UK to swerve recession this year as Jeremy Hunt unveils budget

LONDON — Britain will duck a technical recession this year, Chancellor Jeremy Hunt said, as he delivered the U.K.’s budget Wednesday with a pitch to ease the cost-of-living and turn around the country’s sluggish economic growth prospects.

Introducing the “budget for growth” — the first full-fat fiscal event under prime minister Rishi Sunak — in the House of Commons, Hunt said the U.K. economy had “proved the doubters wrong” as he pointed to a smaller economic contraction this year than originally forecast.

And he unveiled a plan to try and ease the eye-watering costs of childcare in the U.K., some of the highest in the world.

In key measures unveiled by the U.K. chancellor Wednesday:

— The U.K.’s Energy Price Guarantee — which caps mounting bills at a set price — will remain at £2,500 for the typical household for the next three months. Energy charges from prepayment meters — typically used by the poorest households — will also be brought in line with other energy charges.
— Fuel duty on petrol and diesel will remain frozen at its current rate, in a move cheered by the Tory backbenches but likely to be questioned by climate campaigners.
— A new “Brexit Pubs Guarantee” will keep duty on a pint of beer frozen and aim to keep duties lower in pubs than in supermarkets.
— 12 new “investment zones” — areas with loosened tax and regulatory rules — are being promised across the U.K.
— A promise of the “biggest change to our welfare system” in decades was laid out, with a new support scheme to help disabled people “find appropriate jobs” and a push to keep older workers in jobs — including through a pensions tax shake-up — as the U.K. grapples with a major workforce squeeze.

The U.K. faces gloomy economic predictions after the tumultuous tenure of Liz Truss sparked market turmoil.

Hunt was brought in in the dying days of Truss’ premiership to steady the ship and has been kept on by Sunak, who faces a tough general election in the next 18 months and is looking to show progress.

“Today, the Office for Budget Responsibility forecasts that because of changing international factors and the measures I take, the U.K. will not now enter a technical recession this year,” the U.K. chancellor told the Commons, citing figures from the country’s independent fiscal watchdog.

The OBR predicted in November that the U.K. economy would enter a recession in 2022, and contract by 1.4 percent in 2023.

“But today the OBR forecast we will not enter a recession at all this year with a contraction of just 0.2 percent,” Hunt said.

The OBR is also predicting that inflation will fall from 10.7 percent in the final quarter of last year to 2.9 percent by the end of 2023, “more than halving” — a key political goal of Sunak’s government heading into the next election.

“We are following the plan and a plan is working,” Hunt told the House of Commons.

Despite opposition from some in his own party, Hunt’s sticking to a planned hike in corporation tax — from 19 to 25 percent — but sought to woo business with a three-year plan to ease taxes on capital investment.

This developing story is being updated.