This week the UK finance minister Rishi Sunak announced the UK budget plans in his spring statement. The statement started by highlighting the war in Ukraine and its impacts in creating extra pressures for the UK and its economy. Sunak expressed concerns that sanctions implemented in response to Putin’s invasion are not cost free for the UK and present economic risks to the recovery.
The Office for Budget Responsibility is forecasting the economy will grow by 3.8% this year. With predictions of GDP growth set to slow to 1.8% in 2023, 2.1% in 2024, 1.8% in 2025 and 1.7% in 2026. The projected growth figures have been significantly impacted by the worsening geopolitical landscape, higher energy prices and supply shortages. In 2020 the UK experienced a decline in economic growth with growth dropping by 9.4%. Figures published for 2021 showed a sharp rebound in growth with economic activity achieving a 7.5% rise.
With inflation on the rise and forecasted to reach 7.4% this year actions by the government have been taken to try and ease the cost of living pressures. These measures consist of fuel duty being cut by 5p a litre for 12months. Furthermore, the government will cut VAT for households installing solar panels, heat pumps or insulation and an increase to the household support fund boosting it to £1bn. The rate of income tax is also due to be cut from 20% to 19% in 2024.
