and more stimulus or lead the world with long- term solutions to long-term problems."
The chancellor is seeking to strike a balance between spending cuts and sweeteners to reassure the electorate and members of the Tory party as the divisive EU referendum approaches. The deteriorating growth prospects and lower-than- forecast tax revenues have limited his options.
The budget deficit in the year 2015-16 will be 72.2 billion pounds, compared with a forecast in November of 73.5 billion pounds, Osborne said. It will then be higher than predicted at 55.5 billion pounds in 2016-17 and 38.8 billion pounds in 2017-18, compared with previous predictions of 49.9 billion pounds and 24.8 billion pounds, he said, citing the OBR.
Osborne said Britain will have a surplus of 10 billion pounds in 2019-20, compared with a forecast of 10.1 billion pounds, meeting a commitment, now enshrined in law, that he would deliver one by 2020 - the first since 2001.