Budget 2021: Rishi Sunak hails ‘swifter and more sustained’ recovery

Chancellor Rishi Sunak has said the UK’s rapid Covid-19 vaccine rollout will foster a “swifter and more sustained” economic recovery.

Official forecasts predict the UK economy will grow 4% this year, and get back to its pre-pandemic size six months sooner than previously expected.

An extension of the furlough scheme is also expected to limit job losses.

However, Mr Sunak warned that repairing the long-term damage to the economy “will take time”.

The government’s independent forecaster, the Office for Budget Responsibility (OBR), expects the pace of growth to strengthen to 7.3% in 2022.

UK GDP growth

This would be the highest growth rate since official records began in 1949 and help the economy to return to its pre-pandemic size in the middle of next year.

Unemployment is expected to peak at a lower rate of 6.5%, keeping it well below levels seen during the 2008 financial crisis.

However, half a million more people are expected to be out of work by the end of this year.

Government borrowing is expected to rise to a peacetime high of £355bn this year to help pay for economic support measures.

Mr Sunak said: “It’s going to take this country – and the whole world – a long time to recover from this extraordinary economic situation. But we will recover.”

The chancellor said tax rises were needed in the coming years to help repair the public finances.

Mr Sunak announced corporation tax will rise to 25% in 2023.

From April, he will also freeze the amount of money employees can earn before paying income tax at £12,570 until the middle of the decade.

The OBR estimates an extra 1.3 million people will start to pay income tax by 2026 as a result of the freeze.

Mr Sunak said it would be “irresponsible to allow our future borrowing and debt to rise unchecked”.

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