In September 2022, Kwasi Kwarteng, then Chancellor of the Exchequer of the United Kingdom, lifted the veil on a budget offering major tax cuts, thinking of reviving growth. On the contrary, it triggered a financial storm, the beginnings of a pension fund panic and, ultimately, the resignation of the then Conservative Prime Minister, Liz Truss. Six months later, it’s time for a return to normal: Wednesday, March 15, Jeremy Hunt, successor to Mr. Kwarteng, presented the government’s budget without drama or shock.
He could even boast of a certain rebound. Its forecasting services are betting on a 0.2% decline in gross domestic product (GDP) in 2023. In normal times, such stagnation would not cause much pride, but this is a marked improvement on compared to forecasts made in November 2022, which called for a recession of 1.4% for 2023.
This revival is not specific to the United Kingdom – the European economy, too, seems to be avoiding recession – and stems in particular from the decline in energy prices. This suggests a strong decline in inflation, from 10.1% currently to 2.9% at the end of 2023, according to estimates by the British authorities. “The Cassandras were wrong”says Hunt.
Declining labor force
In this peaceful context, Rishi Sunak’s government can begin to deal with long-term problems, of which there are many. In recent years, the UK has experienced one of the worst growth rates among developed countries. At the end of 2022, its GDP remained slightly below its pre-pandemic level, unlike the vast majority of countries in the Organization for Economic Co-operation and Development (OECD).
He is, in turn, “Europe’s Sick Man”, in the words of Keir Starmer, the Labor opposition leader. The budget therefore seeks to resolve several fundamental problems, in particular a curious phenomenon that has developed since the outbreak of the health crisis: the decline in the working population.
The British health system is cracking on all sides: seven million people are currently waiting for care
Since 2019, the number of inactive people (adults who are not working or looking for work) has increased by half a million people. “That makes the UK an exception, notes a report by the Center for Policy Studies, a think tank. Almost all developed countries have seen a spike in economic inactivity during the ravages of the pandemic [de Covid-19]but it was usually temporary (…). Now, most OECD countries have a lower inactivity rate than before the pandemic. »
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