During his second Budget on 3 March, as expected, COVID support featured front and centre of Rishi Sunak’s statement, in what is an exceptionally challenging time for both the UK and global economies.
The Chancellor’s proclamation to “continue doing whatever it takes” set the course, with the statement centring around a three-point plan offering support for jobs and businesses, fixing finances, and charting economic rebound, which he anticipates will be “swifter and more sustained” than previous expectations.
The medium-term economic outlook from the Office for Budget Responsibility’s (OBR) was unveiled. A strong economic rebound for the UK is forecast, over the remainder of 2021, as restrictions ease, allowing economic activities to resume. Growth is expected to moderate towards the end of the year and output to return to its pre-pandemic level in mid-2022, six months earlier than previous predictions, reflective of the faster rollout of the vaccine. OBR forecast economic growth of 4% this year and by 7.3% in 2022.
As the economy reopens and emergency fiscal support is withdrawn, borrowing is forecast to fall back from a peacetime record of £355bn in 2020/21 to £234bn in 2021/22. Although the Chancellor didn’t set any new fiscal targets during the Budget, he did acknowledge that tax rises would be necessary in the coming years to help restore the public finances.
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