No thrills from Chancellor as he
The Budget speech may not have been the most exciting ever, but it was possibly the most future-focused. Indeed, Philip Hammond used the word ‘future’ 33 times at the despatch box, and focused heavily on measures relating to, for instance, firsttime homebuyers, the technology sector, electric cars.
In contrast, there was no mention of pensioners and little to appeal directly to that demographic. This perhaps marks a new era of more youth-friendly Budgets.
Whilst there was a big focus on what the Chancellor said on the floor of the Commons, as always, what is buried within the spreadsheets accompanying the Budget document is much more significant.
Overall, here are some of key things to be aware of:
Growth downgrades: As expected, the economic growth forecasts have been revised down. Indeed, this is the first time that the annual rate of growth for the entire forecast period has been below 2%. The economy is set to slow this year, next year and in 2019, before a modest pick-up in growth thereafter.
Northern Ireland has underperformed against the UK since 2008 and this is not expected to change in the years ahead. Indeed, Northern Ireland can expect to see growth of around or below 1% going forward. Relative to its peers, the UK economy finds itself in the slow lane for economic growth, but the fast lane for inflation. The economic recovery is anticipated to be shallower than had been forecast in March.
Productivity problems: The Chancellor placed a heavy emphasis on the future, but the future of the economy and the public finances are dependent on productivity.
Productivity has been the key thing that the Office for Budget Responsibility (OBR) has consistently been over-optimistic about. Over the last decade, the UK’s productivity (output per person per hour) has only improved by 1%.
It seems that we have been working harder, but not smarter. This lack of significant productivity improvement affects growth, earnings and therefore government revenue and the public finances.