Against decidedly gloomy forecasts for growth, George Osborne is set to outline plans that the government hopes will stimulate the economy and get the UK out of contraction.
He is set to deliver the autumn statement, his update on the UK economy, in the House of Commons after 12:30 GMT.
Details of the statement
Some of the statement’s details have already been unveiled. The speech will include details of credit easing as well as ways to battle youth unemployment, which has skyrocketed past the percentages of the general population.
Osborne is also set to talk about the billions in infrastructure investment that the UK is taking on with the help of global pension funds.
In addition, he is set to discuss and respond to the Office for Budget Responsibility’s stark economic forecasts.
On Monday, the OECD also warned of contraction in the UK’s near future, predicting 0.3% cuts in growth for this quarter. Next quarter the economy is predicted to shrink by 0.15%, meeting economists’ definition of a recession, which 2 consecutive quarters of contraction.
Coupled with the grim forecasts are predictions from Bank of England governor Sir Mervyn King, who told MPs to expect flat growth for the next six months on the back of the eurozone crisis, which threatens economic recovery all over the world.
Osborne will confirm that growth will be lower in the next few quarters, and that borrowing will become much higher than planned. The plans will be passed on the latest forecasts from the independent Office for Budget Responsibility, which is expected to cut its growth forecasts for both 2011 and 2012 down to 1%.
In the Budget in March, Osborne was on track to reduce the UK’s structural budget deficit over five years, with the target end date being 2014-2015.
However, the Chancellor is likely to change this goal to 2016, as much breathing room has been lost due to terrible economic downturn surrounding eurozone fears.
In addition, while borrowing was previously forecasted to be £37 billion in 2014-2015, economists are predicting a new figure of £81 billion.
However, the Chancellor is not set to deliver all bad news. He is expected to announce other schemes, including doubling free childcare for toddlers from lower-income households. The bid will cost £380 million a year and mean 260,000 childcare centres to encourage mothers to get back to work.