Hammond talks up UK’S economic performance
● Hammond welcomes short-term upgrade to growth and hints as easing of austerity, but UK economy still in slow lane
Philip Hammond has insisted that there is “light at the end of the tunnel” for the UK economy despite warnings over suppressed wages and growth.
The Chancellor also used his spring statement yesterday to say he may be able to ease off on austerity in the autumn Budget if Britain’s current economic performance continues and borrowing falls faster than expected.
However, Labour accused Mr Hammond of “astounding complacency” while the SNP claimed Scotland was “shackled to a sinking ship”.
Philip Hammond hailed “light at the end of the tunnel” for the UK economy yesterday despite warnings that suppressed wages and growth will continue for years – with the worst impact from Brexit still to come.
The Chancellor said that, if the current economic performance continues and borrowing falls faster than expected, he may be able to ease off on austerity in the autumn Budget.
But businesses warned that the UK remained “locked on to a low growth trajectory for the foreseeable future” and the SNP claimed Scotland was “shackled to a sinking ship”.
Delivering his first spring statement since the Budget was moved to the autumn, Mr Hammond hailed the “first sustained fall in debt for 17 years” as a “turning point in the nation’s recovery from the financial crisis of a decade ago”.
Government borrowing will be £45.2 billion this year – some £4.7bn lower than predicted in November and £108bn lower than in 2010.
The Chancellor said the UK is set to run a “small” surplus on day-to-day spending in 201819, borrowing only for capital investment, and the government is forecast to hit its borrowing target for 2020-21 with £15.4bn headroom.
Debt is forecast to be 1 per cent lower than expected at the time of last autumn’s Budget, peaking at 85.6 per cent of GDP in 2017-18, before falling gradually to 77.9 per cent in 2022-23. Telling MPS he had put aside as much £11bn to ease the pressure on public services in the coming financial year, Mr Hammond said: “If, in the autumn, the public finances continue to reflect the improvements that today’s report hints at, then... I would have capacity to enable further increases in public spending and investment in the years ahead, while continuing to drive value for money to ensure that not a single penny of precious taxpayers’ money is wasted.”
He rejected Labour “doom and gloom” over the state of the economy, saying the recession repeatedly forecast by shadow chancellor John Mcdonnell since 2010 had failed to materialise.
The Chancellor’s optimism was boosted by short-term GDP figures, with confirmation that the UK economy grew by 1.7 per cent last year, compared with the 1.5 per cent forecast by the Office of Budget Responsibility (OBR) last year.
The OBR now expects GDP growth in 2018 to be 1.5 per cent, above the estimate of 1.4 per cent at November’s Budget.
It said the outlook “looks broadly the same” as before although the economy has “slightly more” momentum.
However, growth will weaken in the years following the UK’S exit from the EU.
GDP is expected to meet the OBR’S existing forecasts of a 1.3 per cent increase in 2019 and 2020, but estimates have been downgraded from 1.5 per cent to 1.4 per cent in 2021, and from 1.6 per cent to 1.5 per cent in 2022.
And there was confirmation of the long-term cost of Brexit with the revelation that the UK could end up paying for the pensions of EU civil servants and European Investment Bank projects until 2064 – 48 years after the referendum vote to leave. The OBR estimated that the UK’S EU “divorce settlement” will £37.1bn.
The slimmed-down statement contained no major policy announcements, but the Treasury published 18 consultations to examine possible tax and spending measures ahead of the budget.
They include looking at how tax is collected from tech companies like Airbnb, how VAT is collected, and how to expand cashless payments – including a proposal to do away with the 1p and 2p coins. The Treasury said 8 per cent of coppers end up being thrown out.
The government will also consult on how the tax system can support the effort to cut down on single-use plastic.
Mr Hammond told MPS that the economy had grown in every year of the Conservativeled governments, with manufacturing enjoying its longest unbroken run of growth for 50 years, three million additional jobs and higher levels of employment in every part of the UK.
This amounted to “solid progress towards building an economy that works for everyone”, the Chancellor said.
And he claimed that Labour plans would soak up all of the reduction in borrowing achieved over the past eight years, adding £350bn to debt and taking the figure over 100 per cent of GDP.
The government had taken “another step on the road to rebuilding the public finances decimated by the party opposite, and one that they would again place at risk,” he told MPS.
Playing on his own reputation for gloom, he joked: “If there are any Eeyores in this Chamber, they are over there. I, meanwhile, am at my most positively Tigger-like.”
But shadow chancellor Mr Mcdonnell labelled Mr Hammond’s “complacency” as “astounding” as he responded to the statement.
And referring to the Chancellor’s Eeyore reference, shadow communities secretary Andrew Gwynne joked that Mr Hammond was “talking Pooh”.
Responding for the SNP, Westminster leader Ian Blackford said: “Philip Hammond had an opportunity today to tackle some of the biggest threats facing the economy.
“Instead, the Chancellor has his head firmly in the sand, as he chose to remain wedded to his government’s disastrous austerity agenda.”
“If there are any Eeyores in this Chamber, they are over there. I, meanwhile, am at my most positively Tigger-like”
PHILIP HAMMOND