Hunt’s Fiscal Repairs Won’t Mend the UK Economy

UK Chancellor Jeremy Hunt’s first budget had to pass one test above all: After September’s fiscal-policy debacle, which crushed the pound and caused bond yields to spike, investors needed to be persuaded that the Tories’ new leaders know what they are doing. Hunt took no chances and did what was necessary. He announced serious tax increases and spending cuts that, in due course, should be enough to get public borrowing back under control.

The bad news is that the forecast attached to the new measures is simply dire. The Office for Budget Responsibility, Britain’s independent fiscal watchdog, predicts a recession lasting more than a year. Aggregate output isn’t expected to recover to its pre-pandemic level until 2024, a far worse performance than that of other advanced economies. Household disposable income, adjusted for inflation, will stay below pre-pandemic levels through 2027. Give Hunt credit for facing reality — but there’s no disguising the gravity of this setback.