Britain unleashed more austerity on Wednesday in its latest annual budget and cut its growth outlook, blaming the impact of global market turbulence rooted in China.
Chancellor of the Exchequer George Osborne also said that a potential “Brexit,” or departure from the EU, would risk damaging the nation’s economic recovery, ahead of a referendum in June.
Osborne said the government would seek additional spending cuts totaling £3.5 billion (US$5 billion) by 2020, when it expects to reach a budget surplus despite higher borrowing.
Photo: Bloomberg
The chancellor pointed to a “dangerous cocktail of risks” including “turbulence in financial markets, slower growth in economies like China and weak growth in the developed world” for the growth downgrades.
In a speech lasting about one hour, Osborne forecast that the British economy was set to grow by 2 percent this year, down from November last year’s estimate of 2.4 percent.
Growth was expected to stand at 2.2 percent next year, down from 2.5 percent.
Britain’s fiscal watchdog the Office for Budget Responsibility, which compiles official government forecasts, said the latest predictions were based on the assumption that Britain remained in the EU.
Osborne, a top figure in British Prime Minister David Cameron’s Conservative Party and government, also revealed plans to cut several taxes levied on businesses amid strongly divergent views from companies on whether Britain should quit the EU.
Turning to Britain’s June 23 referendum on EU membership, Osborne repeated the government’s strong desire for the UK to stay within the 28-nation trading bloc.
“Britain will be stronger, safer and better off inside a reformed European Union — and I believe we should not put at risk all the hard work the British people have done to make our economy strong again,” Osborne told parliament.
While corporation tax is to drop from 20 percent to 17 percent in 2020, new measures to make multinational companies pay more tax were announced, following a public outcry over revelations that tech giants were paying little by moving profits offshore.
From April next year, there is to be a cap for the amount that major multinationals can deduct from their taxes by borrowing in Britain to invest elsewhere.
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