Chancellor Philip Hammond has said his first Autumn Statement “is focused on preparing and supporting the economy as we begin writing a new chapter in our country’s history”.
He announced this afternoon that he has scrapped the Autumn Statement, so this will be the last one. The Budget will now be in the autumn, with a Spring Statement, much to the amusement of MPs in the House of Commons this afternoon.
It’s a move recommended by the IMF, and Mr Hammond said: “This change will allow for greater Parliamentary scrutiny of budget measures ahead of their implementation.”
Opening statements
- Britain will be the fastest growing major economy this year, Mr Hammond said, quoting the IMF. It has “confounded commentators at home and abroad with its strength and resilience” since the Brexit vote.
- Tackling the UK economy’s “long term weaknesses” is more urgent than ever, Mr Hammond said, and he promised to build an “economy for everyone”
- Mr Hammond praised his predecessor George Osborne’s record, and said the UK needs to be “match fit” with a resiliant economy for the challenges of leaving the European Union
Forecasts
- The Office for Budget Responsibility said growth will be 2.1pc in 2016, higher than forecast in March. However, it will slow to 1.4pc in 2017 because of lower investment and weaker consumer demand
- Growth is expected to be 1.7pc in 2018, 2.1pc in 2019 and 2020, and 2pc in 2021
- The OBR said the effect of the UK leaving the European Union will knock 2.4 percentage points from UK growth
- The Government will now no longer seek to deliver a surplus in 2019/20, but Mr Hammond said he remains committed to seeing the UK’s finances return to balance “as soon as practicable” in the next Parliament, “while leaving enough flexibility to support the economy in the near-term”. Mr Osborne had planned it for this Parliamentary term
Borrowing and debt
- Three new fiscal rules in a new draft Charter for Budget Responsibility: public finances should be returned to balance as early as possible in the next Parliament, and, in the interim, cyclically-adjusted borrowing should be below 2pc by the end of this Parliament; public sector net debt as a share of GDP must be falling by the end of this Parliament; welfare spending must be within a cap, set by the government and monitored by the OBR
- OBR forecasts for borrowing: 2016/17: £68.2bn; 2017/18: £59bn; 2018/19: £46.5bn, 2019/20: £21.9bn, 2020/21: £20.7bn, 2021/22: £17.2bn
- Public borrowing will drop from 4pc last year to 3.5pc this year and will continue to fall over Parliament reaching 0.7pc in 2021/22 – the lowest in two decades
- The OBR expects cyclically adjusted public sector net borrowing to be 0.8pc of GDP in 2020/21, against the Government’s target of reducing it to less than 2pc
- The OBR forecasts that debt will rise from 84.2pc of GDP last year to 87.3pc this year, peaking at 90.2pc in 2017/18 before falling to 89.7pc in 2018/19
Productivity
- Mr Hammond said raising productivity is essential: he will to prioritise “high value investment” to raise productivity, funding in the short term by additional borrowing
- There will be a new national productivity investment fund of £23bn for “innovation and infrastructure” over the next five years, aimed at science and tech research and development
Housing
- The goal of home ownership remains out of reach for “too many”, Hammond said. A Housing White Paper will be published “in due course” which will address some of the problems in the market
- £2.3bn housing infrastructure fund to open up sites for up to 100,000 homes
- £1.4bn for 40,000 affordable homes, as well as a relaxation of restrictions on Government grants to help building
- Right-to-buy pilot for housing association tenants
- The Government will double capital spending on housing in real terms over the course of the Parliament, Mr Hammond said
- Fees for tenants in rented accommodation will be banned
