Chancellor Philip Hammond delivered his Spring Statement to Parliament today. Speaking after the House of Commons' rejection of Theresa May’s revised Brexit deal and just hours ahead of a further vote on leaving without a deal, he conceded the government had ‘more pressing matters.’
As expected, there was nothing new on taxation, leaving the way clear for a more detailed Budget in the autumn. Mr Hammond highlighted that the economy and public finances are in a ‘remarkably robust’ position but warned that further progress would depend on an orderly exit from the EU, which he expressed confidence could be achieved. A ‘no deal’ scenario would mean significant disruption in the short and medium term.
The key points were as follows:
- The OBR (Office for Budget Responsibility) has cut its GDP growth forecast for this year to 1.2%, from 1.6%, which is a smaller downgrade than expected. Meanwhile, estimates are maintained at 1.4% for 2020, and increased to 1.6% in each of the next 3 years.
- The OBR also predicted borrowing will fall to £13.5bn by 2023, from £29.3bn this year. As a percentage of GDP, debt peaked at 83.3% in 2018/19 and is expected to reduce to 73% in 2023/24. There has been a boost from strong tax receipts.
- Wages are growing at the fastest rate for a decade and, with inflation below target, the benefits are being seen in real terms. Employment is at a record high, helped by an increase in female participation and a halving of youth unemployment.
- Hammond emphasized his promise to deliver new homes, with an additional 220,000 built last year, and noted that 240,000 first time buyers have benefited from the abolition of stamp duty. He also announced a £3bn scheme for affordable homes.
- An acceptable Brexit agreement would free up cash for a ‘deal dividend’. Hammond was clear that any extra spending, delivered from an economic boost following a recovery in business confidence, would only be delivered if a deal is concluded.
- £200 million is to be allocated to the infrastructure to support Britain’s world-leading innovation. This supports the government’s ambition to raise research & development investment to 2.4% of GDP by 2027.
The chancellor confirmed the government will undertake a detailed departmental spending review, with a focus on improving productivity, which will be published alongside the Autumn Budget.
The next budget will therefore set an overall path for public spending for 2020 and beyond with a plan to deliver ‘higher wages, lower taxes, debt going down and a stronger Britain than ever before’.