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“I understand people are concerned about global inflation,” Mr. Sunak said. “But they have a government here at home ready and willing to act.” He reiterated the Bank of England’s remit to keep inflation “low and stable.” The central bank aims for an annual rate of 2 percent.

The Office for Budget Responsibility, which provides independent economic and fiscal forecasts for the government, said on Wednesday that supply bottlenecks in Britain had been “exacerbated by changes in the migration and trading regimes following Brexit.” Over the next few quarters, labor shortages, higher energy prices and supply chain blockages will hold back economic growth and push up inflation, potentially to its highest level in three decades, the agency said.

The agency upgraded its forecasts for economic growth and lowered its borrowing predictions, but the outlook for households is much bleaker. Household disposable income, once adjusted for inflation, will rise only 0.3 percent next year.

Many of Mr. Sunak’s biggest policy decisions were announced in the days before his presentation to Parliament, including tens of billions of pounds in spending on the National Health Service and public transport, and a nearly 7 percent increase in the minimum wage to £9.50 ($13.05). Other spending includes plans to build homes on brownfield sites, and more money for skills qualifications for young people and adults. Last month, a widespread tax increase was announced to help the health service get through its backlog of cases and fund more adult social care.

Among the announcements made on Wednesday were tax relief for research and development spending; a 50 percent discount on business rates, which is a type of property tax, for retail and hospitality businesses; a revamped tax arrangement for alcoholic drinks that will result in cheaper draft beer and sparkling wine; tax relief for museums and theaters; a £1.4 billion investment fund; and an improvement in the generosity of a welfare benefit called Universal Credit for people who work.

Mr. Sunak also announced the outcome of the spending review, which lays out the government’s spending priorities for different departments over the next three years. It had been postponed last year because of the pandemic.

Mr. Sunak is also trying to balance his own instincts to be fiscally cautious and pull back borrowing after it reached wartime levels against the desires of Prime Minister Boris Johnson, who has proclaimed that Britain is on its way to being a high-wage, high-productivity economy, and who is willing to spend to reach that goal and to “level up” the country, which has suffered from long-term regional inequalities.

“Last year, the state grew to be over half the size of the total economy,” Mr. Sunak said. “Taxes are rising to their highest level as a percentage of G.D.P. since the 1950s. I don’t like it, but I cannot apologize for it.” He said this had to be done because of the size of the crisis caused by the pandemic.

“But now we have a choice,” he added. “Do we want to live in a country where the response to every question is, ‘What is the government going to do about it?’”

But for now, Mr. Johnson’s instincts to spend have persevered. Government departmental spending will increase nearly 4 percent a year by the end of 2024. “Every department will see a real terms rise in overall spending,” Mr. Sunak said.

The chancellor has “delivered a ‘Boris budget,’” Torsten Bell, the chief executive of the Resolution Foundation, said in a statement.

Mr. Sunak is taking advantage of the better economic growth outlook and tax receipts, which have reduced forecasts for borrowing. He plans to spend about half of those savings on more public spending, which will increase the size of the post-pandemic state.“The government is spending more because they have favored a higher tax form of conservatism than many — including many Tory MPs — expected,” Mr. Bell added.

This is Mr. Sunak’s third budget since becoming chancellor in February 2020 just weeks before Britain was plunged into its worst recession in three centuries. He quickly became one of the country’s favorite politicians as he spent heavily — to the tune of £344 billion over the next year — on a furlough program that paid up to 80 percent of wages to restrain unemployment, on loans and grants to businesses, and even a meal-discount program to reinvigorate restaurants in August 2020.

Since then, he has looked for ways to shore up the Treasury’s finances. In March, at the last budget, he announced a plan to raise corporation taxes beginning in 2023, the first increase in the headline rate since 1974. And he said the government would freeze personal income tax allowances beginning next year, a measure that will push more people into higher tax brackets. Mr. Sunak has raised taxes by more this year than any other chancellor since 1993, according to the Office for Budget Responsibility.

A lot has changed since March, when the Office for Budget Responsibility predicted unemployment would rise to 6.5 percent, the economy would only grow by 4 percent this year, inflation would be 1.5 percent and borrowing would be £234 billion in the fiscal year ending in March 2022. Last March, just under 2 percent of the population had been fully vaccinated.

Now it is just under 80 percent of people over the age of 12. The economy seems on track to regain its prepandemic size around the turn of the year, several months earlier than previously predicted, and several of its other forecasts have undershot. The Office for Budget Responsibility now predicts the economy will rise 6.5 percent this year, and unemployment will peak at 5.2 percent and borrowing will be £183 billion.

The current pressures on supply chains and prices are mostly transitory, but there will be some long-term consequences, said Tera Allas, the director of research and economics in McKinsey’s United Kingdom and Ireland office.

“The budget is implicitly taking that into account by not delving deep into austerity right at the moment,” she said. “Recognizing there is still vulnerability in the economy, recognizing that Covid is not over and therefore you need to keep some of your options open.”

Article source: https://www.nytimes.com/live/2021/10/27/business/news-business-stock-market