George Osborne has hailed the biggest upward revision to growth between Budgets for at least 30 years, but despite a “resilient” economy warned growth will slow in 2015 and 2016.
Delivering his penultimate Budget before the May election next year, the Chancellor said Britain's economy was continuing to recover, and faster than forecast.
Osborne told the House of Commons: “We set out our plan. And together with the British people, we held our nerve. We’re putting Britain right. But the job is far from done.
“Our country still borrows too much. We still don’t invest enough, export enough or save enough. So today we do more to put that right.”
Because the economy is growing quicker than expected, the Office for Budget Responsibility (OBR) has revised its forecasts. The economy will now grow 2.7% this year, 2.3% in 2015, 2.6% in 2016 and 2017, to 2.5% in 2018.
The OBR also now expects the economy later this year to be larger than it was before the recession.
To help boost manufacturing and exports, Osborne said he would be backing British businesses wanting to sell abroad. He announced changes to investment allowances so firms would not face upfront tax costs when investing. He also announced a doubling in the amount of loan finance available to exporters to £3bn and lower interest rates on that money.
Public finances are improving - the deficit should be lower than expected this year at 6.6% - and a budget surplus is now expected in 2018-19, Osborne said.
In terms of borrowing rates it will be £108bn for 2013/14, £95bn in 2014/15, £75bn in 2015/16, £44bn in 2016/17, £17bn in 2017/18, ending up with a surplus of £5bn in 2018/19.
Osborne also got a boost ahead of the Budget speech this morning with news that the number of people claiming unemployment benefit was falling.
He said that the pace of net job creation had been three times faster than in any other recovery on record - 1.3 million more people in work.
“The OBR today forecast one and a half million more jobs over the next five years,” he added. “We now have a higher employment rate than the USA. That’s what we mean by getting Britain working.”
The Chancellor completed his fifth Budget speech saying that with the help of the British people, they were turning the country around.
“We’re building a resilient economy. This is a Budget for the makers, the doers, and the savers,” he said.