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Financial Statement

This Budget rewards work. Britain is going to earn its way in the world. There is no other road to recovery. This Budget supports working families and helps those looking for work. It unashamedly backs business, and it is on the side of aspiration—of those who want to do better for themselves and for their families. This Budget reaffirms our unwavering commitment to deal with Britain's record debts, but because we have already taken difficult decisions this can also be a reforming Budget that seeks to repair the disastrous model of economic growth that created those debts—a model that saw manufacturing almost halved as a share of our national economy, while the national debt doubled. This is how Britain will earn its way in the world: with far-reaching tax reform, with a simpler tax system where ordinary taxpayers understand what they are being to pay; with a tax system that is more competitive for business than any other major economy in the world; with a tax system where millions of the lowest paid are lifted out of tax altogether, while the tax revenues we get from the wealthiest increase. Reforming tax is only part of the story. We will earn our way in the world by saying to all business, large and small, ““We will provide you with modern infrastructure, new growth-friendly planning rules and employment laws and the kinds of schools, universities and colleges our future work force need. In return, you, British business, will have the self-confidence to invest, expand, hire, innovate and be the best.”” We earn our way in the world if we stop being afraid to identify Britain's strengths and reinforce them instead, backing industries such as aerospace, energy, pharmaceuticals, creative media and science—a deliberate strategy to create a more balanced national economy where financial services are strong, but are not the only string to our bow. Stability comes first, and the report from the Office for Budget Responsibility reminds us today of the risks to stability. Despite the welcome action by the European Central Bank, the impact of the sovereign debt crisis on the European economy has been significant. Italy, the Netherlands, Belgium and others are now in recession, and Germany's economy shrank in the last quarter. In today's report, the OBR is sharply revising down its forecast for euro area growth this year by 0.8% to minus 0.3%. Its forecast for world economic growth is also revised down over the next two years, by 0.2% and 0.3% respectively. Of course, Britain is not immune from those developments in our largest export markets, and the OBR says today that"““the situation in the euro area remains a major risk to our forecast””." Another risk that it identifies is a"““further spike in oil prices””," and there is no doubt that the high oil price, driven both by real demand and the Iranian situation, is of great concern across the world. It means that the OBR's overall assessment of the outlook for, and risks to, the British economy is ““broadly unchanged”” since last November's report. Despite those head winds, there are some more positive signs. The OBR expects the British economy"““to avoid a technical recession with positive growth in the first quarter””" of this year. The British economy has, in its words,"““carried a little more momentum into the new year than previously anticipated””." Indeed, the Office for Budget Responsibility is slightly revising up its growth forecasts for the UK this year to 0.8%. It then forecasts 2% next year—[Interruption.]