Hammond tees up £15bn spree
Higher growth means NHS and other public services will get a boost
‘Light at the end of the tunnel’
PHILIP Hammond paved the way for a £ 15billion injection into public services yesterday.
In an upbeat assessment of Britain’s economic prospects, the Chancellor said the battle to get back into the black had reached a ‘turning point’.
He suggested he would ease austerity and release more cash for the NHS and other priorities in his budget this autumn.
Treasury officials said an improvement in the public finances meant Mr Hammond was beating his targets by more than £15billion.
They stressed that not all of this windfall was likely to be ploughed into public services because deficit reduction and low taxes were also important.
The Chancellor told MPs that families would start to see their living standards improve within weeks. Wages have lagged behind inflation – putting pressure on household budgets.
He used his spring statement on the economy to confirm that day-to-day government spending is poised to be back in the black for the first time since the financial crash. Falling borrowing suggested the UK was now on course for ‘the first sustained fall in debt for 17 years’.
Mr Hammond talked of seeing ‘light at the end of the tunnel’, adding: ‘It’s another step on the road to rebuilding the public finances that were decimated by the Labour Party. And it is one that Labour would again place at risk.’
The independent Office for Budget Responsibility expects average earnings to rise by 2.7 per cent this year while inflation falls to 2.4 per cent from the current 3 per cent. The watchdog also believes the number of people in work will rise from 32.2million now to 32.7million in 2022.
‘Our remarkable jobs story is set to continue with the OBR forecasting more jobs in every year of this parliament,’ said Mr Hammond.
‘And over 500,000 more people enjoying the security of a regular pay packet by 2022.
‘I am pleased to report that the OBR expect inflation, which is currently above target at 3 per cent, to fall back to target over the next 12 months – meaning that real wage growth is expected to be positive from the first quarter of 2018/19, and to increase steadily thereafter.’
The Chancellor has been dubbed the Cabinet’s Eeyore figure in the past because of his gloomy assessments of Brexit and the economy. Yesterday he insisted it was Labour talking the country down.
‘If there are any Eeyores in this chamber, they are over there,’ he told MPs, gesturing at the Labour front bench. ‘I, meanwhile, am at my most positively Tigger-like.’
His comments came as the OBR unveiled a minor upgrade in its growth forecasts. It is still predicting only modest rises for the next few years. GDP growth for 2018 was upgraded by a tenth of a percentage point to 1.5 per cent.
But it remains virtually static in following years, at 1.3 per cent in 2019 and 2020, 1.4 per cent in 2021 and 1.5 per cent in 2022, at a time of a stronger global economy.
Shadow Chancellor John McDonnell branded Mr Hammond ‘complacent’ for delaying relief for cashstrapped hospitals, schools and police.
Robert Chote, who chairs the OBR, said the economic boost would be short lived. He argued the public finances had come in better than expected because the country is on a temporary upswing thanks to global growth, rather than because of better policies and more successful companies.
He said productivity had risen at its fastest rate in six years in the third quarter of last year but this was ‘more likely to be a statistical quirk than a real improvement’.
He added: ‘If this could be sustained, the outlook for GDP growth over the medium term would be a lot rosier.’