George Osborne, the Chancellor of the Exchequer, during his autumn statement to British Parliament, stated the economic growth forecasts made by United Kingdom Government are going to experience a cut. He added that that it will take much more time than initial expectations to tame the budget deficit. The fiscal consolidation was also extended for a year to the 2017-2018 fiscal year. In March this year, it was predicted that the British economy will increase by 0.8%, however, now the forecasts made by Budget Responsibility state that it may actually shrink by 0.1% in 2012.
Labour Party, the main opposition party attacked Osborne as it claimed that he is trying to cut the deficit way quicker than required, thereby damaging the British economy further. Incidentally, Osborne was criticized earlier as well for cutting down the income tax for high earners in March Budget. He also rebounded from numerous policy making decisions this year, thereby affecting his reputation.
During his autumn statement, Osborne also mentioned that some feel United Kingdom should stop the deficit plan that it’s running currently. Many also say that the Government should start borrowing more. However, for Osborne, that’s not a solution as he clearly stated such a step would increase the interest rates and generate more debt interest payments; thereby, affecting the fiscal credibility of UK.
British Pound (GBP) or Sterling is currently priced at 1.23 Euro (GBP rose by 0.2%) per GBP. 1 GBP, on the other hand, will cost you 1.61 USD.
During the autumn statement, Osborne released the growth forecasts for years 2014 and 2015 as well, those being 2% and 2.3% respectively. The growth for 2016 is currently predicted to be 2.6%. He added that the Debt-GDP ratio will see a high of 79.9% in 2015-2016 and after that, it will experience sort of decline as well. Osborne has also decided to introduce a 1 percentage point reduction in the corporation taxes to boost the economy. This ensures that the rate companies will pay on their profits to 21% in 2014, compared to 21%, what they are paying now.
The 10-year gilts of UK rose, however the 2-year note yield plummeted by 2 basis points and is at 0.29% currently. 30-year security rates also increased by 5 basis points and is at 3.11% now.