Key facts on 1993
1993 - Recovery - GDP growth at 1.75% for the year. Investment still very low at 15.2% of GDP (public and private investment).
Earnings growth well down, but unemployment peaked at over 3m in January, though fell to 2.81m by end of the year. Inflation fell to a 30 year low of 1.2% - one of lowest rates in Europe (only Denmark and Irish Republic lower).
Balance of Payments switches to a new method of calculation. Single market means that data can now longer be measured at border, and so has to be done from VAT information. This means information will only be available at 6 month intervals. Deficit on current account rises to around £12bn, but export growth outpaces import growth.
PSBR - £50bn - help! Spending increases of £30.7bn and tax falls of £20.2bn to blame. Much of it recession, but by no means all.
Two Budgets in 1993 - one in March - Norman Lamont, the second in December - Kenneth Clarke. Norman put VAT on fuel and power at 8% initially in April 1994, and 17.5% from April '95. Tax increases were staggered -
- 1993/4 £6.7bn
- 1994/5 £10.3bn
All designed to reassure markets, but not make the recovery falter. Outlook for PSBR looked even worse in December 1993, so Kenneth topped even these tax increases making them the largest ever peacetime tax increases - equivalent to 7p on income tax. Much of increase was by reducing tax allowances and reducing the rate of 'mortgage tax relief'. Base rates were at 5.5% at the end of the year.
Problems for the ERM worsened with Irish Punt, Spanish Peseta and thePortugese Escudo all devalued. On 2nd August European Finance Ministers bowed to the heavy selling pressure and widened the ERM bands to 15% for all currencies. The Uruguay round of GATT negotiations was finally completed on 15th December 1993 after various bits of brinksmanship, and heavy negotiation between the USA and France. FTSE index breaks 3000 for the first time in August and goes on to end year at 3400.